OCALA, Fla., March 14, 2014 — It has been nearly six years since the global financial crisis began, but we have yet to resolve all the problems created by that disaster. America’s economy remains mired in a low-growth recovery that has left real incomes stagnant and millions trapped in long-term unemployment.
Free trade and free markets are possible solutions. Everyone from Wall Street to Washington to talk radio seems to favor freer international trade. They say that it will open new doors for American products and that it will be a win for American consumers.
Economists tell us there are no free lunches, so any arrangement which is supposed to create prosperity for all should draw our careful scrutiny.
“’Free markets,’ like most political terms, can be debated, but it basically just means capitalism without government regulation or private monopolies,” says Ian Fletcher, former senior economist at the Coalition for a Prosperous America. Fletcher advocates for a trade policy that benefits American interests first and foremost.
“’Free trade’ means there are no taxes on imported goods greater than those levied on domestic goods, and no quotas or other restrictions to block imports,” says Fletcher. “Obviously these are both purist concepts that don’t literally apply in the real world, and what people mean when they use these terms is minimal regulation and minimal barriers to trade.”
The Ron Paul movement, which is a growing force in the Republican Party, promotes hardline libertarianism. Libertarianism has no use for trade protectionism. Would the U.S. economy would fare well under strong libertarian influence?
“If all you mean by a ‘strong libertarian influence’ is giving free markets and private property their due, then we’re there already and have been for a long time: this country is more free-market and private-property oriented than most other major economies,” Fletcher says. “The results, the pluses and minuses, are all around us: we’re good at things that depend mostly on a strong private sector, but lag other nations in the provision of public goods.
“If you mean having the U.S. adopt libertarian crank ideas like abolishing the Fed or returning to the gold standard, then we’d be in for a rough ride. The U.S. economy in the late 19th century, when we actually implemented such policies, was considerably poorer, nastier, and more volatile than what we have today. The hard data is out there if you want to look.”
Libertarian economists believe that free trade has benefited American households because it lowers the price of commonly purchased goods. “There is no evidence for this belief,” says Dr. Paul Roberts. “Prices continue to rise, despite ‘reforms’ that understate the official measure of inflation.” As an assistant Treasury secretary under Ronald Reagan, Roberts played a key role in formulating the Gipper’s now-legendary fiscal policy. As a journalist, he made no bones about reporting the facts as he saw them. Now, as a columnist, he shares his opinions about America’s turbulent sociopolitical climate.
According to Roberts, “Statistician John Williams (shadowstats.com) carefully monitors official government data and its measurement. He reports that the current rate of inflation when measured by the official methodology of 1980 or 1990 is a multiple of the current rate as measured by the substitution methodology and the assumption that numerous price rises are not price rises but quality improvements.
“Even if there were evidence of lower prices, that is only half of the equation. The other half is the lower incomes and joblessness of the Americans harmed by jobs offshoring, mistakenly called ‘free trade’ by libertarians. The evidence is clear that real median family incomes and the labor force participation rate have been falling.”
There is no free lunch. Free markets and free trade will help some and hurt some, and the trick is to sort out which side different people will be on. What we call “free trade” may be worse for ordinary Americans than the disease it’s supposed to cure. They are right to be wary of it.