Labor Day Morning Rant: Principled Free Traders™ and the Imaginary World of “Econ 101”

It is no secret that I have extreme animus toward the Principled Free Traders™ who sought to offshore every last American manufacturing job out of fealty to a utopian economic system that doesn’t exist in the real world. (And let’s be honest, those so-called “free traders” had no interest in there even being reciprocal free trade of American-manufactured goods. They are globalists who dislike American sovereignty and detest working-class Americans. Denying a living wage to blue collar Americans was a feature, not a bug of our elites’ actions.)

Michael Lind is a writer I’ve been both warm and cold to over the years, but I just stumbled upon this outstanding article he published a couple months ago. In it, he summarizes the fundamental flaw with the economic views of Principled Free Traders™.

The Idiocy of Econ 101 – Michael Lind [Compact – 6/21/2022]

The world of Econ 101 is an idealized version of a pre-industrial agrarian society, in which competition among many small firms—family farms, blacksmiths, cobblers—is the norm and can be modeled with equations and thought experiments in the classroom, with no need to venture outside to look around. All product and labor markets are assumed to be competitive, and all monopolies are assumed to be unnatural and soon eliminated by competing firms...

Telecommunications and social media networks, giant manufacturing operations, transportation networks, etc all operate outside of that hypothetical, idealized pre-agrarian village. Their size and scale change the dynamic of the relationship with both government and labor. Apple and Google have far greater control over labor costs and local government policy than a village cobbler does.

The Econ 101 story about the “free labor market” is just as irrelevant in the factory and network sectors of an industrial economy. It may be true that in rural villages of yore, a number of local blacksmiths had to engage in bidding wars and offer decent wages to attract a limited supply of apprentices. But in the United States today, more than half of the private-economy workforce is employed by companies with more than 500 employees—many of these in increasing-returns or network-effects sectors that naturally tend to be oligopolistic or monopolistic. The bargaining power of most of these workers in haggling over wages or benefits with corporate behemoths and leviathans is effectively nonexistent.

Size, consolidation, and the accompanying power of large corporations also eliminate competition in a manner that wasn’t possible to the sole proprietor of the blacksmith shop in the idealized village.

In both the factory sector and the network sector, there is a tendency toward winner-take-all oligopoly or monopoly, because the firms that take an early lead often eliminate or absorb their rivals. In the mythology of free-market village economics, any temporary monopoly will quickly be cut down to size by competition with numerous rivals,

In the world of Principled Free Traders™, it doesn’t matter what foreign government favors are extended, or what relaxation of human rights are involved, so long as offshoring American jobs causes a reduction in corporate labor expense, and so long as deplorable Americans are put out of work.

Mr. Lind also dares to acknowledge that the Econ 101 foundation of offshoring jobs is illegitimate.

Econ 101 is anachronistic as well in its conception of international economics.

The power of a corporation to pit states against states within the United States, and to pit America against other nations, in a race-to-the-bottom, divide-and rule strategy to extract maximum subsidies and regulatory and labor concessions from governments competing for corporate investment, may benefit corporate managers and shareholders, as well as some local elites and workers in the jurisdictions that win the race to the bottom. But none of this has anything to do with free trade.

“But none of this has anything to do with free trade.” Exactly! That’s why I use the mocking term Principled Free Traders™. Because they use the term “free trade” when their favored policies have nothing to do with free trade. But at least everyone benefits from lower prices, right?

Nor are free trade ideologues correct that all sides benefit, if, as a result of corporate arbitrage strategies, a once-thriving manufacturing region turns into a derelict rustbelt, and domestic capital and domestic workers are shifted permanently into the low-tech, low-wage, low-productivity, nontraded service sector.

I might also add that the promise of lower-priced consumer goods from outsourcing all manufacturing evaporates when broken supply chains and international tensions cause scarcity, with accompanying price spikes.

Many of the economic policy disasters of the last generation are easy to understand, once you realize that American policymakers continue to be guided by the superseded lessons of Econ 101,

Mr. Lind likens the economic destruction wrought by Principled Free Traders™ to pilots crashing into a mountain, because the ancient map that is used doesn’t account for mountains.

The premodern agrarian economics of Econ 101 needs to be replaced by the modern industrial economics of Econ 202. Until that happens, pilots guided by the wrong map will keep crashing into mountains they didn’t know were there.

Over the past year or two I’ve noticed that most all the Principled Free Traders™ on the right have shut up about the benefits of outsourcing American jobs. They have done a great deal of damage, but they are no longer on offense. We are winning the battle against those who hate American workers.

Happy Labor Day!

Songs of the Season

Much gratitude to each and every one of you who gets up each day and goes to work, providing for your families, and keeping the economic engine of this great country moving. Here’s a fitting song for this day.

This is for the one who drives the big rig, up and down the road

For the one out in the warehouse, bringing in the load

For the waitress, the mechanic, the policeman on patrol

For everyone who works behind the scenes

With a spirit you can't replace with no machine

Hello America let me thank you for your time

“Forty Hour Week” – Alabama

(buck.throckmorton at protonmail dot com)

posted by Buck Throckmorton at 11:00 AM

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