• Populist Economic Myths

      Citizens United is the group that made the movie “Hillary, the Movie,” and then, fortunately, got the Supreme Court to rule that Congress cannot restrict the ability of unions and corporations. Now Citizens United has made another movie, called "Generation Zero," which is scheduled to come out in theaters this month. The movie makes important points about our unsustainable debt and how government helped cause today’s financial problems.  The movie won plenty of applause at its premier last week.

      But the film also sells some dubious economics. It suggests that many of the evils of the world can be blamed on the greed of the baby boomers – the generation of the hippies and greedy Wall Streeters:

      If you go back to the 1980s and the 1990s, you had this real money culture that developed… A lot of people started measuring their worth by what they could buy, by what they had…

      “It was the most spoiled, self-centered process that we've seen in any thirty year American period of American history.”…

      “It's a generation that allowed excess - individual excess -- and, you'd have to say, greed -- to run rampant.”

      Come on. Greed is nothing new. Greed is a constant.  Most everyone wants more for himself.  If you have an honest government that doesn’t play favorites, then that greed is usually a force for good.  The only way that people can enrich themselves is by inventing better ways to serve consumers.

      But greed is a handy villain.  Politicians throw the word around when attacking, taxing, and plundering business.

      During the Great Depression, Harvard professors blamed the country’s troubles on greed.

      But that’s nonsense. What made the Great Depression a “great” hardship was government meddling.

      The film also allows some people I respect, like U. Maryland business professor Peter Morici, to spout economic fallacies:

      "we have essentially de-industrialized America through a series of trade agreements."

      Wait, no we haven’t!   Here’s a graph of U.S. manufacturing output.

      Manufacturing

      I didn’t know that Morici was a protectionist.  He also rails against the “trade deficit”:

      Over and over again, we have signed bad deals. First with Japan, and now with China. They export so much more to us than they import…

      From 2004 to 2008, the trade deficit averaged over 700 billion dollars a year.

      So what. The trade deficit just means that when we buy goods from places like China, they turn around and, instead of buying goods in the US, they invest here. Economist Don Boudreaux mocks the “trade deficit” by suggesting that we crack down on trade deficits between states:

      Think of it!  No longer, for example, would Mississippians ship dollars out of state in return for cars imported from Detroit.  You’ll keep those dollars at home, and as a result get a booming, high-tech manufacturing industry – and, to boot, also get rid of the large and growing trade deficit in motor vehicles that has long plagued your state.

      And what’s true for cars will also be true for hosts of other goods and services – insurance that Mississippians now import from New York, banking that they now import from North Carolina, chicken that they now import from Arkansas, oranges that they now import from Florida, pharmaceuticals that they now import from New Jersey, coffee that they now import from Hawaii, and wine that they now import from California.  These are just a few of the products that Mississippians currently import from non-Mississippians.  Shouldn’t the jobs necessary to produce these, and countless other, products be held by Mississippians?

      In the film, Lou Dobbs also chimes in:

      If one wanted to be a free trader, you could not be, because the Chinese have barriers to trade. It's true throughout the entire world. Free trade doesn't really exist, despite the efforts of politcal class in both parties to try to create that illusion.

      But other countries don’t need to be free traders for us to benefit by trading with them. Even if China buys no goods from us, we would still benefit from the cheap goods they sell.

      I hope to have Dobbs on my show soon to debate these issues.

      TAGS
      Economics
      Free Market
      Free Trade
      Libertarianism