Trade For Kids—and Dummies

Free trade

She sure is stupid, isn't she?

Trading is something they did in the 18th century. Today the point to understand is that we have been and are competing head on in the same industrial goods and other areas with countries like China that have labor costs so much lower that our businesses go under, or move, and with a Japan that is forging ahead of us in quality and technology. While we passively rely on markets, other nations target our industries and jobs, such as Japan with electronics and India with software. Many of them even engage in predatory practices such as dumping, counterfeiting, and industrial spying. Our politicians in Washington are so corrupt on illegal infiltration, we are inundated with Chinese spies.

Observe the top and bottom of the following table:

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html

We may interpret this to mean we are buying things from China, or trading wealth for plastic toys, colorful beads, and other trade goods. Thus we see on the street ever more numbers of newly poor Americans riding bicycles as their primary transportation, and ever more numbers of newly rich Chinese driving cars.

Adam Smith would ask what difference it makes if we trade gold, or wealth, for Chinese goods? Is not gold just another commodity to be used in trade like soybeans or meat offal? One might think a ten year old could see the fallacy in this reasoning and point out that we might run out of gold before the Chinese run out of plastic toys, colorful beads, and other trade goods.

Put another way, globalization causes enormous pressure for wages to equilibrate worldwide, which comes about by moving high wage jobs to low wage countries; moving low wage immigrants into high wage countries, as businessmen and their lackeys in Congress hope to accomplish by bringing tens or even hundreds of millions of fecund, low wage immigrants and illegal aliens into the U.S., eliminating benefits such as health insurance and pensions, and so forth. This is good for low wage countries in general, and bad for high wage countries.

Oh, well. As Confucius advised, if free trade is inevitable, then lie back and enjoy it.