Phil Magness decries Joseph Stiglitz’s attempt to legitimize Venezuela’s dictatorship. A slice:
Note that he [Stiglitz] provides no evidence for his defamatory allegations against Hayek and Friedman, both of whom denounced fascism in their lifetimes. But there’s another problem with Stiglitz’s line of attack: his own lengthy track record of coddling undemocratic regimes and authoritarian dictators.
In 2007, Stiglitz traveled to Caracas, where he gushed over Venezuela’s Marxist leader Hugo Chavez, crediting him with poverty alleviation and economic reform. In reality, the Chavez regime ushered in a collapse of the Venezuelan economy that persists to this day.
Chavez’s handpicked successor, Nicolas Maduro, refuses to leave office after losing reelection in a landslide last month. Maduro concocted his own forged election results to declare himself the victor and is now waging a brutal campaign of military suppression and arrests in a desperate bid to remain in power.
Although Stiglitz has been more cautious about Maduro in recent years, he left no doubt of his appreciation for the Chavez regime. Shortly after meeting with the Venezuelan dictator, Stiglitz became a vocal media advocate for Chavez’s proposed “Bank of the South.” Chavez created this initiative in an effort to induce other Latin American countries to withdraw from the International Monetary Fund and World Bank.
Andrew Stuttaford is not impressed with recent (or past) U.S. industrial policies.
U.S. tariffs are taxes on Americans’ purchases of imported goods. When a tariff is imposed, it directly increases the cost of the imported product — a cost the bulk of which is passed on to consumers in the form of higher prices. Considering that at least 50 percent of imported goods are raw materials or intermediate goods, tariffs will likely increase production costs for domestic manufacturers. And these costs, too, are of course passed on to consumers. Also, numerous economic studies have shown a correlation between tariff implementation and price increases. For example, studies on the 2018–19 U.S.–China trade war found that American consumers bore much of the cost of the tariffs through higher prices.
To support his critique of trade liberalization, Lind argues, “In the nineteenth century, the US pursued a successful import substitution strategy that transformed it from an agrarian to an industrial economy with the help of tariffs that kept out manufactured goods from Britain and other more advanced economies, reserving America’s growing home market for American-made goods.”
Unfortunately, Lind provides no sources to support this claim. But there are plenty of sources arguing the opposite. Samuel Gregg, for example, offers one such critique. Douglas A. Irwin has likewise explored the question empirically, and finds that “evidence in favor of the import substitution view [of American economic history] is weak.”
The implications of Lind’s mistaken grasp of American economic history are two-fold. First, it misleads people into believing that the failure to “protect” American firms from foreign competition has led to the manufacturing declines we see today. The second is that many will mistakenly believe that applying tariffs and industrial policy to American industries will somehow re-shore manufacturing jobs, boost pre-tax wages, and bring about more economic equality.
Both claims are empirically false and belie a failure to grasp even the basics of Econ 101.
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Turning to Lind’s second claim: protecting American industries through tariffs has not achieved its stated goals. The 2019 Economic Report of the President, written by President Trump’s own Council of Economic Advisors, confirms that the 2018 tariffs on steel and aluminum did not lead to any beneficial changes in Chinese trade policy. More damaging, a 2019 Federal Reserve analysis illustrates that the tariffs imposed under Trump’s leadership were “associated with relative reductions in manufacturing employment and relative increases in producer prices.”
Also from Dave Hebert is this superb letter in today’s Wall Street Journal:
The tax bill blocked by the Senate was indeed a bad bill (“Good Riddance to a Bad Tax Bill,” Review & Outlook, Aug. 2). It would have added to the now-$35 trillion U.S. national debt.
Imagine someone with $445,000 in credit-card debt said to you, “I just don’t make enough money.” You’d think that person was a fool and caution them to reduce their spending. Unfortunately, congressional Democrats disagree.
With annual federal revenue of $4.5 trillion, the national debt represents almost eight years’ worth of revenue. Meanwhile, the median weekly earnings of full-time workers are equivalent to about $57,150 annually. Multiplying this number by the debt-to-income ratio gives us about $445,000. Are we really to believe that Congress has a revenue problem?
David Hebert
Senior research fellow, American Institute for Economic Research
Grand Rapids, Mich.
Sadly, political diversity is dying at Oxy and is being replaced by less tolerant wokeness. Yet there’s a silver lining. Mr. [Daron] Djerdjian in June founded an academic institution with a peer-reviewed journal—the Carl Menger Institute for Market Economics in Los Angeles. Many of his former students are signing up to take classes from his new institute. Mr. Djerdjian has also secured a new position teaching as an adjunct at the University of California Los Angeles. You can’t keep a good man down.
Tom Grennes reminds J.D. Vance that America has always been a melting pot.
Joakim Book recommends Erik Angner’s new book on economics.
Amity Shlaes quotes Calvin Coolidge: (HT Kevin Briggs)
“But I do criticize those sentiments, held in all too respectable quarters, that our economic system is fundamentally wrong, that commerce is only selfishness, and that our citizens, holding the hope of all that America means, are living in industrial slavery.”—Cal Coolidge. Whoa! CC didn’t mince words.
