Facts vs. Faith

by Don Boudreaux on October 7, 2004

in Trade

A Café Hayek reader sent me a link to this website, advising me that perusing it might “cure [me] of [my] blind faith in free trade.” This kind offer of assistance came one day after I had a long and interesting discussion with several students in my law class about international trade.

During the class, I showed my students that one benefit of free trade is that it encourages resources to shift into more-productive uses. I conceded, of course, that increased foreign trade typically does eliminate some domestic jobs, but that it also creates other, generally higher-paying jobs. I conceded also that the creation of new jobs is not instantaneous.

After class, a student asked “How do you know new jobs will be created? I see your point in theory, but aren’t you relying upon faith that the market will create these new jobs?”

I answered that a belief that is founded upon a compelling theory and that is consistently supported by plenty of empirical evidence is not properly described as “faith.” As I understand the meaning of the word “faith” – especially when this word is used in an attempt to discredit a proposition – it means belief in something for no rational reason and without sufficient supporting empirical evidence. Indeed, truly to have faith in something requires that you believe in that something even if it is illogical and if the empirical evidence is stacked against it.

Is it an article of faith that new jobs will be created domestically to replace the ones eliminated by greater trade with foreigners? Faith and begorrah no! The evidence that new jobs are created in free and open economies to employ virtually everyone who is willing to work is overwhelming.

Consider, for example, these facts:

– a century ago the portion of the U.S. labor force working in agriculture was about 35%; today it’s less than 3%;

– in 1950 the number of jobs in the U.S. was about 60 million; today it’s more than double that amount at over 140 million;

– starting especially in the 1970s, American women entered the labor force in huge numbers

Is there any evidence that the great diaspora of workers from agriculture into non-agricultural sectors, or women from their houses into the workforce, created lasting unemployment? No. Jobs – well-paying jobs – were created as the labor-force expanded. Material prosperity continues to rise.

Those who worry that domestic jobs eliminated by increased foreign trade will not be replaced by other jobs in other industries believe, contrary to all evidence, that the number of jobs in an economy is fixed.

Indeed, the true believers, the ones who rely on faith, are those who seek to restrict trade on the belief that no new jobs will be created – or on the belief that most of the new jobs that will be created will be lower-paying and less-desirable – or on the belief that free trade impoverishes a country rather than promotes its prosperity. Virtually all of the evidence contradicts the beliefs and fears and accusations of protectionists. (One of many excellent sources of evidence on the great benefits of free trade is Johan Norberg’s book, In Defense of Global Capitalism.)

Protectionists, not free traders, are the true believers. Protectionists, not free traders, are the ones with a blind and abiding faith that free trade will suddenly stop generating wealth increases and that protectionism is a key to prosperity.

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