According to a Washington Post/Schar School poll of Americans published on July 11, only 39% of respondents approved of US President Donald Trump’s imposition of tariffs on foreign countries, while 56% were opposed. But, while it’s good news that a majority of Americans oppose their president on this key issue, Trump is plunging ahead, apparently thinking the public will like the tariffs better when they are in place.
It is a puzzle why even 39% support these policies. Ever since the Great Depression and World War II, and the 1947 General Agreement on Tariffs and Trade, the United States – both its government and its people – has been squarely in support of free trade.
In his 1776 book The Wealth of Nations, Adam Smith provided an eloquent and convincing argument for free trade, instead of trade distorted by tariffs. With free trade, the economy prospers because goods and services are sourced from the countries that are most productive in creating them.
Shiller should have stopped right there. That is all one needs to know. Instead, Shilled dove straight into government intervention of another kind.
The problem today is that, with increased globalization an apparently permanent new condition, and with inequality within countries widening, people tend to feel that their long-term economic situation is getting riskier. We need to find a way to insure people against the risks of the global market without in any way demeaning them.
Fortunately, there is abundant precedent for in-kind government redistribution that does not seem like charity for society’s losers. When the government spends tax money on universal public education and health care, it does not strike many as redistribution, because the services are offered to everyone, and accepting them appears more patriotic than abject. As long as most people use the government schools and doctors, redistribution does not look like charity.
Another solution is to have the government encourage private livelihood insurance by subsidizing it to help cover the cost of jobs lost because of foreign trade.
Trump’s trade war is an international tragedy. But it could have a happy ending if it eventually reminds us of the risks that free trade imposes on people, and if we improve our insurance mechanisms to help them.
Yes, Trump's trade war is an international tragedy. The second sentence is ridiculous.
One who accepts Adam Smith ought not be proposing government solutions and free stuff as the solution.
The price of medical care and college education are both through the roof for one reason and one reason only: government intervention in the free market.
Mike "Mish" Shedlock