Trade and Vulnerability

by Don Boudreaux on July 26, 2012

in Complexity & Emergence, Crony Capitalism, Innovation, Man of System, Myths and Fallacies, Seen and Unseen, Trade, War

Here’s a letter to the Washington Post:

Peter Whoriskey reports on former Homeland Security secretary Tom Ridge’s study that concludes that America’s “reliance on imports” (as your headline describes it) “leaves U.S. vulnerable to disasters” (July 25).

Mr. Ridge’s assertion that reliance on imports makes us more vulnerable to natural disasters fails the smell test.  By expanding the size and diversity of the geographical area from which we receive food, fuel, and other supplies, trade makes us less – not more – vulnerable to natural disasters.

Also dubious is Mr. Ridge’s assertion that greater government protection of U.S. industries from foreign competition will strengthen our defenses against terrorism and hostile foreign military forces.  As the great international-economics scholar Leland Yeager writes, “The assumption is false that a government can know in advance just which weapons and industries will be most important in some possible future war.  Constant technological change is a leading feature both of modern war and modern industry.  Furthermore, modern industry has proved itself remarkably able to convert and reconvert between peacetime and wartime production….  [T]he United States should not partially freeze its industry by Protectionist policies into a pattern that might well prove, if war finally came, to be out of date – and all at the cost of a sure loss in real national income.”*

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030

* Leland B. Yeager, Free Trade: America’s Opportunity (1954).

Other errors infect Mr. Ridge’s report, including his claim that “We are a country at risk because we’ve ignored the gradual erosion of our manufacturing basis.”  In fact – as Mark Perry’s shows – in 2009, the inflation-adjusted value of U.S. manufacturing output was about 10 percent higher than in 2000; 47 percent higher than in 1990; 83 percent higher than in 1980; and 120 higher than in 1970.  This figure has apparently risen even further since 2009.

U.S. population, by the way, is today 10 percent higher than in 2000; 25 percent higher than in 1990; 36 percent higher than in 1980; and 52 percent higher than in 1970.  So, even when measured against per-capita U.S.-population, the real value of U.S. manufacturing output over the past 40 years has risen significantly.

Here’s David Henderson’s response, from over at EconLog, to the Washington Post‘s report on Ridge’s report.

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