Trade

A lesson that Econ Professors Russ Roberts and Don Boudreaux have taught me on their site, Cafe Hayek, is that voluntary trade results in improved standards of living.

Some commenters to a recent post at the Cafe expressed skepticism that protectionist policy does not help improve the standard of living.

Protectionist policy is where government interferes in international trade for any any number of reasons.  A popular reason is to protect an industry and its workers from foreign competition.  To do this, government might impose tariffs (a surcharge) on imports to make consumer price of a foreign produced good higher than the domestic product.

One particular commenter by the name JHeim777 asked:

Are you making the case that if China were to remove tariffs (i.e. allow its currency to appreciate) that it would be growing even faster?

I think that’s the wrong question.

We all know that economic growth in China is happening fast.  Media repeats this often and its true.  But, I think there’s a mistake in comparing the growth of a country like the U.S. to the growth of China.

Media doesn’t often make it clear that when talking about China’s economic growth, we’re really talking about moving the standard of living from about the level it was in the U.S. in 1960 to about 1963, and we’re probably not talking about a distribution in the standard of living that is not nearly as equitable as it was in the U.S. in the 60s.

I think the better question is why isn’t the standard of living in China about the same as in the U.S. now?

The answer is that government imposed trade restrictions, both past and present, have prevented that.

Now, thinking of a China that has an average standard of living scares some people.  It shouldn’t.

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