Let’s hear it for globalization — for free markets everywhere
In our combined 20-plus years of teaching economics in the Alamo City, we’ve learned that many of our students are inherently familiar with the principles we convey.
We’re simply putting economic flesh on the bones of real life.
By the time they advance to high school, they’ve likely handled money. They have reflexively retreated when the price of, say, athletic shoes forced them to decide whether to chip in some of their allowance to seal the deal.
Although they may not know the terminology, they know the opportunity cost of sleeping well past noon on a Saturday is the new song they’re not learning on the piano.
Regardless of how satisfying it is to see the occasional light bulbs go off over their heads early in the term, we’re invariably anxious to arrive at the policy chapters. These past couple years have regrettably provided us another example of suboptimal policy — that focused on international trade.
Three-quarters of a century ago, we sank to the depths of trade policy and worldwide international relations: the Smoot-Hawley Tariff Act and subsequent retaliatory tariffs — and world war.
Resentment from the First World War had been lingering when the U.S. unwisely passed that impulsive of legislation in an effort to protect domestic industry. Global depression ensued. Armed conflict soon followed with the Second World War.
It is an ancient principle that if goods don’t cross borders, armies will. Nineteenth-century French economist Frédéric Bastiat wrote, “I do wish someone would tell me what would be the use of large standing armies and powerful navies if trade were free.”
Lesson learned, a couple dozen countries gathered after WWII and signed the General Agreement on Tariffs and Trade, or GATT, an effort to reduce barriers to global commerce.
Having emerged from WWII as one of the least scathed countries, the United States led the way in putting the world back together again, namely with the reconstruction of Japan.
Not quite a generation later, it bore fruit as Japan grew into the second-largest economy behind the U.S. A few years after that, Germany rose to third, largely through the guidance of its economic minister, Ludwig Erhard, who had the courage to abandon wage and price controls, betting instead on economic freedom.
Oddly, this evolution seems to have perplexed those with a protectionist bent. At best, they don’t fully appreciate the potential of ideal policies dropped into the right setting. It’s reminiscent of an Andrew Dice Clay riff from the 1980s regarding Japan: “Didn’t we drop a couple bombs on them a few years ago? What was in those bombs, fertilizer?”
The fertilizer, per se, was already there in the form of the people. After “those bombs” came the rich soil of the garden known as “free market capitalism.”
At worst, the paranoia of this crowd drives a tribal fear that we’re getting “ripped off,” that our manufacturing base has been “hollowed out,” that we don’t “make things anymore.” Cold-hard data contradict these anxieties, as real manufacturing output and real exports have maintained upward trends for generations, and are lately being joined by an uptick in manufacturing employment.
It’s as if they have forgotten that some of our most valuable exports, institutional bedrocks like property rights protection, are what propelled Japan, Germany and, later, China to economic prosperity.
As long as our folks are free to chart their own course, specialize in whatever they choose and trade with others who took a different path, we can’t lose.
It is highly unlikely our economy will be surpassed by another country both absolutely and where it counts — GDP per capita. Currently, it’s six times as big for the U.S. than for China.
After addressing the basic concepts of comparative advantage and specialization, one of us (Baecker) advises his students to think of free trade and globalization as a bizarro hurricane. Whereas such storms leave death and destruction in their wake, globalization spawns an emergent order of prosperity.
While we leverage our human capital to pave the road to the future, poorer countries are only too happy to employ our innovated processes to produce goods that consequently have become commoditized.
As history has shown, not only does this “globalist” storm “exploit workers” right out of poverty, but in so doing, it creates customers for new products Americans create.
A good visual analogy is the end of Disney’s “Moana,” when the goddess Te Fiti pushes her fingers along the ground and an abundance of vibrant flora sprouts up. Those fingers are akin to the values that allow people to flourish, like limited government and free trade.
Having to apply to the Commerce Department to import steel, aluminum, etc., tariff-free is the antithesis of that. It’s otherwise known as crony capitalism.
Politicians blocking the free movement of people, goods and ideas in order to concentrate voting blocs make us no wealthier. It is the animating contest of freedom that made America great and will make China great if it can get back on track toward its slow-motion repeal of communism.
Late last year, one of us cast aside an aversion to wearing flip-flops. Upon buying them, the thought occurred “one of the most base items of clothing … decorated in red, white and blue … made in China.”
How, we wonder, is that type of symbolism lost on this supposed nationalist crowd?
Christopher E. Baecker manages fixed assets for Pioneer Energy Services and is an adjunct lecturer of economics at Northwest Vista College in San Antonio. He can be reached at Facebook.com/professormetal or firstname.lastname@example.org. Scott K. Harris is a consultant at the Free-to-Choose Network, an associate at Izzit.org, and teaches macroeconomics, psychology and philosophy at Ronald Reagan High School in San Antonio.