Defending Free Speech and Free Trade

by Don Boudreaux on February 22, 2007

in Current Affairs, Trade, Weblogs

Cato Institute scholars have very recently published important op-eds in Washington’s daily newspapers.  The first appeared in yesterday’s edition of the Washington Post; it is by Raja Kamal and Cato’s Tom Palmer.  They defend the right to free speech in Egypt — where it is, sadly, now under severe attack.  Kamal and Palmer open their op-ed with this sad fact:

A former college student, Abdelkareem Nabil Soliman, is sitting in an
Egyptian prison, awaiting sentencing tomorrow. His alleged "crime":
expressing his opinions on a blog. His mistake: having the courage to
do so under his own name.

The second op-ed, in today’s edition of the Washington Times, is by Cato’s Dan Ikenson who challenges the arguments and assumptions trotted out almost daily now by the current gaggle of mercantilists occupying offices on Capitol Hill.  Here’s a selection from Ikenson’s op-ed:

Too many in Congress view exports as good, imports as bad, and the
trade account as the scoreboard. Because the United States has a large
and growing trade deficit, they reckon we are losing at trade. The
reason we are losing, the story goes, is because our trade partners are
cheating, and the Bush administration has turned a blind eye. The
Democrats therefore intend to reverse our eroding economic standing
through greater enforcement of our trade agreements.

An honest discussion about trade would note that as imports
and our trade deficit have increased over the past year, five years, 10
years and 25 years (take your pick), the economy has expanded, creating
an average of 1.8 million net new jobs each year since 1981. There is
very clearly no inverse relationship between the level of imports and
U.S. job creation. And in the sectors that compete most directly with
imports, productivity gains (not import competition)account for the
preponderance of job attrition.

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Don Lloyd February 22, 2007 at 7:53 am


"There is very clearly no inverse relationship between the level of imports and U.S. job creation."

But there is no reason to rule out the possibility, if not the likelihood, that imports result in both the creation of new jobs and the retention of existing ones.

Someone has to sell and distribute imported products, even if the imports are not merely a necessary strategic factor of production for more complex domestic products.

Regards, Don

David White February 22, 2007 at 9:21 am

On the contrary, as Gary North writes over at LRC —

"The economic bulls are insistent that deficits don’t matter – not on-budget Federal deficits, not off-budget Federal deficits, and not trade deficits. We can eat, drink, and be merry, for tomorrow we will eat, drink, and be even merrier. Nor will our health care expenditures bankrupt Medicare, despite its present funding shortfall of $60 trillion, which keeps rising. This is the optimism of the drug addict who is living off of the "generosity" of the drug cartel, which has temporarily lowered its prices in order to extend size of the market. Things seem rosy now. Instead of mind-altering drugs, the most abused substance today is central bank fiat money. Instead of a drug cartel, we face a central bank cartel. Instead of poppies grown in secluded off-shore regions, the off-shore export to the West is Asian money. … We are the world’s "inner city ghetto" society: more consumption than production. We have the trade deficit to prove this."

John Konop February 22, 2007 at 10:17 am

The job growth is mostly illegal immigrants!!!!

Please do not let the facts get in the way of good story.

Bush Administration, Dying at the Border

Don Boudreaux February 22, 2007 at 12:18 pm

John Konop asserts that the job growth reported by Dan Ikenson in the original post "is mostly illegal immigrants."

This claim is impossible to believe. It would mean that more than half of the 45 million NET jobs created in the U.S. over the past quarter century are held by illegal aliens.

There are lots of reasons for doubting such a figure, but perhaps most obviously, if more than half of all net job creation over the course of 25 years is comprised of jobs held by illegal aliens, the U.S. unemployment rate would be many percentage points higher than the 4.6 percent that it is today.

John Konop February 22, 2007 at 3:33 pm

More facts less spin!!! Try it Dan you might like it!!


Last week the Bureau of Labor Statistics re-benchmarked the payroll jobs data back to 2000. Thanks to Charles McMillion of MBG Information Services, I have the adjusted data from January 2001 through January 2006. If you are worried about terrorists, you don’t know what worry is.

