Economic Reality and History Lessons of Free Trade

by ALEXANDER G. MARKOVSKY December 15, 2016

My response to the letter of 370 economists denouncing Trump's economic policies is so simple that even the Nobel laureates can understand.

About a month ago 370 economists published an open letter in The Wall Street Journal denouncing Trump's economic policies including his approach to free trade. To enhance the credibility of their arguments, some of them had been touting their Nobel laureate status.

Given the Nobel Committee's political pedigree, if Karl Marx were alive today, he would be a Nobel laureate in economics many times over. And, as to add some extra flourish, he was recently awarded the Nobel Prize posthumously for his book Das Kapital. Thus, if history is any guide, the status speaks more about the Nobel Committee's agenda than the quality of the laureates' ideas.

The open letter for the most part reflects the conventional wisdom that prosperity is a function of globalization. However, contrary to what has been publicized, free trade is not an economic theory promulgating economic development and wealth creation in the developing world; it is an economic model emanated from the decidedly pro-Marxist ideology of redistribution of wealth on a global scale and it has been accomplishing exactly what was intended. Over the past three decades, it has led to the de-industrialization of the United States and the loss of millions of well-paying jobs.

In this new world economy, the United States does not have a competitive advantage by virtue of superior organization and advanced technology. Nowadays, if you know what you want and have the money, practically anything can be bought. Project financing is available to anyone anywhere in the world, provided by multilateral lenders and a syndication of investors worldwide. The technologies are available to anyone willing to pay for them, and information is available to anyone with a computer or an iPhone. In this environment, America cannot compete with the world of developing nations. Saying that an American worker is "the most productive in the world" makes for good rhetoric but has little to do with reality. If Chinese enterprises employing modern technologies do not have to comply with U.S. environmental and health regulations and pay their workers in a day what their American counterparts make in an hour, this country cannot possibly succeed. American industries are under a military-style assault coordinated by the Chinese government that includes, but is not limited to, manipulating currency, dumping, stealing technologies and know-how, and counterfeiting American products.

The prevailing mood among the Democrats and liberal economists is that the imposition of taxes or tariffs on imports, a policy promulgated by Donald Trump, will make imported goods and services more expensive, reduce consumption, and subsequently hurt the economy. This populist argument is based on neither economics nor history lessons. America needs to stop its job base from imploding and create a more dynamic economy to replace welfare checks with paychecks, and welfare recipients with taxpayers. People who do not make much cannot consume much. This is an economic veracity. The history lesson emanates from the destiny of ancient Rome. A millennium and a half before the United States was born, circa the second century CE, there was the Roman Empire. By that time it had begun to unravel from within. The agrarian economy that had been the foundation of the state was falling apart, unable to compete with cheap crops imported from North Africa. The consumers definitely benefited from the arrangement until North Africa's cheap crops destroyed Rome's economy, just as cheap imports are destroying America's industries. The situation is relevant and amenable to the manipulation of trade by China, Japan, South Korea, and many other countries. It is fine to compete with the economies that employ wages and regulations similar to those in this country, but the American trade partners should not expect to profit from a trade that takes advantage of American regulations and high wages and their artificially devalued currency

The United States still remains the world-dominant economic power, for which international trade, unlike for some of our more "backward" partners, is not a key building block of economic development. We are in a position to design an effective mechanism safeguarding American interests and enforcing a form of trade that reflects long-term strategic interests and restores the American role in the international balance of power. It can be applied in a manner that allows all of the participants, including politically antagonistic entities, to enjoy the fruits of a global economic system. Those objectives should not be viewed as nostalgia for economic preeminence, but rather as an imperative for our economic survival.

Alexander G. Markovsky is a Russian émigré. He holds degrees in economics and political science from the University of Marxism-Leninism and an MS in structural engineering from Moscow University. He resides in Houston, Texas, with his wife and daughter, where he owns a consulting company specializing in the management of large international projects. Mr. Markovsky is a contributor to FamilySecurityMatters.org, and his essays have appeared on RedState.com, WorldNetDaily, Family Security Matters, Ruthfullyyours and other websites. He can be contacted at alex.g.markovsky@gmail.com


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