Bernie Sanders

On Trade, Trump and Sanders are Two Peas in a Rotten Pod

Sanders and Trump are flaming protectionists, which means they peddle perhaps the oldest, most-thoroughly discredited economics doctrine ever spoken.

|

nhanusek/Flickr

Neither Bernie Sanders, the self-described democratic socialist, nor Donald Trump, the self-described terrific businessman, knows squat about economics. If their policies were enacted, regular working people would be harmed.

This is most clear with trade. Sanders and Trump are flaming protectionists, which means they peddle perhaps the oldest, most-thoroughly discredited economics doctrine ever spoken. (An older fallacy may be that an economy can grow by creating purchasing power from thin air.)

Observe: what Sanders and Trump seek to protect us from is low-priced useful products made outside the United States. Crazy, right? Our living standard depends on the ease with which we can choose from a growing array of products that make our lives better. Products, then, are an odd thing to promise protection from. In 1886 Henry George exposed the demagoguery inherent in protectionist appeals such as those from Sanders and Trump:

Trade is not invasion. It does not involve aggression on one side and resistance on the other, but mutual consent and gratification. There cannot be a trade unless the parties to it agree, any more than there can be a quarrel unless the parties to it differ.

Note two points: first, trade is voluntary cooperation—nowadays between perfect strangers across great distances, a good thing; and second, when government interferes with trade, it wrongs both parties, who would not be trading if they did not expect to benefit. George put it even more pithily: "What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war."

Exactly. So how dare Sanders and Trump propose to interfere with trade! If they don't want to buy from people outside America, they don't have to. But, please, leave the rest of us alone.

Sanders, Trump, and their worshipers in the electorate will say that free trade hurts third parties by taking "our jobs" and creates damaging trade deficits because we send billions of dollars to China and other countries. Balderdash! Trade doesn't take "our jobs" because America doesn't own jobs. Non-Americans are people too, and if they wish to accept whatever job offers come their way, that is their right. (If the governments they labor under are oppressive, they will have to find a way to change that. Starving them through trade wars won't help.)

Trade, like technology and fickle consumers, does bring change, but this comes in the form of shifting employment, not unemployment (unless government stands in the way). It is true that far fewer Americans work in manufacturing, but this is not because "we don't make anything anymore." Manufacturing output is historically high; diminished employment is the result of technology—far fewer workers can produce far more goods today than just a short time ago. 

Factory jobs now done in developing countries are low-skilled jobs (using inputs made everywhere) that by their nature wouldn't pay high wages if they were done here. In America those jobs have been replaced by an expanding variety of high-tech and service jobs. At any given time, labor and resources are finite, but our desire for goods is infinite—alas, we will never run out of work. Don't blame trade for what the government-induced Great Recession and ill-conceived "recovery" policies have wrought.

The benefit of trade, driven by comparative advantage, is that when the market process (i.e., people cooperating through commerce) directs labor and resources to their most lucrative employment, all of us have more goods and services available at the lowest possible prices—in a word, we're richer.

And don't worry about the "trade deficit." When we buy goods from abroad, sellers have only three things to do with their dollars: buy American goods and services, invest here, or buy their own country's currency, in which case the new holder of dollars faces the same options. No wonder Adam Smith said, "Nothing … can be more absurd than this whole doctrine of the balance of trade."

Government trade agreements are bad not because they free up world trade, but because they empower bureaucracies and impose stifling intellectual property laws on poor foreign workers. Don't let Sanders, Trump, and misleadingly named free-trade agreements sour you on real free trade. Trade makes peace and wealth. Protectionist politicians threaten trade wars and strife. Where do your interests lie?

This piece originally appeared at Richman's "Free Association" blog.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

41 responses to “On Trade, Trump and Sanders are Two Peas in a Rotten Pod

  1. If their policies were enacted, regular working people would be harmed.

    At this point, their respective regular working people devotees don’t know or care.

    1. And our current trade policies have been working so well as of late.

  2. These are hardly two peas in a pod.

    Trump is a con artist. Sanders is mentally ill and evil.

    Trump’s policies would result in an orgy of cronyism. Sander’s policies would destroy the nation.

    1. Trump’s policies would result in an orgy of cronyism.

      IOW, no change to the status quo then.

      1. Oh, it would be a yuuuuuuge change in the status quo.

        The current cronies — Wall Street, alternative energy flimflam artists, bullshit academicians, etc. — would be out in the triumphant Trump regime, and new cronies will be in. From their perspective, the status quo change will be yuuuuuuge.

