Tuesday, March 15, 2016

Bernstein Again -- This Time As A Protectionist

Jared Bernstein has now gone two for two.  In back to back New York Times articles, he has substituted politics for economics.  This time he has declared war on free trade, joining the luddites which include most of today's front running political candidates.  According to Bernstein, free trade is nothing more than a job killer.  Somehow, free trade only kills jobs in America -- never in other countries.

Keep in mind what free trade is.  Free trade means that you want to trade something with someone else, where both parties agree to the trade.  Bernstein wants to forbid that transaction.  Outlawing (or, what amounts to the same thing, raising tariffs so high as to prohibit the transaction) is an infringement on people's rights to trade with one another and is economically stupid.

If abolishing free trade was a good idea, why don't we erect tariffs between various states in the US.  Then we could accomplish in America what Bernstein wishes to accomplish globally.  Suppose we effectively forbid Texas to trade with New York.  Then gas prices in New York would quickly go to $ 10 per gallon, while in Texas, gas prices at the pump might stay at $ 1.50.  This, according to Bernstein, is a good outcome.

As most sane economists have always known, one of the key reasons why the American economy outgrew the rest of the world from the 1860's on is the free trade between its states, while Europe and the rest of the world struggled with the Bernstein plan -- high tariff walls and protectionism.  When the recession of 1929 led to the world economic collapse of the 1930's, the Smoot Hawley Tariffs were largely to blame.

Bernstein favors beggar-thy-neighbors autarky as opposed to letting people freely transact whenever they wish to, without interference of government.  Beernstein and the front running political candidates are wrong and the world and its people will suffer if Bernstein and these candidates get their way.

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