Job growth over the last five years is the weakest on record. The US economy came up more than 7 million jobs short of keeping up with population growth. That’s one good reason for controlling immigration. An economy that cannot keep up with population growth should not be boosting population with heavy rates of legal and illegal immigration.

Over the past five years the US economy experienced a net job loss in goods producing activities. The entire job growth was in service-providing activities–primarily credit intermediation, health care and social assistance, waiters, waitresses and bartenders, and state and local government.

US manufacturing lost 2.9 million jobs, almost 17% of the manufacturing work force. The wipeout is across the board. Not a single manufacturing payroll classification created a single new job.

The declines in some manufacturing sectors have more in common with a country undergoing saturation bombing during war than with a super-economy that is “the envy of the world.” Communications equipment lost 43% of its workforce. Semiconductors and electronic components lost 37% of its workforce. The workforce in computers and electronic products declined 30%. Electrical equipment and appliances lost 25% of its employees. The workforce in motor vehicles and parts declined 12%. Furniture and related products lost 17% of its jobs. Apparel manufacturers lost almost half of the work force. Employment in textile mills declined 43%. Paper and paper products lost one-fifth of its jobs. The work force in plastics and rubber products declined by 15%. Even manufacturers of beverages and tobacco products experienced a 7% shrinkage in jobs.

The knowledge jobs that were supposed to take the place of lost manufacturing jobs in the globalized “new economy” never appeared. The information sector lost 17% of its jobs, with the telecommunications work force declining by 25%. Even wholesale and retail trade lost jobs. Despite massive new accounting burdens imposed by Sarbanes-Oxley, accounting and bookkeeping employment shrank by 4%. Computer systems design and related lost 9% of its jobs. Today there are 209,000 fewer managerial and supervisory jobs than 5 years ago.

In five years the US economy only created 70,000 jobs in architecture and engineering, many of which are clerical. Little wonder engineering enrollments are shrinking. There are no jobs for graduates. The talk about engineering shortages is absolute ignorance. There are several hundred thousand American engineers who are unemployed and have been for years. No student wants a degree that is nothing but a ticket to a soup line. Many engineers have written to me that they cannot even get Wal-Mart jobs because their education makes them over-qualified.

Offshore outsourcing and offshore production have left the US awash with unemployment among the highly educated. The low measured rate of unemployment does not include discouraged workers. Labor arbitrage has made the unemployment rate less and less a meaningful indicator. In the past unemployment resulted mainly from turnover in the labor force and recession. Recoveries pulled people back into jobs.

Unemployment benefits were intended to help people over the down time in the cycle when workers were laid off. Today the unemployment is permanent as entire occupations and industries are wiped out by labor arbitrage as corporations replace their American employees with foreign ones.

Economists who look beyond political press releases estimate the US unemployment rate to be between 7% and 8.5%. There are now hundreds of thousands of Americans who will never recover their investment in their university education.

Unless the BLS is falsifying the data or businesses are reporting the opposite of the facts, the US is experiencing a job depression. Most economists refuse to acknowledge the facts, because they endorsed globalization. It was a win-win situation, they said.

They were wrong.

At a time when America desperately needs the voices of educated people as a counterweight to the disinformation that emanates from the Bush administration and its supporters, economists have discredited themselves. This is especially true for “free market economists” who foolishly assumed that international labor arbitrage was an example of free trade that was benefitting Americans. Where is the benefit when employment in US export industries and import-competitive industries is shrinking? After decades of struggle to regain credibility, free market economics is on the verge of another wipeout.

No sane economist can possibly maintain that a deplorable record of merely 1,054,000 net new private sector jobs over five years is an indication of a healthy economy. The total number of private sector jobs created over the five year period is 500,000 jobs less than one year’s legal and illegal immigration! (In a December 2005 Center for Immigration Studies report based on the Census Bureau’s March 2005 Current Population Survey, Steven Camarota writes that there were 7,9 million new immigrants between January 2000 and March 2005.)

