Why is Trump fighting the trade war?
Critics of Trump's trade policies think everything is okay if we don't do anything. The chart at the right shows that everything is not okay if we don't do anything.
This is a chart of capital spending in the U.S. from 1968 through to the present. It is a straightforward presentation of monthly data from the Commerce Department. There is nothing clever, nothing tricky about this presentation or about the time frame chosen. The Commerce Department started this series in 1968. It superseded another series on capital spending.
It is a death sentence for America.
|... Economists think mercantilism can never work, thus Trump attacking it as practiced by China is a fool's errand or worse. This is based on the early 19th-century Theory of Comparative Advantage developed by David Ricardo. It states that among trading parties, even if one party's production costs are greater in all goods than the other party's, the first party should focus on those goods where it has a comparative advantage – i.e., where its own cost of production is lower. If the two countries then trade, both will improve their welfare. If, under these conditions, a country practices mercantilism, it impoverishes itself. This is a substantial insight.|
But it depends on a key assumption: that capital is fixed. Ricardo's example was that the British should raise sheep and the French should make wine, and they should trade these goods with each other. The example was based on climate, the ultimate in fixed capital.
With capital mobile, as it is now, mercantilism works. By forcing a trading partner to move its assets, technology, know-how, intellectual property, and R&D to the mercantilist country in order to participate in its market, a country can build itself up at the expense of its trading partner. Following its accession to the WTO, China has been strip-mining the U.S. economy of high value-added industries and high-wage jobs by doing this.
For the reason that the late, great Canadian economist, John Kenneth Galbraith explained: because all universities are controlled by very rich people or their puppets and very rich people are globalists, intent on moving their capital (including technology) from the rich countries, where wages are high, to poor countries, where wages are low, thereby increasing the return to capital. That means impoverishing the people of the rich countries who lose their source of wealth, namely, their jobs.
Do today's teachers of economics deliberately lie? Probably not. Today, no one seems to read original sources. The required qualification for a university teaching job is not knowledge, wisdom or the ability to think, but proof of having received a requisite number of hours of instruction in approved courses, all taught, not from original sources, but from textbooks created by publishing giants owned by globalist corporations with no interest in promoting understanding of the economic consequences of globalization among those who are its victims.
Read entire article at the American Thinker
Thanks to Vox Pop for the reference