Constant repetition of fallacies doesn’t turn them into facts.
Editor, New York Review of Books
Editor:
Robert Kuttner’s favorable review of three pro-protectionist books contains several errors (“The Import of Exports,” Dec. 19). Not the least of these mistakes is his presumption that free(r) trade has – as he quotes Rana Foroohar – “hollowed out” American industry. Yet the only evidence in support of this claim is its incessant repetition by opponents of free trade. It’s contradicted by actual empirical evidence.
For example, industrial production hit its all-time peak in September 2018, and is today only 1.8 percent below that record high. In inflation-adjusted value, American industry today (October 2024) produces 16.4% more output than it produced when China joined the WTO (December 2001), 53.2% more than when NAFTA took effect (January 1994), and 150% more than when America last ran an annual trade surplus (1975).
Given this reality, it’s unsurprising that the real net worth of nonfinancial corporations in the U.S. today – although slightly lower than its peak in 2021 – is 73% higher than when China joined the WTO, 202% higher than when NAFTA took effect, and 396% higher than when America last ran an annual trade surplus.*
Note also that Kuttner errs when he asserts that there is “no metric for factoring in the [economic] system’s fragility.” Such “factoring in” is done by the very financial market that Kuttner so disdains; this market capitalizes the expected future productivity of assets into their values today. Given that the total real value of U.S. businesses is now near an all-time high and much higher than it was before any of the steps toward alleged “hyperglobalization” were taken, it’s clear that investors – people risking their own money – do not share Kuttner’s (and other protectionist pundits’) opinion that the economy is “fragile.”
Other errors abound in Kuttner’s piece, such as his embrace of the mercantilist fallacy that governments that allow their citizens greater access to imports are imposing a cost on their country in order to be “generous” to foreign governments. But this letter is already long enough.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* Using the GDP deflator, I converted the nominal dollars found at the link into real dollars.
