Protectionists
claim that free trade is bad for America - that increasing imports
of goods means increasing exports of jobs, thereby gutting our
economy. This notion could only be valid in a zero-sum world with a
fixed number of jobs, where one country's gain would be another's
loss; in fact, though, the number of jobs, both at home and abroad,
is locked into a clear uptrend. New businesses and industries
continually emerge in the never-ending attempt to satisfy humankind's
insatiable wants. We can never run out of jobs.
Free trade doesn't reduce employment, but rearranges it to more efficient applications, just as economic competition across town, across the state, or across the country causes some jobs to supplant others. This process is natural and healthy, not sinister or harmful. Yes, as counterintuitive or perverse as it may seem, a healthy economy is one that destroys jobs - by replacing them with new jobs. Just as a healthy human body undergoes a constant process of renewal by shedding dead cells and replacing them with living cells, so a healthy economy is one in which more efficient providers of goods and services displace less efficient providers.
If that sounds cold and clinical to you, then ask yourself if you would rather be part of the U.S. economy or to have been a worker in the Soviet economy. The Soviet Union had the most protectionist system possible - the government guaranteed everyone's job so that there was never any unemployment. The price for guaranteed employment was an economy without flexibility or adaptability. With employment and the economy frozen in place, the Soviet planners in effect outlawed economic progress, resulting in devastating stagnation and impoverishment in the so-called "worker's paradise."
By contrast, the dynamic U.S. economy has always pushed people out of old jobs and into new jobs. While challenging for the individuals affected, these are the inevitable growing pains associated with progress for us all. Look at American agriculture, for example. Over the past 250 years, farm employment has shrunk from over 80 percent of our population to less than 2 percent. We may sympathize with the anguish of millions of Americans who have had to abandon farming as their source of income, but our society is much richer today as a result of this shift. Because so few people are needed to produce agricultural commodities, tens of millions of other Americans are now free to provide countless other goods and services that wouldn't even exist if their providers were still back on the farm.
The slogan "Buy American" resonates within and appeals to our patriotism, but insofar as it means to shop for American-made products instead of the lowest-price, highest-quality products, it is a rejection of economic rationality. Economists going back to Adam Smith understand that the true measure of "the wealth of nations" is the affordability of John Q. Public's cost of living. If the United States had been closed to foreign trade over the past 50 years, we might be paying $40,000 for a Ford Pinto IV, $15 for a gallon of gasoline, $5 for a quart of orange juice, etc. We would all be a lot poorer.
What actually has happened over the past 50 years is that protectionist barriers have been lowered. It is estimated that the average American household's income is $10,000 per year higher as a result of tariff reductions in the past half-century.
In 1992, Reform Party presidential candidate Ross Perot warned of "a giant sucking sound" of jobs moving from the United States to Mexico if the North American Free Trade Agreement (NAFTA) were adopted. Since NAFTA took effect in 1994, the United States has enjoyed a net increase of nearly 2 million jobs per year, with compensation in three-fourths of the new jobs above the national median.
What, then, in the face of all the evidence to the contrary, explains the persistent warnings about trade's alleged threat to the country? These cries are protests from those Americans whose jobs are most threatened by foreign competitors with greater productivity. Those workers will need to reinvent their careers as American production continues to evolve in the direction of higher-value-added, digital, and knowledge-based goods and services, and away from low-tech or semi-skilled physical labor. Who can blame these Americans for being unhappy? But like generations of bankrupt farmers before them, the individual travail of certain individuals is essential to the progress of the nation. As one who has suffered unemployment, I sympathize with those who are forced to change their job, but the overarching fact is that as long as our economy keeps generating new jobs, the country's economic future is bright.
Dr. Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision and Values at Grove City College.
