Samuel Gregg explains how openness to trade promotes America’s national security. Two slices:
Understanding how, in the name of strengthening nations, economic nationalism actually weakens national security requires recognizing one of economic nationalism’s original foundations: the notion that commerce across national borders resembles a zero-sum game. This was an underlying assumption of mercantilist doctrines that dominated the West from the late fifteenth century until the mid-eighteenth century. Today, such thinking manifests itself in the economic nationalist premise that other nations are entities from whom you can at best expect irregular and relative economic gains rather than as partners with whom there can be ongoing mutually beneficial exchanges.
This is why economic nationalists worry about trade deficits. When America exports more than it imports, protectionists consider this positive. Foreigners, they say, are purchasing more American-produced goods than Americans are buying foreign goods. America thus “wins.” Conversely, when Americans buy more foreign-made products than American goods, America “loses.”
Alas, such reasoning rests upon a serious misconception of the nature of trade. When two businesses in two different countries enter into a free exchange, both “win” because each secures what they want from the other. Otherwise, neither would have consented to the exchange. From this angle, trade deficits between nations are in themselves neither bad nor good. What matters is that people get what they value. Governments attempting to alter the balance of trade in their nations’ favor through protectionism are thus trying to rectify a non-problem.
…..
A second salient fact is emerging empirical evidence suggesting that re-shoring supply chains does not improve a country’s resilience in the wake of severe disruptions. During the Covid pandemic, economists began devoting more attention to this issue. While the research is still preliminary, one major World Bank study of Covid’s impact on resilience found that “there is generally no resilience benefit from renationalizing international supply chains” and that “there is no sector in which supply chain renationalization notably improves resilience, measured either by GDP, or by value added of the sector itself.”
There is also substantial evidence that trade openness makes it easier for businesses to adjust rapidly to domestic and international shocks by permitting them to more easily source goods from a wider plurality of nations. Likewise, trade openness allows businesses to switch their supply chain quickly when parts of it become unreliable or cost-ineffective. This has allowed American companies like Apple and Hasbro, recognizing that the cost of maintaining parts of their operations in China outweighs the benefits, to shift these activities faster to India and friendlier countries in Southeast Asia.
George Will decries the insanity of both American political parties’ schemes to restore fiscal sanity. Two slices:
Republicans propose cutting taxes and regulations enough to ignite economic growth so rapid and constant that a gusher of revenue will restore fiscal health. This approach is marginally less implausible than the Democrats’ proposal, because one can at least postulate a sufficient growth rate — say, 5 percent, forever. But given the bipartisan normalization of enormous annual deficits — $2 trillion and heading up — substantial borrowing probably would be needed to supplement revenue streams, no matter how large they are.
The Democrats’ proposal is even less realistic: “Tax the rich” until they pay their “fair share.” The Republican approach ignores political and economic probabilities. The Democratic approach ignores arithmetic. The Manhattan Institute’s Brian Riedl explains this in his recent study “The Limits of Taxing the Rich.”
…..
Taxing high-earners and corporations at revenue-maximizing levels conjecturally might raise at most $7 trillion over a decade, but, Riedl warns, probably significantly less. This is because taxes on those entities and individuals — they do the most investing and job-creating — would reduce incomes, wages and economic growth.
My intrepid Mercatus Center colleague, Veronique de Rugy, warns of more debt coming our way.
Scott Sumner identifies sources of slowing productivity growth. A slice:
The 1970s saw a huge surge in other productivity killing regulations, such as the EPA and OSHA. The various environmental bills ended up hurting the environment in all sorts of ways. Because of requirements such as “environmental impact statements”, it is now far more difficult to build clean infrastructure. It is also much more difficult to build multi-unit housing. Reason magazine points out that a wind farm capable of powering 500,000 New Jersey homes was recently killed by regulation—the Jones Act made it too expensive to build.
It is also more difficult to get permission to build single-family homes, which has also slowed the growth in living standards.
In a tweet last week, U.S. Sen. Elizabeth Warren (D–Mass.) harrumphed: “We don’t need another private equity deal that could lead to higher food prices for consumers. The @FTC is right to investigate whether the purchase of @SUBWAY by the same firm that owns @jimmyjohns and @McAlistersDeli creates a sandwich shop monopoly.”
This is ludicrous for various reasons. I appreciate the value of a nicely assembled sandwich—and as a free-market advocate understand the complexities of running any type of business—but slapping lunch meats and condiments on bread is not some high-barrier-to-entry endeavor. Should a federal government that is nearly $ 34 trillion in debt and can’t manage basic operations be micromanaging fast-food business purchases?
