The other day, John Kerry said something stupid like, “Bush wants to send jobs overseas. I want to keep jobs here and send products overseas.”
It reminded me of a paragraph from the book “New Ideas from Dead Economists”, by Todd Buchholz:
“Abraham Lincoln put one protectionist argument pithily: ‘I don’t know much about the tariff, but I do know if I buy a coat in America, I have a coat and America has the money – if I buy a coat in England, I have the coat and England has the money.’ He was right – he did not know much about the tariff.”
Free trade (outsourcing jobs to India is a form of trade) is one of those economic ideas that is always proven right, but still fights to be accepted because it is so easily misunderstood, thanks in part to pithy, incorrect statements by politicians such as Lincoln and Kerry.
Free trade is good. Protection is bad. Protection can benefit a few people, but at the expense of everyone else. Adam Smith said, “It is the maxim of every prudent master of a family never to make at home what it will cost him more to make than to buy.” This is also true of nations. If we can buy something cheaper abroad (in this case labor by the hour), we should buy it there and make something else here. The argument may be that there’s nothing left to make, everyone does everything cheaper. But that argument doesn’t work in the US. We are the most flexible, well-trained, wealthiest, easily educated, entrepreneurial society in the world, and we constantly reinvent ourselves to increase our wealth and employ our people. Our labor force has been getting more efficient, educated and wealthy every year, despite being held back by unions and others trying to stop the constant flood of jobs overseas. It has been happening for decades, but we still enjoy lower unemployment than most countries in the world, and higher wages. Interestingly, more jobs are “insourced” to the US than are outsourced abroad.
Alan Greenspan strengthened the argument against Kerry when he said a “new round of protectionist steps” represented “alleged cures” which “would make matters worse rather than better.”
Any educated person knows that free trade is good. John Kerry must know that free trade is good because the source of his wealth, his wife’s family business, H.J. Heinz Co., operates 22 factories in the United States and 57 in foreign countries. So why is John Kerry making a fool of himself by arguing on the wrong side of this proven issue? Perhaps it’s not that he’s uneducated about trade, but that he’s making a bet that enough potential voters are uneducated about trade. It just might work. As explained in the article below, “Why a Left,” the “Conservative catch-up problem” comes into play here. Certain complex ideas are easier to sell in liberal terms because to explain the Adam Smith, Alan Greenspan economic rationale behind them is too complex for a bumper sticker or John Kerry speech. John Kerry must be hoping the public doesn’t get educated on this topic, because if they do, he’s going to be on record as someone who doesn’t understand basic economics.
Who would want such a dumb President?