Out of Control Policy Blog

How the New Congress Hurts

Like many frustrated-but-not-surprised libertarians, the GOP's congressional reign failed to meet my very low hopes. I took a "serves 'em right" attitude toward the R's recent defeat, and if I can muster any hope now it's for the effects of gridlock, not for the other team.

A case in point comes from How Free Trade Hurts, a recent WaPo oped by Senators Byron Dorgan and Sherrod Brown:

    The result [of free trade agreements] has been a global race to the bottom as corporations troll the world for the cheapest labor, the fewest health, safety and environmental regulations, and the governments most unfriendly to labor rights. U.S. trade agreements paved the way for this race: While rejecting protections for workers or the environment, they protected investors and corporate interests.

    Worker activism, new laws and court decisions changed all that during the past century.

Greg Mankiw reacts:

    That last sentence is striking. There is no doubt that most Americans have seen dramatic improvements in living standards and workplace norms over the past century. But should we really give most of the credit to "worker activism, new laws and court decisions?" I don't think so.

    I would give most credit to economic growth, which in turn is driven by technological progress, a market system, and a culture of entrepreneurship. As the economy grows, the demand for labor grows, and workers achieve better wages and working conditions.

    Economic studies of unions, for example, find that unionized workers earn about 10 to 20 percent more by virtue of collective bargaining. By contrast, real wages and income per person over the past century have increased several hundred percent, thanks to advances in productivity.

    Similarly, working conditions are poor in less developed countries today because productivity is low there. The key to improving lives in those nations is economic growth, not "worker activism, new laws and court decisions."

The Sens included the requisite "race to the bottom" canard and also continue to whip up fears about the trade deficit. Apparently Americans should yearn for the days when our nation boasted a trade surplus.

A while ago Don Boudreaux (no link) offered an important reminder:

    ... in 102 of the 120 months of that most economically depressed decade, the 1930s, the U.S. ran trade surpluses. On an annual basis, America had a trade surplus for nine of the ten years of the 1930s (with 1936 being the only year of a trade deficit). For the whole of that decade, the U.S. ran a significant trade surplus. Exports over those dreary ten years totaled $26.05 billion while imports totaled only $21.13 billion.

    Clearly, just as a trade deficit is no sign of economic malaise, a trade surplus is no sign of economic vitality.

Related: Dismantling another Dorganism

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