The economics profession has failed America. It touts a meaningless number while joblessness soars. Lazy journalists at the New York Times simply rewrite the Bush administration’s press releases.

On February 10 the Commerce Department released a record US trade deficit in goods and services for 2005–$726 billion. The US deficit in Advanced Technology Products reached a new high. Offshore production for home markets and jobs outsourcing has made the US highly dependent on foreign provided goods and services, while simultaneously reducing the export capability of the US economy. It is possible that there might be no exchange rate at which the US can balance its trade.

Polls indicate that the Bush administration is succeeding in whipping up fear and hysteria about Iran. The secretary of defense is promising Americans decades-long war. Is death in battle Bush’s solution to the job depression? Will Asians finance a decades-long war for a bankrupt country?

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at:

John Konop February 22, 2007 at 3:41 pm

Now Dan factor in 12 to 20 million illegal immigrants that are using fake SS card via the SS department.

BTW the SS department fakee SS #s in 2004 was 8 million. In their report they even told Congress it was mainly illegal immigrants in their opinion.

Do you think that # got bigger or smaller of fake SS #s since 2004?

The only way the BLS number is correct is if millions of Americans went to Mexico or somewhere as illegal immigrants. BTW I have not senn any articles about that issue have you?

Don Boudreaux February 22, 2007 at 3:48 pm

John Konop sends along (just above) one of Paul Craig Roberts's recent writings on trade. I try in all of my writings to be civil — I try to assume the best about others' motives and insights.

But Craig Roberts is ridiculously mistaken. Here's a blog-post from last May that deals with many of the kinds of claims that Roberts makes in the piece sent by Mr. Konop:

save_the_rustbelt February 22, 2007 at 4:12 pm

Has anyone looked at the quality of the jobs being created?

There are plenty of $8-an-hour warehouse jobs in our area, someone has to move all of the Chinese-made merchandise. But then who needs healthcare coverage or a pension anyway (and of course it is the fault of the workers)?

Mark Thoma is hosting an interesting discussion about why people are contemptuous of economists. Good reading.

US February 22, 2007 at 4:38 pm

Unfortunately, Kamal & Palmer's piece did not make any difference:

4 years in jail for a few blogposts. Most bankrobbers get shorter sentences than that where I come from.

David White February 22, 2007 at 4:54 pm

What Don Boudreaux and his ilk fail to understand is that you can't have truly free trade without a free market in the basis of trade — ie., money — especially when money is no longer a good used as a medium of exchange but consists instead of irredeemable paper currencies that are printed ex nihilo and ad infinitum, precisely as all the world's central banks are doing.

What this absolute corruption of money has created is nothing less than the Mother of all Bubbles. And when it bursts, the Mother of All Hyperinflationary Depressions will be upon us.

python February 22, 2007 at 4:58 pm

John Konop insists on "facts" and less "spin" then quotes an article that is so full of spin, I feel like my clothes have just been washed.

In my most humble opinion, commentators are hacks if they comment on employment during the Bush administration but don't mention A) the huge investment bubble that was ready to burst when Bush stepped into office and B) the huge loss of revenue from 9/11 (tourism and airlines were almost dead for 2 years).

I love these guys who talk about how bubbles are bad during the Bush administration (housing), but they don't list them as bad during the Clinton administration (Stock, investment, employment). Much of the employment in the late 90s was based on overprojections by companies not wanting to be left behind the tech rush. Why count these job losses against Bush? All those Y2K programmers weren't needed after Y2K. Is that Bush's fault? Get some historical perspective before you cherry pick data.

Globalization did not start the day Bush stepped into office, why use employment numbers from just the Bush part to try to find negatives regarding globalization?

And who cares what portion of manufacturing has gone away? The United States does not need manufacturing jobs as much now as we did 50 years ago, so why compare?

