Mr Jeremy Warner
London Daily Telegraph
Dear Mr Warner:
Your criticisms of Paul Krugman’s recent embrace of protectionism are eloquent (“Paul Krugman, the Nobel prize winner who threatens the world,” March 19).
But I pick one nit: you write as if the alleged trade imbalances between the U.S. and China are real. They are not. The Chinese sell Americans goods; we pay with dollars; the Chinese then use many of these dollars to buy IOUs issued by Uncle Sam. Although the result is a measured U.S. current-account deficit with China, there’s no more any economically meaningful “imbalance” in such a result than there would be if, say, Texans lent a lot more of their dollars to Uncle Sam.
Talk of imbalances in trade diverts attention from the real problem: Uncle Sam’s gargantuan debt. That fast-accumulating debt is a huge problem. It is caused, though, not by trade with China but, rather, by Washington’s lack of fiscal discipline. Unless you believe that protectionism (and only protectionism) would induce Congress to be more fiscally disciplined, you should avoid all talk of imbalances in trade and instead talk of imbalances in political institutions that encourage politicians to give disproportionate weight to the demands of current voters and to ignore the resulting ill-consequences that will curse future generations.
Sincerely,
Donald J. Boudreaux
Save for his careless (albeit common) talk about trade “imbalances,” Jeremy Warner, writing for the London Daily Telegraph, is smack-on in his criticism of Paul Krugman. Some paragraphs:
Paul Krugman, a Nobel Prize-winning economist, has taken to advocating a 25 per cent “surcharge” – he refuses to use the more descriptive term of “import tariff” – on goods from China as a way of bringing the Chinese leadership to heel over currency reform. So potentially dangerous and out of character is this idea that when I first read it, I assumed he was being ironic. But sometimes the cleverest of people can also be the most stupid, and he’s now said it so often that you have to believe he’s serious….
What he’s advocating is trade retaliation so extreme that it would make the 1930s look like a stroll in the park. Contrary to Professor Krugman’s naïve assumption that the Chinese would soon cave in and allow their currency to float if confronted by such hard-ball tactics, I am certain that nothing is more guaranteed to produce the opposite response.
Professor Krugman’s suggestion mines a rich seam of populist US thinking and rhetoric which grows ever more vocal and worrying as the recession persists. What makes Krugman and other highly regarded economists who toe the same line so dangerous is that they give intellectual respectability to a fundamentally disreputable idea.
(HT my GMU colleague Tom Hazlett)
by Don Boudreaux on March 20, 2010
in Politics
In today’s Washington Times, Richard Berman understandably laments that “Unfortunately, some of our $300 billion in annual donations [to private non-profit organizations] goes to frauds and swindlers instead of aiding legitimate charity work.”
Berman is right to condemn such shysters. But let’s keep matters in perspective: Uncle Sam now annually confiscates 12 times the amount that Americans give voluntarily to non-profits. And not just some, but every one, of those confiscated dollars “goes to frauds and swindlers.”
Moreover, once a private non-profit is exposed as being a nest of con artists, people can choose to stop funding it. In contrast, Congress routinely displays itself publicly as being a covey of clowns whose irresponsibility would embarrass any town drunk and whose legerdemain is legendary. Yet persons who see the true nature of the frauds and swindlers on Capitol Hill are imprisoned if they choose to stop funding Congress’s operation.
UPDATE: “Anonymous” e-mailed me a moment ago, presumably after having read this post, and challenged me to provide one “clear example of Congress’s shystering.” Gee – so much to choose from. So here: read this recent post from the ever-diligent and careful Arnold Kling.
Here’s a letter to the Boston Globe:
Both the New York Times and your paper today have essays that make the following argument: health-care reform is so important that the present bill before Congress, although flawed, ought to be passed now, for such an opportunity (as you put it) is a “once-in-a-generation chance for health reform” (“Lynch’s flawed logic on health,” March 19).
Peculiar logic. Obviously, you endorse such “reform” because you trust government to implement it over the coming years and decades in a responsible – i.e., presumably non-political – fashion to improve Americans’ lives. But your misgivings about the very same government that will be charged in the future with the task of implementing any “reform” enacted today are so intense that you believe that that government cannot be trusted to legislate in ways that you think to be in the public interest.
Really odd.
Sincerely,
Donald J. Boudreaux
Here’s my latest column in the Pittsburgh Tribune-Review. In it, I discuss the popular writings of a newspaper columnist-economist far more famous and decorated than me.
For those who wish to read the Famous Economist’s columns that I quote in my own humble essay, the first-mentioned 2005 one is here; the second-mentioned 2005 column is here; and the 2009 one is here.
18 March 2010
Rep. Mike Michaud (D-ME)
U.S. House of Representatives
Capitol Hill
Washington, DC
Dear Rep. Michaud:
Seeking legislative action against Americans who trade with the Chinese, you say that “China’s currency manipulation essentially subsidizes Chinese exports and imposes tariffs on foreign imports. This presents an insurmountable trade barrier to U.S. manufacturers.”
After you’ve succeeded in denying Americans access to the lower prices and larger quantities of goods made possible by Beijing’s current monetary policy, will you and your colleagues take similar action against Silicon Valley? After all, firms there famously engage in technology manipulation, which – by improving the productivity of nearly every industry in the economy – essentially (as you would say) subsidizes production of countless industries and imposes tariffs on the outputs of workers who compete with these advanced techniques. Such advanced techniques present an insurmountable barrier to the ability of many such workers to continue in their old jobs.
Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030
Here’s a letter to the New York Times:
Bob Herbert frequently flaunts his Moral Superiority – his uncommon compassion for the downtrodden, his unflagging sensibility to the self-serving excuses of the greedy who profit at the expense of the oppressed, and his ethically refined awareness that the wealthy have responsibilities to help the poor.
So I was surprised to read his objection to Toyota moving part of its assembly operations from Fremont, CA, to Mexico (“Workers Crushed by Toyota,” March 16). Surely Mr. Herbert knows that the typical Mexican worker is much poorer than is the typical California worker; surely Mr. Herbert understands that the economic opportunities open to ordinary Mexicans pale in comparison to those open to ordinary Americans (even during today’s downturn); and surely Mr. Herbert realizes that the wages of the average Mexican worker are about one-eighth those of the average American worker.
In light of these facts, it’s wildly mysterious that Mr. Herbert condemns Toyota for taking steps that provide jobs and opportunities to desperately poor Mexicans, even if doing so means taking jobs from far-wealthier Americans.
Sincerely,
Donald J. Boudreaux
Share
Podcast RSS Feed
Full EconTalk Text
