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THE FALLACY AND DANGER OF FREE TRADE

Craig Harrington | Published 12/03/08

The concept of “free trade” as we have come to understand it is inherently misleading. There is a misconception that “free trade” equals “fair trade.” The phrase “free trade” merely refers to the ability for trade to move internationally without obstruction. There is freedom in the movement of goods; it has nothing to do with the qualities associated with the practice of international trade.

Modern “free trade” is built around the concept of comparative advantage. The idea is simple, each nation should specialize in the trade or craft that makes the most efficient use of its resources. One country would specialize in one sector, another would specialize in another sector and via “free trade” all parties involved would be better off and more prosperous.

Like many socioeconomic theories, this concept fails in practice. Unfortunately, most economists think only in terms of models and mathematics rather than in real-world observation so the theory has stuck – with some alterations (see: Hecksher-Ohlin Model) – for nearly two centuries.

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TODAY'S NEWS

The Tip of the Iceberg

Dustin Ensinger | 12/03/08

Americans are living in debt. That is no surprise to anyone, or shouldn’t be at least. For years now American consumers have been taking on more and more debt while simultaneously saving less and less. This is obviously a toxic mixture, but who is to blame? The consumer? The greedy banking industry? The government turning a blind eye? Or some combination of all three?

According to an anonymous banking executive who sent an e-mail to The New York Times, the main culprit is the banking industry, with the government coming in a close second.

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Japanese Auto Industry Phenomenon

Economy In Crisis | 12/03/08

In an industry hotly contested by major corporations on three continents, Toyota enjoys a lead in manufacturing skills almost unprecedented in world business history. IBM in its pre- Bill Gates days was certainly much more deeply entrenched in its industry . And so of course was the brainstorming Xerox of the 1960s. But in both these cases, leadership was based on special factors that reflected hardly at all on the sort of consummate nuts-and-bolts manufacturing mastery that is at the heart of the Toyota story.

Within the Japanese industry Toyota is clearly king, accounting for more than one-third of all Japanese-badged cars produced worldwide. Toyota’s share is more than double that of Japan’s second-place player Nissan. More to the point Toyota passed Ford Motor in 2004 to become the world’s second largest maker and is believed to have overtaken General Motors to take the number one slot in 2008.

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Where Will It End?

Dustin Ensinger | 12/03/08

There appears to be an endless supply of taxpayer dollars being funneled into AIG, a company whose misfortunes in the subprime mortgage markets were of its own creation. A company that less than one week after receiving a loan of $85 billion taxpayer dollars decided it would be prudent to send its boneheaded, greed-addled executives - who brought it to the brink of bankruptcy - on a $400,000-plus executive retreat. A company that just three years ago was fined $1.6 billion for shady accounting practices.

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Current Recession Feels Like Bottomless Pit

Dustin Ensinger | 12/03/08

Other signs of economic despair - manufacturing at its lowest level in 26 years, 120,000 jobs being shed a month, the volatility on Wall Street, home price plummeting - suggest that the bottom may be a long way off.

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JPMorgan Chase to Shed 20 Percent of WaMu Workforce

Dustin Ensinger | 12/03/08

JP Morgan Chase, the largest U.S. bank by assets, has announced that it will be shedding 9,200 jobs at Washington Mutual. Until WaMu was sold to JPMorgan Chase it was the nation’s largest savings-and-loan.

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The Great American Sell-Off: A Disastrous Habit

Foreign Ownership of U.S. Industries

	Sound recording industries	97%
	Commodity contracts dealing	79%
	Motion picture and sound recording industries	75%
	Metal ore mining	65%
	Motion picture and video industries	64%
	Wineries and distilleries	64%
	Database, directory, and other publishers	63%
	Book publishers	63%
View Full List of Industries

Foreign Financing of U.S. Government Debt

	Japan	$593.4 Bn
	China	$518.7 Bn
	United Kingdom	$290.8 Bn
	Oil Exporters	$173.9 Bn
	Brazil	$148.4 Bn
	Carib Bnkng Cntrs	$133.5 Bn
	Luxembourg	$75.8 Bn
	View Full List of Debtholders

U.S. Consumption Spent On Foreign Goods

	Footwear	90%
	Audio & Video Equipment	87%
	Other Leather Products	86%
	Leather and Hide Tanning	75%
	Apparel Accessories	67%
	Apparel	67%
	Computer Equipment	59%
	View Full List of Products