Trade | Tom Mullen Talks Freedom

trump-xi-wall-street-1069240 Here’s another little piece of evidence that whatever made the American psyche one inclined towards freedom is long dead: the irrational fear China may surpass the United States as the world’s largest economy.

So what?

China’s population is five times larger than the U.S. population. It should be the largest economy in the world. If both countries had laissez faire free market systems, China would have the largest economy in the world and that would be great for the Chinese, for Americans, and for the rest of the world. It would mean an enormous increase in the world supply of goods and services, making the average inhabitant of this planet richer, just as the industrial revolution made richer the inhabitants of the countries in which it occurred.

Anxiety about China’s economy being larger than ours is born out of statist, collectivist thinking, in which the individual is subordinate to the glory of the state collective. In a word, it’s dronethink.

The only reason the U.S. economy has ever been larger than China’s is because it was relatively freer than China’s – by orders of magnitude during China’s communist era. The reason that gap is closing is because China, while still by no means a laissez faire free market, is becoming relatively freer, while the US is becoming relatively less free.

The only way for China to become the largest economy is by continuing to make its markets and, eventually, its entire society freer. Whether it will do so or not remains to be seen. The freedom momentum there has slowed somewhat recently, although the momentum here is in entirely the other direction.

Anyone who wants to live in a freer, richer, and safer world should hope both Americans and Chinese have the good sense to clean house in their respective governments and establish a laissez faire system in both countries, resulting in both becoming far more productive. Yes, China’s economy would then become the largest economy in the world and that would be just fine.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

The Broken Window Fallacy

Every time a Trump supporter sees “Made in China” on a pair of sneakers, he throws up his hands and says, “Do you see that? They’re stealing our manufacturing jobs.” He then repeats a version of Bastiat’s broken windowfallacy. It goes something like this:

China puts tariffs on our products so our exports can’t compete in its markets. But we don’t put tariffs on China’s exports, making their sneakers cheaper than we can make them here. American sneaker manufacturing jobs go to China, but no Chinese manufacturing jobs come to the United States.

Not only do millions of Americans lose their jobs, say the protectionists, but all of the money they would have spent domestically is instead spent in China. This causes other American businesses to fail, cut production, or not expand as much as they otherwise would. The unemployed American factory worker doesn’t eat out at the local restaurant. The restaurant needs fewer wait staff and cooks, who in turn don’t have money to spend on new clothing, etc.

As Bastiat would say, this is “what is seen.” But their argument ignores what is unseen.

What is unseen is the money American consumers no longer have when the tariffs are put in place. For example, the tariff may result in them paying $200 for the same pair of sneakers they previously paid $100 for. That means they no longer have $100 they previously had after buying the sneakers, which they could spend on other products. Whatever jobs they were supporting with that $100 are now lost.