Friday, January 18, 2019

Establishment Economists Are Completely Baffled By the Support for Mercantilism By President Trump and His Followers

Alan Blinde
You don't get much more establishment than Alan Blinder.

He is the Gordon S. Rentschler Memorial Professor of Economics and Public Affairs in the Economics Department at Princeton University. He served on President Bill Clinton's Council of Economic Advisers (1993-1994). He was also the Vice Chairman of the Board of Governors of the Federal Reserve System (1994-1996).

He appears baffled by the anti-free trade, mercantilist, position held by President Trump and also supported by his followers.

Blinder writes in the Council on Foreign Relations publication, Foreign Affairs:
We must always take heed that we buy no more of strangers than we sell them, for so we should impoverish ourselves and enrich them.” Those words, written in 1549 and attributed to the English diplomat Sir Thomas Smith, are one of the earliest known expressions of what came to be called “mercantilism.” Update the language, and they could easily have been tweeted by U.S. President Donald Trump, the most prominent mercantilist of today. Trump believes—or at least says—that the United States “loses” when it runs trade deficits with other countries. Many Americans seem to agree.

Yet the economists Adam Smith and David Ricardo made the definitive case against mercantilism and for free trade more than 200 years ago. Their arguments have convinced virtually every economist ever since, but they seem to have made only limited inroads with the broader public. Polls show only tenuous public support for free trade and even less understanding of its virtues.

Some of the problem comes from the nature of the case for trade. Unlike other economic concepts, such as supply and demand, the idea of comparative advantage—which holds that two countries can both benefit from trade even when one can produce everything more cheaply than the other—is counterintuitive. Defenders of free trade also have to contend with populist politicians and well-financed opponents who find foreign workers and firms easy scapegoats for domestic economic woes.
Of course, the failure to appreciate the law of comparative advantage might have something to do with the fact that this relatively simple concept, which explains the benefits for all of free trade, is not taught in high school and that mainstream media rarely brings the concept up when President Trump calls for, or introduces, new tariffs.

Perhaps a little educational effort by the CFR might help, instead of its spending so much time advocating for overseas military activities of the Empire.


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