Ron Paul delves into last week's news that Donald Trump saved 1,000 U.S. jobs with his Carrier deal. He also debunks some very common protectionist myths. From our notes:
tariffs do not work, the Carrier deal is not so good for labor over all
reducing taxes to Carrier only makes other US businesses suffer
- we benefit from another's country's protective tariffs
- domestically protecting one industry damages another and ultimately our competitiveness
- currency wars > trade wars > military escalation
- Any tariff benefits are short lived
We have a ton of inflation
He concludes that due to government interventions and the resulting misallocations of capital, inflation is here. It just has not filtered to the prices of consumables yet. People should be ready for that next.
Introduction
Here is our favorite part
Even if other Countries Used Protectionism while the US didn't, we'd benefit
In one section Ron channels Friedman, who we agree with. This is not an easy comment to explain, and the following is a bit reductionist. But the point remains. Intervention in any form delays free market forces. It kicks the can dow the road creating inefficiencies for generations in unsustainable industries. It delays seasonal and cyclical industry renewal. Ron's sentiments in our own words:
- What If the US had no protectionist barriers but others did?
- a foreign country subsidizes its company to sell 5k refrigerators at 4k in the US, the US becomes wealthier
- the other country's protectionist ways will impoverish it in the long run
- Won't removal of Trade protections will result in lower employment?
- the fear of temporary dislocation and increased unemployment prevents the government from doing the right thing
- the inability to decomplexify the situation is the major culprit of the persistence of trade protectionism (see the tax code)
- trade barriers hinder free markets, which encourage mal-investment and the propping up of inefficient businesses
- corporations benefit under the guise of "saving jobs", the consumer's benefit and thus his economic freedom is secondary
- protectionist measures delay natural market-clearing events that if permitted, would sort themselves out much more efficiently then when protectionist complexities can no longer keep market forces at bay and collapse
Ron Paul's main point in a very illuminating take on free trade, protectionism, and debunking some myths about protecting labor and free trade via "protectionism"
- Government's Purpose
- Misconception of Protectionism
- The Carrier Deal was not Good
Ron Paul: Government's Purpose
- Government's purpose is to protect liberty, property ownership, and voluntary contracts only
- The spender of capital is king and how he spends his money should not be impeded upon
- Yet we Must Protect labor even while the consumer is king
- labor and consumer protectionism are not at at odds with each other
- the unnecessary complexities in our system have made it difficult to address both these problems because of the carving out of deals for special interests, like corporations, subsidies, protectionist tariffs that hinder free trade
- Free trade enhances all the people who participate in it
- You can spend your money any way you want, including overseas purchases- war aside
- protectionist tariffs, currency wars, impede your right to spend money as you want
- in hindering free trade, they remove the freedom of capital movement for consumer spending, and make labor issues asymmetric
The rest is a rather eye opening lucid analysis on the Carrier trade deal. Enjoy
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