  3. Stateless free-trade does not exist.
    Conservative principle of anti-Trust rules are necessary for good markets and to prevent monopolies and oligarchies from gouging the little guy.
    The Sherman anti-Trust legislation was key to key US market freest and most productive.
    There is no global objective entity with the power equivalent to administering anti-Trust- otherwise the OPEC community would have been sanctioned long ago.
    The US consumer market and labor market is directly influenced by decisions of foreign government entities.

    A policy that intends to have lowest consumer prices without interest in having some controlling influence on the impact on labor market obviously shifts a greater percentage of US wealth to globalist-minded importers.

    American voters are not buying it anymone.

    1. anti-trust laws are terrible. your fear of monopolies is as economically ignorant as bernie’s fear of free trade. but it’s a great boogieman to use to get more gov’t control over the economy. read some rothbard and get back to us.

    2. Sounds like the naive economic reasoning of my old 9th grade civics teacher. Her analysis was muddled fifty years ago, and it’s even more discredited today, but I’m sure that the economic understanding of most kids ended with the indoctrination they received in government-run schools. Seriously read some elementary economics, like Economics in One Lesson.

      The State is not the friend of consumers. Neither is it the friend of labor. In fact, the only long-lasting conspiracies in restraint of trade are those that are enforced by the State, usually as a result of arrangements between politicians and their cronies. Politicians love to grant monopolies, patents, and other privileges in exchange for the patronage of their cronies.

    3. The only monopolies that are gouging us are the letter mailing monopoly, the road building monopoly, the airline security monopoly, the drug safety evaluation monopoly, the food safety evaluation monopoly, and especially the contracts and torts dispute resolution monopoly.

  4. Protectionist rhetoric in the West reminds me of tariffs on imports in Canada when it went rogue – ie independent. The MacDonald conservative government insisted on protectionism. Problem is, there was nothing in Canada to protect. We didn’t produce or manufacture much; if anything. In addition, there was a mercantilist policy where we sent raw resources abroad only to buy finished products at higher prices to ensure Britain’s economy (and other nations who bought our resources) rolled along. Sadly, this pretty much remained right into the 20th century.

    What exactly would Trump and Sanders achieve by going protectionist? Populism is poppy-cock-poop.

    1. So are you saying that Canada’s trade policy controlled Britain? Because Britain was the country that fetishized ‘free trade’ in order to do EXACTLY what you claim Canada controlled. To protect the pound as the sole true reserve currency by creating structural trade deficits – and since the pound was directly tied to gold it also meant that Britain needed to physically exert its control over both the world’s marginal supply of gold (and yes the Queen as CinC of Canada and Australia armed forces counts as control – as does the takeover of the Boers) and impose ‘free trade’ by force on countries that tended to prefer silver at the time (China via the Opium wars and India via the EIC).

  5. Of course, it’s entirely fair to ask what libertarians – or anyone else – actually knows about economics.

    One of the measures of the legitimacy of a science is it’s value as a predictive tool. The track record of economists, of every school you can name, including the much-ballyhooed Austrians, is absolutely horrible. You’d do as well consulting an astrologer.

    I hold no brief for Sanders’s economic views, but I’ll point out that free-marketers have been predicting the collapse of Sweeden for decades. While Sweeden is certainly having it’s troubles these days, most of them appear to have their roots in it’s immigration policies, which libertarians are more than happy to sweep under the rug.

    Moral of the story: whenever you hear someone criticizing someone else’s economic opinions, check the history of their own predictions. Chances are pretty good they aren’t any better than those of a monkey with a dartboard.

    1. I’m pretty sure the track records of most economists of any school stink; just like sports prognosticators over time.

      It’s more of an art – with some observed laws learned over time – more than anything as you allude to.

      1. Economics is the science art of explaining why your predictions were wrong.

    2. On the collapse of Sweden thing, they have made major cutbacks to their socialist state to avoid that collapse.

      Which points out one reason that “predictions” of economists are so hard to test. People normally will adjust to changing conditions. The prediction of “if this policy continues, then X will happen” can rarely be tested, because “this policy” rarely continues until the point of X.

      The exceptions are pretty easy to spot. North Korea. Venezuela, right now. Hong Kong.

      That being said, the US is currently doing a pretty good impression of a nation that is hell-bent on testing out those predictions of what happens when you have uncontrolled deficits and unsustainable debt levels. So we may be “lucky” enough to test those predictions as well.

