There always has been and always will be a tension between free trade, which produces large aggregate economic gains, and protectionist or socialist structures that attempt to ease the short term (and sometimes long-term) pain that capitalism can inflict on many individuals.
I'm a dedicated Democrat, but I'm dismayed that protectionism has become such an issue in the campaign this year. It really isn't good economics. In my mind, the solution is not to prevent the loss of jobs, but to ease the transistion of people who are experiencing structural unemployment. It's not a small challenge, but it's better and probably cheaper to reeducate the unemployed than it is to pay the economic price of protecting their jobs.
The economic cost of protecting a job is quite high, but it is spread out through the economy. While consumers might pay mere pennies more for a product, those pennies add up. Of course, consumers aren't aware that they're paying more than they ought to. The people who really feel the pain are the ones that lose jobs because they can no longer compete. The squeaky wheel tends to get the grease.
Quote:
The High Cost of Protectionism
How much does it cost to protect a job? An average of $231,289, figured across just 20 of the many protected industries. Costs range from $132,870 per job saved in the costume jewelry business to $1,376,435 in the benzenoid chemical industry. Protectionism costs U.S. consumers nearly $100 billion annually. It increases not just the cost of the protected items but downstream products as well. Protecting sugar raises candy and soft drink prices; protecting lumber raises home-building costs; protecting steel makes car prices higher; and so forth. Then there are the job losses in downstream industries. Workers in steel-using industries outnumber those in steel-producing industries by 57 to 1. And the protection doesn't even work. Subsidies to steel-producing industries since 1975 have exceeded $23 billion; yet industry employment has declined by nearly two-thirds.
|
http://www.dallasfed.org/fed/annual/2002/ar02b.html
This article is a good explanation of why free trade is beneficial, and is published by the Dallas Federal Reserve bank. It isn't very techinical, and is a better starting point than a WSJ editorial, which can't bear to pass up a chance to plug Reagan and take a shot at the Soviets.