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Notes -
The United States is not, no.
Not necessarily true - in this system there are losers as well as winners, at least proportionately.
There's definitely alternatives between "get critical industrial supplies from China" and "complete autarchy." The best position for any country, of course, is limited autarchy - being self sufficient on
You can offshore some of this to trusted allies, or try to compensate for it in other ways, but producing the above locally (which the United States does not do) is a desirable goal for any country.
I also think that a lot of your statements rely on a perfectly efficient and frictionless market. The market is not perfectly efficient, and it is definitely not frictionless. The United States, in particular, has a lot of what might be described as barriers to internal trade - some of them quite severe. It's quite possible (and I listened to some economic-types who are probably smarter than me suggest this, so it's not something I just made up) that even with tariffs, the US grows wealthier by cutting down these internal regulations.
Yes - this is the sort of move I have been discussing.
I work with medicines and the US despite being the most advanced in pharmaceutical industry, depend strongly on global trade for their drug supply. The industry is so global that it is not possible to be independent. I remember the situation some years ago when some European companies refused to supply thiopental used in capital punishment, the US had to rely on alternative methods to execute their death row prisoners. Even such a simple drug was not made in the US.
The trade makes everyone better off. Maybe you can find an example of some third world country that was exploited for its resources and consider it to be a loser. That is slightly different situation from a voluntary trade. Exploitation could also be caused by bullying – sell us these resources otherwise I will make things bad for you. But discounting those examples, it benefits all. The economy is not zero sum game.
In any case, the US has benefitted the most from global trade. You could consider that, for example, Vietnam leaders are exploiting their workers to produce cheap things for Americans to buy. You could make a moral case about that. But the US is clearly a winner in this situation.
Ehhhhh - in the United States, to use some examples, the value of a home relative to the value of wages has increased tremendously since the 1960s and 1970s. The price of college education has also increased (although that came later).
Now, I don't know that it is fair to pin that on trade, or entirely on trade, but my perception - as an American - is that free trade has inadvertently created a trap, by offshoring traditional industrial manufacturing, which as I understand it often granted people long-term stable employment with the prospect for real growth in wages. Now most people looking to earn good money in America go to college, often by taking out loans, which then traps them in long-term debt. On paper plenty of wealth is being created, but often at the expense of actual prosperity and fiscal stability of ordinary Americans. I'm not much of a liberal but it is true that wealth in the United States has become more unevenly distributed over time, which I think is probably partially attributable to free trade, and at a certain point that's (practically speaking) a potential societal hazard. And, more darkly, free trade has helped enable the American opioid epidemic, which is more dangerous and destructive to Americans than terrorism or crime.
I am not sure it was reasonable to expect the 1960s to last forever (we had just bombed the rest of the civilized world to ash, so they had to buy our stuff) and I am not necessarily arguing that free trade is bad for the United States on paper.
But it is true that offshoring hollowed out a lot of traditionally prosperous parts of the United States. And now you're complaining that Donald Trump, whose election was in part a response to...offshoring, which was due to free trade, is going to make us all poorer.
Perhaps free trade is necessarily in tension with democratic government, or perhaps it is possible to arrange free trade in such a way as to prevent the evils of offshoring and atrophying domestic industrial might, or perhaps any number of things. Certainly what I've said here is necessarily an oversimplification. But if I had to guess free trade, like immigration, follows a natural cycle and if it is not properly moderated and balanced against the concerns of its citizens, it will be subject to backlash.
Just to clarify - I'm not really against "free trade." It's more that I think as implemented the United States has made some major mistakes in the last 50 years and needs to stop making them. I don't really consider "lower tariffs" as one of those mistakes so much as "offshoring" but sadly one begets the other. I also think, unfortunately, that it's impossible to admire your cake and eat it too. Perhaps, for all the ill it did, we really did pursue the best course, more or less. But if that's true maybe it's also possible, for all the ill it does, that we are pursuing the ~best course now. Different times call for different measures.
This narrative that the US has not prospered since 1960s is wrong. I used to believe that wages have been stagnant but recent data by economists have proved me wrong. A lot of middle class have migrated to upper class. Even the low earners have seen their incomes grow.
Obviously there are some areas which have suffered like Detroit. It is government's failure to provide sufficient subsidies to them to reorganize their economy. In this sense it is true that some people have it worse due to free trade. But as a country in total it has prospered. These problems could be solved by transfers to those areas. The US needs to build much more infrastructure, for example.
People are very bad at estimating progress. I come from Latvia, which used to be part of the USSR. It was closed economy, better than third world countries due to socialistic programs to ensure education and industries but lagged behind the west. It was behind the “iron curtain” and had to produce everything themselves. I could clearly see that due to lack of competition and free market, the products were of low quality and shortages were everywhere. Even basic things like shoes or furniture were very hard to buy.