    3. the actual austrian economists like mises and rothbard are very careful to point out that economics is NOT and can never be predictive. there are no constants in human action like there are in the natural sciences.

      the chicago school bastardized free-market economics by trying to make it predictive and quantitative, which it can never be. don’t blame the austrians for friedman’s hubris or the public’s poor understanding.

      economics is qualitative. it is analytical. it can tell you that doing X can not help you reach Y, and that doing Z may encourage Y. But it can never tell you that doing 50 more Z brings about 30 more Y.

      1. More importantly, Austrian economics never predicts that doing Z will accomplish Y next year or even in the next decade. Austrian economics has a long-term time horizon: it only explains doing Z will encourage Y though Y may never be attained due to the innumerable variables related to the attainment of Y.

      2. Austrian economists quite deliberately ignore EVERYTHING empirical. It has chosen to be irrelevant for that reason. Its descent into Cartesian intellectual masturbation is nothing more than the same pretense by pot-smoking college sophomores that they can solve all the worlds problems merely by talking them to death in all-night bull sessions.

        1. Keynesian economics on the other hand deals with problems by kicking them further down the road because “in a hundred years we’ll all be dead.” This may be fine for the generation adopting the trick of borrowing future growth to pay current bills but sucks for the generation that gets stuck with the results. Unfortunately we have been using Keynesian theory for about 80 years so looks like we are that generation. Thanks Gramps.

          1. Why on Earth do you think I’m a Keynesian? I think the entire economics profession started losing its way (for purely careerist reasons) when it adopted ‘marginalism’ – before there was such a thing as ‘Austrian school’.

            That said – the Austrian notion that you can use systematic rationalist brain farts to comprehend messy human action is insane. It is a messy empirical world that actual humans live in – but it IS empirical and you damn well better realize that if you want to understand human action.

    4. “Of course, it’s entirely fair to ask what libertarians – or anyone else – actually knows about economics.”

      Not sure if you’re serious.

      I’d say that libertarians are probably the only ones who actually take the time to learn a little bit about how basic economics works. That’s another thing that sets us apart from the right and the left, which just can’t seem to grasp even the simplest ideas such as the law of supply and demand.

      That’s why you will never hear a libertarian who propose an idea such as a government program to defend against potential extraterrestrial invasions in order to create jobs.

      1. If XCOM is anything to go buy, such a program would create ludicrous demand for “Rookie” soldiers (and their attendant coffins).

    5. It depends on what predictions you’re talking about. What you say is true with economy-wide macroeconomic predictions. But that’s to be expected – there are vast amounts of exogenous factors that drive an economy. But if an economist predicts that a 50% tariff on a good will significantly drive up the domestic price of that good he’ll be right pretty much every time.

  6. Hi Reason!

    Listen, I understand that Trump as a populist demagogue nearing a major party nomination is a unique event in the United States and deserves plenty of loud attention, but Ted Cruz has quietly become the “alternative candidate” to Trump by winning the second most delegates thus far. Perhaps it is time to start focusing some attention on his record and philosophy? I’d say he stands a greater chance of winning his party’s nomination than Sanders does in his race.

    From what I can see, Cruz might be the best available major party option for libertarians. Or he might be a theocratic nightmare. I suppose it depends on which audience he is speaking to, and whether you think any religious right social policies have a snowball’s chance in hell of being enacted in this day and age.

    1. I get the distinct feeling guys like Cruz use libertarian rhetoric when it suits them and to principally distinguish them from Democrats. I doubt they hold enough of it to form policy or to govern.

      1. I am always suspicious of lawyers and debate champions (Cruz was both) because they are trained to win by arguing both sides not by standing for the truth. Does Cruz really believe that you can bomb fundamentalist Islam into submission? Is he an idiot or does he just say that to pander to idiots? Can he really support free trade in goods but not the free movement of people and not understand the importance of both to the economy?

        I agree that it’s most likely that Cruz is saying whatever he thinks will get him votes.

        1. …or does he just say that to pander to idiots?

          Isn’t this the main focus of political campaigns?

  7. This may be the best piece Sheldon has ever done. I’m kind of shocked by it.

  8. 8 more months or 8 more years of TRUMP, TrUMp, TrumP, tRUMP.

  9. Sheldon has just hit another one out of the park.

    I’ll have what he’s having.

    1. Make that a double.

  10. I support protectionism! We need punitively high tariffs on Derp. Socialist Ideology imports should be taxed at $5k/derpunit as should Hate speech laws.

    Now can someone with more scientific knowledge help me define the derpunit?

  11. Stateless free-trade does not exist.

    Ummm, that is the definition of “black markets”. They don’t exist?

