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July 18, 2011

Free Trade and the Campaign for Village Idiot

My local paper ran a funny story a few days back, soliciting local reactions to the last space shuttle flight.  One quote came from a fellow who was relieved that the flights were coming to an end.  His concern was that the shuttle flights were punching holes in the ozone layer, and thus contributing to global warming.  This amused even my 7-year-old, who has only a budding grasp of physics. Clearly the comment was tongue in cheek, because the race for village idiot is well financed and far too competitive to enter this late in the electoral cycle.  Our humorist wouldn’t stand a chance.

Within a day or two of this news article, an equally absurd letter about trade agreements and the decline of the American economy appeared in the same paper.  Indeed, letters to the editor decrying trade agreements appear with remarkable frequency in papers around the country.  I actually find it astonishing that there are still Americans who devote themselves to opposing free trade on the grounds that it hurts the economy.  There is no more easily disproven fiction than that offered by protectionists, and yet it continues to provide grist for discussion.  The whole matter makes Elvis sightings and flat Earth debates appear to bubble forth with reason and evidence.

The free trade argument was largely settled in an economics book published in 1815.  David Ricardo’s book was influential enough to ultimately change the commercial design of the British Empire.  Unfortunately, the technical argument requires mastery of algebra, and so sadly appears too infrequently in news print.  Perhaps this is better though.  The anti-free trade crowd is not given to the sort of abstract reasoning required of economic theory.  It is better to simply stick with the evidence.

The most often cited complaint about free trade is that it destroys American jobs.  The 1994 implementation of NAFTA is the most often referenced event.  Exposing these arguments to data devastates them.  U.S. employment skyrocketed after NAFTA, and has been higher in each and every year since then.  There’s more.  Not only did NAFTA not result in net declines in U.S. employment, it was also accompanied by almost continual manufacturing growth.  Indiana is a fine example. The year-over-year growth in manufacturing production in Indiana saw its fifth best year out of the last 50 years following the passage of NAFTA.  Indiana’s manufacturing sector grew by an astounding 12.5 percent in 1994.  It has been higher in every year since, including the darkest days of 2009.  Indiana’s manufacturing employment rose in the years following NAFTA.  This trend continued nationwide throughout the 1990s. Likewise manufacturing wages rose after NAFTA and are higher in inflation adjusted terms than before NAFTA.

Any contention that the U.S. economy has shrunk, wages dropped or manufacturing production declined following NAFTA are simply untrue.  The data are available in every public library and the internet.  Then again the anti-free traders might be running a clever campaign for village idiot.  If so, they deserve your vote.

Link to this commentary: https://commentaries.cberdata.org/578/free-trade-and-the-campaign-for-village-idiot

Tags: trade


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

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