Since the dissolution of the USSR, the GDP of Latvia has grown about 10 times. That is very impressive growth and we all notice the difference. During Soviet times very few people had cars. Now practically everybody in my enlarged family have a car. During Soviet times it was very hard to travel even within country, hotels were rare and could be reserved only with special permission. Now every year we go on vacation to European countries, to Paris or London etc. Clearly things are much better even though Latvia is still one of the poorest EU countries. And yet, every time we have a discussion about the economy, there are people always complaining that economy is worse than during the Soviet times. Either they have a poor memory, or are very unlucky, or they are just people who maliciously or naively spread memes online similar to “hitler was actually good”. No amount of data will convince them, they will always find some contra-argument that GDP is a false measure, that data is false, that inequality makes it useless, that true measure is fertility which has fallen and so on and so on. And if that fails, they will quote some examples of poor or homeless people and will say that we had no homeless people during the Soviet times which is true but misses the point.
One specific example that opioid crisis in the US was caused by free trade is wrong. It was caused by Purdue Pharma, an American company, now defunct, that provided misinformation that their synthetic opioids don't cause addiction. Apparently regulators failed to act sooner before damage was done and a lot of people became addicts. The cause is definitely not access to fentanyl because that is the result.
I am not saying it has not prospered. I am saying that free trade can generate losers as well as winners - which it sounds like we agree on. This is true of anything, so within certain parameters, that's fine. But left unchecked it can be dangerous.
Yes, perhaps. In a vacuum, I quite agree with your idea. Unfortunately, the US government already spends too much, so I am not sure where it's supposed to get this extra money from (well - I know where I would get it from, but I do not run the US government).
I mean - reductio ad absurdum, this is true at a certain point, is it not?
Imagine we gave all the wealth in the United States to the best hedge fund managers in the US, and he owned the rest of the population as chattel slaves. Since hedge fund managers are probably better at managing money than 60% of Americans, GDP would skyrocket. Or just imagine that we executed people who are credibly predicted to be a considerable drain on public welfare (like terminally ill indigent poor, dialysis patients, convicts, drug addicts, etc.) Again, this would redirect wealth in more profitable directions. But obviously people would be quite justified to argue that GDP is a false measure of their well-being in these cases, right?
And that is similarly true in the immediate post-Soviet-breakup aftermath: life expectancy dropped! That's objectively bad! That's different from arguing that the economy is better, which I doubt is true (although the Soviet break-up was a short term economic shock to be sure).
(Note that I am not arguing that Latvia would be better off now not to have broken up).
Except the fentanyl trafficked to the United States comes from China and Mexico, not from Purdue Pharma. And I doubt it would reach our shores nearly as easily (particularly from China) without the free trade apparatus we've constructed.
That's not necessarily to say that free trade is inherently bad. But there are tradeoffs, and in specific cases I think it is fair to consider whether or not the tradeoffs prompt reconsideration. I would quite like it if the end result of all of this is what I think Trump may be aiming for, and what you have proposed - closer cooperation and more trade between the US and more trustworthy allies, less trade with China (I don't really mind cooperating with China, of course). If we have to bring out the "big stick" of tariffs to accomplish that, I think it might be worth it.
Even without fentanyl they would still be addicts. Fentanyl is just a cheaper option which in a way made those addicts to commit less crime to obtain funds to finance their drug habit. The problem with the fentanyl is that it is so potent that it needs extreme care handling and diluting it. It is too easy to overdose which leads to more deaths. It is sad but most opioid addicts are for life. They could have received opioid replacement therapy from the government and lead somewhat functional lives.
This was clearly government's fault for not regulating opioids better initially.
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This proves again that economic growth is super important. Indeed, GDP dropped substantially in the shock after the breakup of the USSR. People didn't starve but they were very unhappy, alcoholism, depression, reduced healthcare etc. all contributed to shorter life expectancy.
Maybe this shock severely traumatized some people and that's why they still argue after 30 years that the Soviet system was better. Because it was so terrible experience in their lives, they are unable to see that eventually we recovered and greatly surpassed the Soviet baseline.
This was one of the reasons why I was so adamant against widespread lockdowns and closing of schools during covid. It traumatized children too much. In Latvia math results for children who missed this time at school are still considerably lower than to others. The whole generation will be less competitive in job market. Undeveloped social skills were already serious problem in some countries and all this made it even worse.
The economy suffered during covid but this time economists did the right thing by showering people with free money. It caused terrible inflation later on but they knew that effects of suffering from more poverty would cause even greater trauma similar to what people experienced after the breakup of the USSR. By their efforts it didn't happen and at least people were prevented from this trauma. Most people don't even realize that economists are the real heroes in the pandemic.
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