  12. Balderdash!

    I read Sheldon for all the swearing.

  13. Richman – you are either delusional or ignorant about what a reserve currency is. Any nation that is STRUCTURING its trade balance into a particular long-term deficit/surplus is mercantilist. It is the state attempting to control the terms of international trade – as agent for a domestic beneficiary. A structural trade deficit is, mathematically, the equivalent of a monetary surplus – and for the reserve currency country it is the export of that currency into the world that drives everything. Every reserve currency country has to be willing to kill off its manufacturing sector – and, like 19th cent UK, the country most willing to do that is the one that ends up being the reserve currency. It is nothing but protection for that country’s financial sector. That country must create a mythology about what it is doing because domestically that mythology is the only way one can undermine opposition and pretend that everyone is better off. Britain chose the meme ‘free trade’ and it worked for them so we’re now doing the same meme. And we are also coopting a socialist sociology meme – ‘post-industrial society’ – to create our own Whiggish/Marxist version of historical inevitability/progress.

    Which is why every trade agreement that the US now does is designed to keep the trade deficit high. And why the US military is charged with intervening in every global situation that could potentially threaten the dollar as the reserve currency. Can’t have your cake and eat it too.

    1. Yep, the TPP just transfers manufacturing to South East Asia as China transitions to a consumer economy. The US has already transitioned. Wash, rinse repeat. And the myth of free trade (can’t even type that without laughing) is more or less a monetary tool to protect international bankers (see Professor Carol Quigley’s Tragedy and Hope). It is most certainly not a friend to the average Joe and Jane. Joe and Jane have less and less tools to build wealth. It’s real easy to understand; they take our gold and in return they give us sand, the must abundant resource on the planet. Or said another way; they offshore our jobs making it harder and harder to build any kind of wealth and give us really crappy government services in return. Just like the UK in the 19th century as you astutely point out. Reason writers have literally drank the koolaid.

  14. TPP: Dangerous Trade Agreements Great Betrayal – The CFR plans and facilitates things
    in a way they come to fruition practically unseen..Another Giant Sucking Sound!
    The Council on Foreign Relations and the Trans Pacific Partnership..
    Violating the US Constitution and chipping away at your freedom..

    TPP part 1 – Democracy: This is a term often used by Collectivists who have an esoteric
    meaning in their insider lexicon..
    http://www.newswithviews.com/Bryan/jw100.htm

    TPP part 2 – The CFR….Why does the Media avoid discussing it..
    http://www.newswithviews.com/Bryan/jw101.htm

    1. TPP part 3 – The CFR…A sliver on the tip of the iceberg regarding the depth of this evil..
      http://www.newswithviews.com/Bryan/jw102.htm

      TPP part 4: Dangerous Trade Agreements Great Betrayal – The CFR plans and facilitates
      things in a way they come to fruition practically unseen..
      http://www.newswithviews.com/Bryan/jw103.htm

  15. The author really doesn’t understand Trump’s trade ideas, which are not particularly protectionist. He also has pledged to allow Medicare negotiation on drug pricing and, more importantly, the ability of foreign drug companies to enter the US market. Drug companies have created a monopolistic drug market in this country via govt provided patents. No free market exists where monopolies exist. I haven’t heard any free market folks point out the insanity whereby Americans pay 10 times the prices that foreigners do for the same medicine.

  16. Trump is a fair trade advocate. Gback to the late 70’s and live what has passed for free trade. You’ll be surprised to find that the current rendition is anything but, as many factors of trade are heavily managed within the frameworks of all these so called free trade agreements.
    If you believe free trade requires 1,000 pages to describe it then you’re not a real advocate but a dupe, a puppet, a useful idiot for crony capitalists who have co-opted the term for other uses.
    You repeat an article of faith about free trade; that it makes goods cheaper and people richer. The cheaper side is wholly due to advanced technology. Richer? Nah. It’s been quite the zero sum game. Go look at a line of applicants for a new employer paying middle class wages. Applicants outnumber available jobs by quite a good sized factor. Or maybe you don’t believe that stat that 92 M people aren’t even in the workforce, many who are working live on part time jobs without benefits and many of the rest are under-employed. Moving people out of manufacturing has created employment bubbles in other sectors and stagnant wage growth. You might also note that those stat columns gave political impetus to Obamacare amd Medicaid expansion.
    The free trade model is only that: a model like a skin magazine centerfold, wonderful looking and not available in real life.

  17. What about all of the currency manipulation? Surely that does not facilitate free market trade.

Please to post comments

Comments are closed.