George Bernard Shaw once said "If you took all the economists in the world and laid them end to end, they still couldn't reach a conclusion". One conclusion they can agree upon is the mantra that I teach my students: "Trade is Good". Free trade makes the world better off. It's a fact. To most economists, "protectionism" should be one of the seven words you can't say on TV.
However, when times get tough as they are now, politicians think they can get votes by looking like they are saving jobs with tariffs and other protectionist measures, like the "Buy American" clause that was in the stimulus package. During the Great Depression Congress passed the Smoot-Hawley Tariff act, raising tariffs and setting off a trade war that shrank world trade 60% between 1929 and 1932, and helping to make the Depression worse.
The New York Times has two articles today warning about the dangers of protectionism during these hard times. One is this editorial. And if you think the Times editorial page is written by commies, then you can read this opinion piece from the Times business section by Greg Mankiw, famous text book author and former adviser to w. Left or right, people interested in good policy know Trade is Good. Let's hope our politicians get the message.
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