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Book Review: Dani Rodrik, Straight Talk on Trade, Ideas for a Sane World Economy (Princeton, Princeton U. Press, 2018
Raymond Richman, 5/6/2018

Economists usually obfuscate the facts about international trade in their zeal to promote free trade. They ignore the fact that some countries deliberately seek a trade surplus, to export more than they import, to accelerate their rates of economic growth. But their growth is at the expense of countries which import more than they export. They ignore the fact that the trade deficits the U.S. has been experiencing for decades have converted the U.S. from being the world’s leading creditor nation to the world’s leading debtor nation, has caused U.S. growth to stagnate, and have caused millions of American workers to lose good-paying manufacturing jobs.

Prof. Rodrik is not one of those who ignores the negative impact of international trade on the U.S. economy, but he does not blame the trade deficits. In his preface, he writes that economists have overstated the magnitude of aggregate gains from trade and elsewhere he writes, “Economists do not fully understand why expanded trade has interacted with the macroeconomy to produce the negative consequences for wages and employment that it has. “Adam Smith and David Ricardo”, he writes, “would turn over in their graves if they read the details of, say, the Trans-Pacific Partnership” agreement. (All the multi-lateral agreements involve substantial losses of sovereignty with topics ranging from child labor, minimum wages, global warming, compulsory arbitration, etc., etc.. Some have even created new international institutions like the World Trade Organization.)

Prof. Rodrik does not limit himself to the economists’ views on trade but addresses many other economic and political issues. Industrialization was, he writes, “traditionally a powerful growth engine” but developing countries “typically have neither numbers nor resources on their side” and “low-income countries are running out of industrialization opportunities” for export-led growth. This is an opinion we do not share. As though export-led growth was the only means to achieve growth!. In large part, the book reads like an essay because of similar non-sequiturs.

Nevertheless, the Rodrik's insights are worth considering. He talks about “premature globalization” caused by the creation of the World Trade Organization and ensuring trade deficits which led to today’s “globalization backlash”. Imposition of any tariff is called “protectionism” by economists and the media. But he is wrong to describe tariffs intended to remove a trade deficit as protective. In our view globalization is a nonsense goal. Our goal should be balanced trade, the exchange of domestically produced goods for an equal value of foreign-produced goods. When trade is balanced both trading nations gain from trade. Those sectors that are injured in each country can be compensated by those who gain leaving a net gain overall....


Comments: 0

How Trump succeed with North Korea
Howard Richman, 5/1/2018

If you were caught by surprise by the events in Korea, I'd like to suggest that you start following Dilbert cartoonist Scott Addams' blog. He understands how Trump thinks and why he succeeds, so he predicted all of this. The following two blog posts were especially prescient:
1. April 27, 2017:
2. January 3, 2018:


Comments: 0

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]