Oh my, my, my! Twice last Friday, I was surprised by the short-sighted ignorance put forth by well-meaning folks.
First came an email from a politician telling me what a great job he was doing for me because he was “protecting American jobs by promoting products made in the USA.” Next, I picked up a paper and saw an even more appalling article in USA Today’s Money section entitled Some Manufacturing Heads Back to USA.
Quoting from Nariman Behravesh’s recent book, Spin-Free Economics: A No-Nonsense, Nonpartisan Guide to Today’s Global Economic Debates, “Short-sightedness is a serious affliction that plagues both politicians and the media.”
I cannot state this any more clearly, both the political message and the USA Today article are 100% misinformation – wrong and detrimental to the causes that they both claim to be protecting.
I could write a book on this, and probably will write several blog posts. But, to be brief, the politician and USA Today should be ashamed of themselves for taking on such an important subject – “globalization” – and, in an effort to boost their political gain or media hype, presenting an extreme view that distorts the facts and the historical context for improving the standard of living for not only all Americans, but also for everyone in the world.
The key to understanding globalization and the continuous upgrading of jobs – and therefore, the standard of living for all – is free markets.
With free global markets, the most efficient and cost-effective means of satisfying the needs of buyers are established. The efficiency and effectiveness of the free market will allow time for the consumer’s dollar to buy the items they most desire at the best price, which will perpetuate the growth of the standard of living and the creation of better paying jobs.
Yes, there will be jobs lost in each nation during this job migration, but these people must move up to better paying, higher productivity, and more value-added positions to participate in the growth of the standard of living. This is the universal economic evolution that has been happening since cavemen started trading goods, and it is at the very core of specialization and economies of scale.
When free markets are not allowed to work or when people do not move up to higher productivity, negative economic consequences for both the individual and the economy will occur.
Allow me to demonstrate this point in the context of the “double dip” discussion that is in the news almost every day now. In 1930, President Herbert Hoover made one of the largest anti-free market blunders of all time: He signed the Smoot-Hawley Tariff Act, which sharply raised USA tariff barriers on imported goods (buy American). This protectionism policy set off a downward spiral in international trade which led to the Great Depression.
Unfortunately, downward spiral continued as FDR imposed new taxes in 1936 that resulted in a second recession (not a double dip, but a second bonehead political move) from which the economy did not recover until after World War II.
So the facts are clear to me:
1. Free markets work to increase standards of living for all.
2. Interfering with free markets will hurt everyone in the long run.
3. Employment is always the last indicator to respond after a recession, and the deeper the recession, the longer it takes.
4. We need to stay the course: Continue to encourage free trade and encourage people to increase productivity.
5. Politicians and news media need to stop the sensationalism.