Facts Vs. Faith

by Don Boudreaux on April 22, 2007

in Trade

There’s plenty wrong with this new Nation essay by William Greider (not least of which is the fact that he never mentions the principle of comparative advantage; if you’re aiming at the heart of economists’ case for free trade, that’s the principle you aim to slay; unless and until that principle is shown to be either false or inapplicable, the case for free trade remains strong and that for protectionism a mere religious faith in the wealth-creating potential of exemptions from competition).

Here’s a letter that I sent to The Nation in response:

To the Editor:

Inspired by the controversial work of William Baumol and Ralph Gomory, William Greider argues that those of us who oppose protectionism today are mindless members of “the church of global free trade” (“The Establishment Rethinks Globalization,” April 30).  But it is Mr. Greider and his ilk who are blinded by a faith wholly at odds with reality.

If it were true that the developing world’s large supply of highly skilled but low-paid workers inevitably attracts capital away from high-wage countries such as the U.S., foreign direct investment in open developing countries would be higher than in the U.S.  It’s not.  In 2006, China attracted $46 of FDI per capita; India attracted just over $14 per capita; the United States attracted $578 per capita.

Sincerely,
Donald J. Boudreaux
George Mason University

See also Don Luskin’s nice take on Greider’s essay.

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