"There are now hundreds of thousands of Americans who will never recover their investment in their university education." This is so ludicrous, it makes me want to puke. Is the government responsible for ensuring that college students are guaranteed livelihoods based on the education that they sought out when they were 22 years old? If I chose to be a Fine Arts student and couldn't find work, would I be in his stat also?

How can you blame Bush or economists for the choices that college students made 20 to 40 years ago? It's true we don't need as many engineers now. It's also true we don't need as many newspaper boys standing at the corner yelling "Extra, Extra, Read all about it."

DS February 23, 2007 at 7:17 am

"US manufacturing lost 2.9 million jobs, almost 17% of the manufacturing work force. The wipeout is across the board. Not a single manufacturing payroll classification created a single new job."

A phenomenon that is happening all around the world due to PRODUCTIVITY. Even the Chinese are "losing" manufacturing jobs due to PRODUCTIVITY. These jobs that we are supposedly "losing" are disappearing entirely, not moving to low wage countries. Of course those jobs aren't "lost", they simply aren't necessary any more. If Mr Roberts wants to stop the decrease in manufacturing jobs (a process that began in 1955 not 2001 by the way) he needs to stop worrying about illegal immigrants and start outlawing computers, machines tools and dreaded ideologies like the Toyota production system and Six Sigma. Mr Toyota and his evil ideas about eliminating waste and increaing productivity are the real villains in Mr Roberts' morality play.

But Mr Roberts is way behind the game. If he really wants every American to be gainfully employed he needs to work on saving agricultural jobs first. In 1900 almost half of the US was employed in agriculture, now its less than 3%. If he doesn't hurry up and erect some trade barriers we won't even produce our own food any more! Where will all those agricultural workers find work?

John Konop February 24, 2007 at 6:46 am


Economist David O Rear has ask me this question “who’s labor or environmental standards should be the ones America demand the world follow”?


As far as labor and environmental standards in trade deals. This can be negotiated in any trade deal with a factor used to equalize the difference. In the business world we call this horse trading.

Your view as well as Bush, Clinton, Gore, McCain…. Of turning a blind eye to Countries that are controlled by brutal dictators is not free market economics according to Adam Smith. The father of free market economics Smith was a big advocate of human and labor rights, which economist like you never mention nor teach! BTW this debate about cheap goods at the expense of exploitation was had in our own COUNTRY during the time of the civil war years.

FROM THE AMERICAN CIVIL WAR (member of History Channel)

“While some in the North hated slavery because they felt that it was wrong, most people held no opinion of it at all, and some even condoned it because abolishing it would be bad for business”. “Without slaves there would be no cotton. Without cotton the textile industry would suffer”. “To many it was just that simple”.

We also had the debate about child labor and sweatshops read the Jungle by Sinclair.
BTW our economy

John Konop February 24, 2007 at 6:47 am

Is Cheney betting on Economic Collapse?

Deficits do matter and Cheney has invested his money accordingly. Cheney also does not think trade debt is a big issue. If VP Cheney is so bullish on the economy why is betting his investments against our economy?

ICH-Wouldn’t you like to know where Dick Cheney puts his money? Then you’d know whether his “deficits don’t matter” claim is just baloney or not.

Well, as it turns out, Kiplinger Magazine ran an article based on Cheney’s financial disclosure statement and, sure enough, found out that the VP is lying to the American people for the umpteenth time. Deficits do matter and Cheney has invested his money accordingly.

The article is called “Cheney’s betting on bad news” and provides an account of where Cheney has socked away more than $25 million. While the figures may be estimates, the investments are not. According to Tom Blackburn of the Palm Beach Post, Cheney has invested heavily in “a fund that specializes in short-term municipal bonds, a tax-exempt money market fund and an inflation protected securities fund. The first two hold up if interest rates rise with inflation. The third is protected against inflation.”

Cheney has dumped another (estimated) $10 to $25 million in a European bond fund which tells us that he is counting on a steadily weakening dollar. So, while working class Americans are loosing ground to inflation and rising energy costs, Darth Cheney will be enhancing his wealth in “Old Europe”. As Blackburn sagely notes, “Not all ‘bad news’ is bad for everybody.”

