Publication: IBD; Date:2008 Apr 17; Section:Issues & Insights; Page Number: A1
PERSPECTIVE
Better Off From Free Trade? Absolutely
WALTER E. WILLIAMS
Presidential candidates Hillary Clinton and Barack Obama, pandering to antitrade activists, suggest that should they become president, they will restrict trade agreements. Before you buy into their promised paradise, there are a few trade questions you might consider. Suppose you were choosing a country to live in. Which country would you prefer: a country that has the world champing at the bit to put its money into or one where the world is unwilling to invest? Let’s look at the numbers. The U.S. is the world’s largest recipient of foreign direct investment. In 2004, foreigners owned $5.5 trillion in U.S. assets and had $2.3 trillion in sales. They produced $515 billion of goods and services, accounting for 5.7% of total U.S. private output, and employed 5.1 million workers — or 4.7% of the U.S. work force — in 2004. In 2006 alone, foreign investors spent $184 billion investing in U.S. businesses and real estate, the highest amount foreign investors have spent since 2000. My question to Clinton, Obama and the anti-trade lobby is: Would Americans be better off if there were no foreign investment in our country? Between 1996 and 2006, about 15 million jobs were lost each year and 17 million created. That’s an annual net creation of 2 million jobs. Roughly 3% of the jobs lost were a result of foreign competition. Most were lost because of technology, domestic competition and changes in consumer tastes. Some of the gain in jobs is a result of “insourcing.” Foreign companies such as Nissan, Honda, Nokia and Novartis set up plants, hire American workers and pay wages higher than the national average. According to Dartmouth College professor Matthew Slaughter, “insourced” jobs pay 32% higher than the U.S. average. So here’s my question to anti-traders: If outsourcing is harmful to the U.S., it must also be harmful to European countries and Japan. Would you advise them to take their jobs back home? Wal-Mart has become the whipping boy for political demagogues, unions and antitraders. I suggest that they have the wrong target. The correct target is revealed by answering the question: “Why does Wal-Mart exist and prosper?” Wal-Mart exists and prospers because tens of millions of Americans find Wal-Mart to be a suitable source of goods and services. Clinton, Obama, unions and anti-traders should direct their outrage and condemnation at the tens of millions of Americans who shop there and keep it in business. There’s great angst over the loss of manufacturing jobs. The number of U.S. manufacturing jobs has fallen, and it’s mainly a result of technological innovation — and it’s a worldwide phenomenon. Daniel W. Drezner, professor of political science at the University of Chicago, notes that U.S. manufacturing employment between 1995 and 2002 fell by 11%. Globally, manufacturing job loss averaged 11%. China lost 15% of its manufacturing jobs, 4.5 million manufacturing jobs, compared with the loss of 3.1 million in the U.S. Job loss is the trend among the top 10 manufacturing countries that produce 75% of the world’s manufacturing output (the U.S., Japan, Germany, China, Britain, France, Italy, Korea, Canada and Mexico). But guess what: Manufacturing output rose 30% globally during the same period, and 100% in the U.S. from 1987 to today. Technological progress and innovation is the primary cause for the decrease in manufacturing jobs. Should we save manufacturing jobs by outlawing labor-saving equipment and technology? Economist Joseph Schumpeter referred to this process witnessed in market economies as “creative destruction,” where technology, innovation and trade destroy some jobs while creating others. While the process works hardships on some people, any attempt to impede the process will make all of us worse off. Williams is a syndicated columnist and John M. Olin Distinguished Professor of Economics at George Mason University.
Getting it Right - Welcome
The goal of this blog is to publish my thoughts on a variety of economic and political topics in the hopes that people who find them educational or beneficial will utilize them and/or forward to others who might find them interesting and/or worthwhile to promote to others, possibly including politicians who can push some of these ideas to fruition. The topics in my blog are meant to be of value on a long term basis, not a daily diary or political issue of the day log. If the information posted is useful to you, by all means utilize it and/or forward it as you see fit. If not useful, then merely ignore it. There are no universally agreed upon truisms and too little tolerance between some of those with opposing viewpoints to successfully convince the people with hardened opinions to move away from them. I am an analytical type person who will try to be as factual as I am able.
I disdain the current popularity of name calling and condemnation of viewpoints with no factual alternatives or logical solutions given that I see so often. If you don't have a solution based on fact and logic, then opt out of the discussion because you have nothing to contribute. My background is a degree in Economics from the University of Michigan and 39 years working in middle management jobs for a major retailer. My opinions are forged on the personal experence of life, family, friends, and work as well as triumphs and mistakes that I have made and hopefully learned from. My hope is that this blog helps you.
My first topic will be about personal finance. I chose that one first because most of us work long and hard just to survive but not all of us realize our dreams of becoming financially independent from the labors of our work. Much of our political votes/thinking also focus on the economy and in particular how well we are personally doing financially.
It is relatively simple, without sacrificing the enjoyment of living for 'today' and even at moderate incomes, to retire as a millionaire or multi-millionaire, if you focus on that goal consistently from a young age. It is also simple to ensure that your child or grandchild retires rich. It merely requires a one time gift of just $2,000 invested wisely and the passage of time. Please read my first post on this blog to learn more.
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