Quotation of the Day…
… is from page 161 of Deirdre McCloskey’s superb 1990 book, If You’re So Smart: The Narrative of Economic Expertise (original emphasis):
The idea [for nations] is not to “compete,” whatever that might mean in thrillingly collectivist policies, but to become skilled and hardworking and therefore rich. Why foreign trade should be especially important to the matter is obscure, though speaking against the outlanders is common topic. The American economy, it happens, has been largely self-sufficient since its beginning, which is no surprise, since it stretches over half a continent. Lester Thurow pooh-poohs as not wealth-producing the “taking in of one’s own laundry,” that is, trading with ourselves. But that is what Americans mainly do and have always done, with good results, thank you very much. The “lost jobs,” to repeat, are mainly lost to domestic competition.
DBx: Yes.
The dilettante in economics or trade policy might find it odd that I, an American who is outspoken and unapologetic in his championing of a policy of unilateral free trade, would quote this passage. This dilettante might suppose that which is not the case, namely, that McCloskey is here saying that we Americans don’t really gain much by trading with foreigners. But that’s not at all what she’s saying (or what I’m implying by quoting her). McCloskey here is merely pointing out that, being a very large country – geographically and population-wise – the vast majority of the economic activity that we Americans engage in is intranational, not international. And because our markets have always largely been free, we have prospered.
We still gain from international trade and, hence, are harmed by protectionist interventions.
I quote McCloskey here as a reply to Robert Lighthizer’s recently expressed befuddlement at why, in our defense of free trade, Phil Gramm and I nevertheless noted that America’s impressive economic growth in the 19th century owed relatively little to international trade.
But a further point warrants being made: Putting aside genuine national-security concerns, whatever problems protectionists point to as allegedly resulting from free trade – problems such as lost jobs, downward pressure on some wages, economic change faster than some people fancy is appropriate, the shifting of economic activity from some locales to other locales within the country, failure to appropriately value ‘the industrial base,’ you name it – are problems (if and to the extent these are really problems) that arise in the U.S. with much greater frequency and in much larger volume as a result of purely domestic economic activities than of economic activity that is significantly connected to imports. Indeed, even genuine national-security concerns are sometimes raised by purely domestic market processes.
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