This should put to rest once and for all the foolish notion that the “Bush Economic Plan” is anything more than a scam aimed at looting the public till. The whole deal is intended to shift the nation’s wealth from one class to another. It’s also clear that Bush-Cheney couldn’t have carried this off without the tacit approval of the thieves at the Federal Reserve who engineered the low-interest rate boondoggle to put the American people to sleep while they picked their pockets.

Reasonable people can dispute that Bush is “intentionally” skewering the dollar with his lavish tax cuts, but how does that explain Cheney’s portfolio?

It doesn’t. And, one thing we can say with metaphysical certainty is that the miserly Cheney would never plunk his money into an investment that wasn’t a sure thing. If Cheney is counting on the dollar tanking and interest rates going up, then, by Gawd, that’s what’ll happen.

The Bush-Cheney team has racked up another $3 trillion in debt in just 6 years. The US national debt now stands at $8.4 trillion dollars while the trade deficit has ballooned to $800 billion nearly 7% of GDP.

This is lunacy. No country, however powerful, can maintain these staggering numbers. The country is in hock up to its neck and has to borrow $2.5 billion per day just to stay above water. Presently, the Fed is expanding the money supply and buying back its own treasuries to hide the hemorrhaging from the public. Its utter madness.

Last month the trade deficit climbed to $70 billion. More importantly, foreign central banks only purchased a meager $47 billion in treasuries to shore up our ravenous appetite for cheap junk from China.

Do the math! They’re not investing in America anymore. They are decreasing their stockpiles of dollars. We’re sinking fast and Cheney and his pals are manning the lifeboats while the public is diverted with gay marriage amendments and “American Celebrity”.

The American manufacturing sector has been hollowed out by cutthroat corporations who’ve abandoned their country to make a fast-buck in China or Mexico. The $3 trillion housing (equity) bubble is quickly loosing air while the anemic dollar continues to sag. All the signs indicate that the economy is slowing at the same time that energy prices continue to rise.

This is the onset of stagflation; the dreaded combo of a slowing economy and inflation.

Did Americans really think they’d be spared the same type of economic colonization that has been applied throughout the developing world under the rubric of “neoliberalism”?

Well, think again. The American economy is barrel-rolling towards earth and there are only enough parachutes for Cheney and the gang.

The country has lost 3 million jobs from outsourcing since Bush took office; more than 200,000 of those are the high-paying, high-tech jobs that are the life’s-blood of every economy.

Consider this from the Council on Foreign Relations (CFR) June edition of Foreign Affairs, the Bible of globalists and plutocrats:

“Between 2000 and 2003 alone, foreign firms built 60,000manufacturing plants in China. European chemical companies, Japanese carmakers, and US industrial conglomerates are all building factories in China to supply export markets around the world. Similarly, banks, insurance companies, professional-service firms, and IT companies are building R&D and service centers in India to support employees, customers, and production worldwide.” (“The Globally integrated Enterprise” Samuel Palmisano, Foreign Affairs page 130)

“60,000manufacturing plants” in 3 years?!?

“Banks, insurance companies, professional-service firms, and IT companies”?

No job is safe. American elites and corporate tycoons are loading the boats and heading for foreign shores. The only thing they’re leaving behind is the insurmountable debt that will be shackled to our children into perpetuity and the carefully arranged levers of a modern police-surveillance state.

Welcome to Bush’s 21st Century gulag; third world luxury in a Guantanamo-type setting.

Take another look at Cheney’s investment strategy; it tells the whole ugly story. Interest rates are going up, the middle class is going down, and the poor dollar is headed for the dumpster. The country is not simply teetering on the brink of financial collapse; it is being thrust headfirst by the blackguards in office and their satrapies at Federal Reserve.

python February 25, 2007 at 12:28 am

John K.

Please limit your response to either 1,000,000 words or 3 silly points. You seem to have exceeded both limits.

John Konop February 25, 2007 at 4:21 pm


You think VP Cheney betting against the dollar is a silly point?

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