Economists: America’s Worst Villains?

http://www.city-journal.org/2008/18_3_economics.html

America is on the brink of what may be history’s greatest economic collapse, similar to but greater in magnitude than the pre-Nazism collapse of Germany. And we have economists to thank – economists advising our leaders and formulating economic policy. This article is a good summary of the sorry state of modern economics. It’s pretty lengthy, so I’ll just comment on a few noteworthy passages, especially the point dealing with free trade.  (It should be noted that the author of this article, Guy Sorman, is a French economist and that France enjoys a large trade surplus with the United States.  No suprise that he’s a big fan of free trade!)

The uncontrolled printing of currency destabilized Weimar Germany, facilitating the rise of Nazism.

History is repeating itself in the U.S. today. The uncontrolled printing of currency to counter the effects of our enormous trade deficit is undeniably destabilizing America. The only question is what will arise in America when the economic collapse happens. Will it survive at all?

Opening economies and promoting trade have helped reconstruct Eastern Europe after 1990 and lifted 800 million people, many of them in China, Brazil, and a now-license-free India, out of poverty. Even in Africa and the Arab Middle East, nations that have embraced capitalism have begun to escape from the terrible underdevelopment that has long plagued them.

Behind all this unprecedented growth is … a scientific revolution in economics, as yet dimly understood by the public but increasingly embraced by policymakers around the globe. … No longer does economics lie; no longer would Baudelaire be able to write that “economics is a horror.” For the mass of mankind, on the contrary, it has become a source of hope.

Here, the effects have been correctly identified, but not the cause. All of this rise in wealth around the globe has been bought and paid for by America – by the transfer of $9 trillion from America’s economy to the rest of the world through its staggering trade deficit. No wonder the rest of the world is thriving! Economics now perpetrates the biggest lie in the history of the world on the American people. It has graduated from being a liar and a “horror” to an abomination.

2. Free trade helps economic development.As Smith observed when his native Scotland began to benefit from free trade, it is through access to the world market that poor nations become rich. … Free trade also makes rich countries richer, economists agree.

We now know that free trade helps poor, overpopulated nations become rich, and wealthy, overpopulated nations to become even richer at the expense of wealthy, less densely populated nations like America.

By importing less expensive goods made in low-wage nations like China, wealthy nations effectively increase their own citizens’ income—and the main beneficiaries are poor and middle-class people, who can buy cheaper clothes, electronics, and myriad other goods.

The evidence speaks otherwise. Incomes in America have been steadily declining since free trade took root and began wiping out millions of high-paying manufacturing jobs. And when incomes decline faster than prices, people are poorer. Period. Regardless of the price of junk at Wal*Mart.

In fact, economists have long understood the law of comparative advantage: whenever differences in the cost of producing goods exist between two countries, both will benefit from free trade, a mechanism that allocates their resources most effectively.

That law has now been disproven by the rapid decline of America’s economy. The “law of comparative advantage” breaks down between two nations grossly disparate in population density. Since it doesn’t even consider the role of population density, it is not a law at all but a flawed, incomplete theory at best. At worst, it’s a failed theory that belongs atop history’s scrap heap of failed theories.

Free trade not only generates the greatest possible growth; it tends to distribute it widely, both within nations and among them. For evidence, consider the emergence of vast middle classes in all free-market societies, as well as the economic convergence among nations that have embraced capitalist economics. After less than 20 years of market-driven growth, Brazil, China, and India—whatever their injustices—are closer to the Western level of development than they were before that growth got under way.

This does not mean, as some observers fret or gleefully predict, that the United States is about to stop leading the world economically. Other nations may draw closer to it—Western Europe in 1950 had a per-capita income half that of the U.S.; now it’s 80 percent—but the American economy has remained the world’s most vigorous for more than a century because of its superior efficiency, demographic dynamism, and innovation.

This is the biggest lie of all. In spite of the listed advantages of the American economy, it has lost badly to predation by the parasitic economies of overpopulated nations. We now stand at the precipice of total economic collapse, our economy having been drained of trillions of dollars of wealth and our assets sold off and placed in control of the parasites. We’ve been transformed from the world’s greatest industrial power – the wealthiest and most envied nation on earth – into the world’s economic laughingstock, a pathetic, hollowed-out shell of what it once was.

There are a very few good, open-minded economists who objectively evaluate the destruction of America’s economy and acknowledge the folly of unfettered free trade. This is not an indictment of them. But the remainder are an absolute disgrace, clinging like drowning rats to the sinking ship of their failed 18th century theories of Smith and Ricardo, in spite of the mountain of evidence piling up to discredit the very “laws of economics” they use to rape and plunder America’s economy. If America survives, a very open question, they will likely go down in history as America’s greatest villains.

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