Tyler Cowen ponders the performance before Congress of certain university presidents.
When private entrepreneurs try a new technology and consumers don’t take to it, the entrepreneurs end up suffering. When bureaucrats do the same, the consumers end up suffering.
GMU Econ alum Dominic Pino has an easy time poking justified fun at the infantile notions about market competition and antitrust prevalent today among political “leaders” (so called). Here’s his conclusion:
Before the consumer-welfare standard, there was a different standard in antitrust law: “The government always wins,” as Supreme Court justice Potter Stewart quipped. The consumer-welfare standard is the result of having learned from past mistakes and protects the economy from the arbitrary whims of politicians. There is no number of companies controlling some percentage of a market that will satisfy politicians who are going after an industry they hate — and no amount of concentration they won’t tolerate in an industry they like.
Charles Cooke is correct: “Journalist unions are hilarious.”
John Tierney reviews Joe Nocera’s and Bethany McLean’s The Big Fail. A slice:
The American response to the Covid pandemic was an unprecedented disaster— surely the costliest public-policy mistake ever made in peacetime—but most of the politicians, public-health officials, scientists, and journalists responsible still refuse to acknowledge the damage they caused. Many still pretend that the lockdowns and mandates were effective. Others argue that they did the best they could under the circumstances and dismiss critics as partisans trying to score political points. It’s time, they plead, for all of us to move on.
Joe Nocera and Bethany McLean have not moved on, and their new book, The Big Fail, is especially valuable for two reasons. First, it provides an insider’s view of how mistakes were made during the pandemic and how public-health officials and scientists blatantly violated basic principles of their professions. Second, these veteran journalists can’t be dismissed as conservative partisans. Nocera, who now writes for the Free Press, was a long-time op-ed columnist at the New York Times; McLean is a contributing editor to Vanity Fair. Their book attacks Republicans, especially Donald Trump, along with other targets that left-leaning readers love to hate, such as the business executives who run hospital chains and have made America dependent on factories in foreign countries for masks and other medical supplies.
But The Big Fail also shows Democrats how much needless harm their leaders caused, and its subtitle is a dagger aimed at a liberal’s bleeding heart: What the Pandemic Revealed About Who America Protects and Who It Leaves Behind. Democrats in blue states reveled in moral superiority during the pandemic, denigrating the selfishness and stupidity of red staters who refused to lock down, close schools, and wear masks. They mocked #FloridaMorons on Twitter and proclaimed their devotion to “the common good.” The Right lambasted those Democrats for their virtue signaling (as in the Babylon Bee headline, “Inspiring: Celebrities Spell Out ‘We’re All In This Together’ With Their Yachts”). The Big Fail chronicles why they deserved it.
…..
“Maybe—maybe—the social and economic disasters that lockdowns created would have been worth it if they had saved lives,” the authors write. “But they hadn’t. Imposed without any prior evidence of their efficacy, lockdowns helped ‘flatten the curve’ in the short term, which was certainly beneficial for beleaguered hospitals, but their long-term utility was negligible. To look at a list of countries and their death tolls, you would scarcely be able to guess which ones used lockdowns as a mitigation strategy and which ones didn’t.”
The lockdowns were a novel experiment advocated by computer modelers against the advice of eminent epidemiologists with experience in pandemics, notably Donald A. Henderson, who directed the successful worldwide program to eradicate smallpox. He, Tara O’Toole, and two colleagues published a paper in 2006 warning that lockdowns, school closures, and mask mandates would be ineffective and cause collateral damage that would be “devastating socially and economically.” Henderson died four years before Covid, but he disagreed with computer modelers throughout his life, as O’Toole recalls in The Big Fail. She quotes his advice to would-be lockdowners: “Look, you have to be practical about this. And you have to be humble about what public health can actually do, especially over sustained periods. Society is complicated, and you don’t get to control it.”
Henderson had urged public-health officials during a pandemic to focus on maintaining normal social functions and reassuring people, but instead, the Centers for Disease Control and other officials frightened everyone with worst-case scenarios based on absurdly unrealistic computer models. Trump initially resisted the calls to follow China in locking down, but he eventually succumbed to the media hysteria and pressure from Anthony Fauci and Deborah Birx on the White House Coronavirus Task Force. “By then,” as one official explains the administration’s decision in The Big Fail, “it was just, we need to do something.”
