Thursday, February 19, 2009

Jim Stanford's Economic Fantasies

The thing about the NDP is that most of the time their wacky left-wing arguments don't get much press time. We don't see them, so we forget how ill-conceived they are. Thankfully, the Globe gives writing space to socialist economist Jim Stanford. Here's the link to today's delusion. Let's start with the premise. Most serious economist that I've heard don't claim that protectionism made the great depression a depression, they claim that it made it great. In other words, they argue that the closing of borders FOLLOWING the crash of 1929 made it nearly impossible for the global economy to recover. That's why most economists are scared half to death about new protectionist measures coming forth in today's recovery plans. Straw men while convenient are a sure sign of fallacious argumentation. Let's move on. Did free trade cause this global meltdown? Well, no or at least not the free trade most union hacks oppose. The trade of goods and services free from tariffs did not cause this problem. What caused this problem was the simultaneous adoption of subprime mortgages with and the securitization of the relevant credit paper. While this was freely traded which in turn has caused problems (like socialist darling Sweden praying that collapsing banks in the Baltics don't crush Swedish banks), that really is a function of banking regulations not trade policy.

Canadian trade relative to GDP fluctuating in between two years when there was free trade is an irrelevant statistic. I don't know the numbers. But, if Mr. Stanford wanted to make this argument he should have made it between 1985 (before the FTA) and today. Of course at least some of the decline in the period Mr. Stanford marks can be attributed to declining trade within the North American auto industry. When a piece of a car can cross the border numerous times in a production process it has a disproportionate impact on trade statistics. When fewer car parts and cars are crossing the border, the number is going to drop. As Mr. Stanford himself points out auto exports have dropped 40%. Frankly, the decline of the American car giants started in the 1980's or earlier. The residual effects depressing trade stats is not a good argument against free trade. Nor is the loss of the American saving instinct. Why Americans kept borrowing and spending amidst economic decline is a complicated question but I don't know how Mr. Stanford can tie that back to trade. There's no clear cause and effect relationship here. Finally, Stanford argues trade deals with Asia killed the big three. Let's separate fact from fiction. What most people in the North American car industry complain about is the lack of FREE access to Asian markets. The problem with the trade deals isn't that they're too free but that they are not free enough. The argument that the Big Three usually give is that if they could sell cars without tariffs in Japan, South Korea, Europe etc. they'd be just fine. I don't think that's the only problem the Big Three has but I wouldn't oppose making our trade relationships in Asia more free.

It's a sign of great arrogance that Mr. Stanford believes Canadians should only be able to buy cars made by American car manufacturers. This argument is a tad perplexing. In point of fact, the North American auto industry is now much larger than just the big three. Japanese auto manufacturers provide good paying manufacturing jobs to Canadians and Americans alike. I have never seen a reason for Canadians to favour a company based in Detroit over one based in Tokyo. They are both companies based in foreign countries with large economies which are friendly to Canada. The should be treated equally. Mr. Stanford is biased and sees the union shops as domestic industry. They're not. Toyota and GM are equally Canadian in that they fundamentally aren't Canadian. GM Canada is as Canadian as Toyota Canada. In both cases, Canada is not the home base for these companies and will not receive preferential treatment in either expansion or contraction. Magna, which is Canadian, provides parts to many car manufacturers from various countries and they perhaps deserve our consideration in terms of government support. What's good for Magna is good for Canada. What's good for GM is still only good for America.

1 comment:

Anonymous said...

I see a series of ad hominem attacks on Stanford. The arguments proffered here barely qualify as English, have little or no supporting evidence apart from the alcohol-soaked rantings of a dogmatic delusional "Liberal" homunculus, and in fact, miss the point of the article in question.

Do the world a favor and delete yourself from the internet.

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