The Economic Collapse
Oct 20, 2010
Most Americans still seem to be convinced that “free trade” is “fair trade” and that to be against current U.S. trade policies and globalization means that you are anti-business, anti-free enterprise and anti-American. In the mainstream media, any unfair trade practices that are brought up are treated as minor nuisances that will be ironed out as we march towards the glorious globalized economy of the future. But the truth is that the kind of world trade that is going on today is neither “free” nor is it “fair”. Major exporting countries around the globe are openly manipulating their currencies, they are heavily subsidizing their major industries and they are erecting huge tariffs against many U.S. goods in order to protect their own domestic companies. Meanwhile, U.S. consumers enjoy mountains of cheap goods, but thousands of factories, hundreds of thousands of jobs and hundreds of billions of dollars of national wealth leave our country for good every year. So how in the world is that good for us? It is kind of like ripping apart your house to get more firewood just to keep the fire going. Eventually you aren’t going to have a house anymore.
The other day, my article entitled “The Number One U.S. Export To China: Waste Paper And Scrap Metal” really struck a chord with many advocates of current U.S. trade practices. For example, one reader identified only as “Someone” left a comment that was typical of many that were posted on the article….
“The author of this article has shown no knowledge of economics.”
Well, it doesn’t take a genius to look at the numbers and figure out that something is wrong. In 1985, the U.S. trade deficit with China was 6 million dollars for the entire year. In the month of August alone, the U.S. trade deficit with China was over 28 billion dollars.
Can anyone else spot a disturbing trend there?
Years ago, I was also one of those who believed that because I was “pro-business” that also meant that I had to defend “free trade” and trade agreements such as NAFTA and the WTO.
After all, I didn’t want to be labeled “anti-business” or “anti-American” did I?
But the truth is that merging our economy with socialist and communist economies that allow their workers to be paid slave labor wages is not “pro-business” and it certainly is not “pro-American”. Allowing entire U.S. industries to be destroyed because of the unfair predatory trade practices of socialist and communist economies is not “pro-business” and it certainly is not “pro-American”.
If you want to have “free trade”, then by definition you must have a level playing field. For example, trade with Canada (although not perfect) is mostly a very, very good thing. Trade with China is not.
Many readers have suggested that all we have to do is get rid of the horrific regulations and taxes that are holding U.S. businesses back and our trade situation will be fixed.
And yes, the U.S. government has piled so many rules, so many taxes and so much paperwork on U.S. businesses that it is becoming very, very difficult to operate a profitable business inside the United States. There has never been a more oppressive environment for business in the United States than we have today.
But would fixing that solve all our trade problems? Would fixing that bring back all of our factories and jobs?
No, but of course it would help to an extent.
However, the reality is that unless we address the fundamental problems with global trade we are in a heap of trouble.
Unfortunately, not all of my readers agree. One reader named Puzzled was quite blunt is his analysis of my recent article on trade: “I’d recommend a class on basic economics.” Well, it turns out that I did take a number of courses in economics at one of the finest universities in the United States, but our education system has become so dumbed-down that I didn’t learn much.
So let’s hear from someone who is considered to be an expert in economics.
“The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil… Right now, the rest of the world owns $3 trillion more of us than we own of them.”
Advocates of current U.S. trade policies usually respond by saying something like this….
“The global economy is here to stay so you better get used to it. There is no going back. It is a good thing for factories and jobs to be going to China because they can produce things cheaper than we can. We benefit because we get to enjoy large amounts of cheap products. Yes, American workers are going to have a significantly reduced standard of living, but this is necessary as we merge all the countries of the world into a globalized economy which will be better for everyone in the end. After all, it is better for goods and services to cross borders than it is for armies to cross borders. U.S. citizens are just going to have to learn to live within their means. If the United States cannot provide jobs for all of their people in this new global economy, then maybe they need to start implementing some population control measures. Quit blaming China because they aren’t doing anything wrong. Everyone knows that free trade is always the best alternative. Are you an idiot? Go take a class in basic economics you moron.”
The following is a sampling of actual comments that have been recently posted in response to my articles on globalism by advocates of current U.S. trade policies.
A reader named Frodo apparently thinks that I am “anti-freedom”….
You are totally wrong about free trade. “free trade” is part of “freedom” like the freedom of consumers to buy stuff they want made somewhere else.
A reader named John seems convinced that that United States has never lost even a single job to China….
No American has ever lost a job to China: what happens is due to USA govt industrial policy (get big or get out), new jobs are placed in new factories where there will be better stability in the future – China. Those “lost jobs” are not coming back because like buggy whips, we don’t use them anymore.
A reader named Dave believes that “free trade” is precisely what we need to revitalize manufacturing in America again….
Free trade is EXACTLY what’s needed if we ever hope to get manufacturing back in North America.
In the face of such overwhelming logic how can I continue to maintain that the current state of global trade is deeply flawed and deeply broken?
Well, I have a challenge for advocates of current U.S. trade policies.
I challenge you to answer the following 10 questions about our globalized economy. Please answer these questions and tell me why I am wrong….
#1 How can trade be considered “fair” when other major exporting nations openly manipulate their currencies, provide massive subsidies for their national industries and erect massive tariffs against many U.S. goods while we allow them to wipe out many of our domestic industries by flooding our shores with endless amounts of cheap products?
#2 How is it possible that it is good for American workers to be merged into a global labor pool where they must compete for jobs with workers on the other side of the globe that make less than ten percent of what an average American worker makes?
#3 As millions of manufacturing jobs continue to flow to where “labor is cheaper”, can you please explain how in the world we are going to provide nearly enough jobs for blue collar American workers?
#4 If there are not nearly enough jobs for everyone, then millions upon millions of Americans will not be able to take care of themselves. We simply are not going to let them starve to death in the streets. Already, over 41 million Americans are on food stamps. One way or another we are going to pay to take care of American workers. Either we are going to give them jobs or we are going to give them welfare. Are you willing to have your taxes raised substantially to pay for all of the welfare cases that “free trade” is creating?
#5 As U.S. workers are merged into the new global labor pool, can you please explain how wages will not be forced down and the standard of living for average, hard-working Americans will not diminish substantially?
#6 How can any conservative ever justify trading with a nation (China) that has a “one-child policy” and that has mobile abortion vans driving around the country to enforce this mandate?
#7 How can any liberal ever justify trading with a nation (China) that is rapidly becoming an environmental wasteland and where millions of people work in horrific conditions for what is essentially slave labor pay?
#8 The House National Security Oversight Subcommittee recently heard stunning testimony from a number of experts that told them that the rapid decline of manufacturing in the United States has resulted in America losing its edge in numerous industries that are absolutely vital to national security. How is it possible that putting our national security in such peril is a “good thing”?
#9 The United States spends 40 to 50 billion more on goods and services from the rest of the world each month than they spend on goods and services from us. That means that the United States is becoming 40 to 50 billion dollars poorer each and every month. How is that good for the U.S. economy?
#10 Over the past few decades, the communist Chinese have been able to accumulate approximately $2.5 trillion in foreign currency reserves, and the U.S. government now owes them close to 900 million dollars. We constantly have to send top government officials over there to beg them to continue to lend us money. This would have never happened without the insane trade policies of the last several decades. So how in the world can advocates of current U.S. trade policies ever justify this?