“No nation was ever ruined by trade.” — Benjamin Franklin
“My favorite word is ‘tariffs!’” — Donald Trump
This week, the authors of the book “Why Nations Fail” were awarded the Nobel Prize in economics. They focused on the benefits of democracy and private property rights as key elements of prosperity. For example, they looked at the divided city of Nogales, which is half-split along the border between the United States and Mexico, and note that Nogales, Arizona, is far more prosperous than its counterpart in Mexico, even though they have the same Latin culture and climate. The difference is in governance.
The key difference between nations is not only democracy, but the rule of law, limited government, free trade, sound money and laissez-faire regulations — as shown in the Economic Freedom Index.
Economic Freedom Is the Key to Prosperity and Bull Markets
Someday, the Swedish Academy should give the Nobel Prize to Canadian economist Michael Walker, who inspired the development of the Economic Freedom Index that is published annually by the Fraser Institute and the Heritage Foundation.
The Economic Freedom Index is a way of measuring the degree to which countries adopt or reject the Adam Smith “system of natural liberty,” which he developed in his magnum opus, “The Wealth of Nations,” published in 1776. It was a declaration of economic independence.
Making the Short List of Potential Nobel Prize Winners
Gary Alexander, editor of the Navellier Growth Letter, put me on the short list to win the Nobel prize in economics for my advocacy of gross output (GO), the missing piece in the macroeconomic puzzle. He predicts that GO “could, in time, equal the influence of Gross Domestic Product (GDP).” Read his column here: 10-15-24: Who Should Win This Week’s Nobel Prize for Economics? — Navellier.
Steve Forbes predicts that GO “will have a profound and manifestly positive impact on economic policy,” and says that I deserve the Nobel Prize for developing it. But, as an outlier in the economics profession, I’m not holding my breath. There are plenty of other worthy candidates.
Donald Trump’s Error
One of the reasons why the United States and the world have advanced in the past 200 years is a key element of the Adam Smith model and the Economic Freedom Index: Free Trade! Over the years, tariffs and duties have declined sharply, leading to prosperity for all and a sharp decrease in poverty.
Unfortunately, Donald Trump fails to understand this grand principle of sound economics. He has recently doubled down on his advocacy of a 10-20% across-the-board tariff on U.S. imports, plus extremely high duties on products made in China and Mexico. As The Economist warned, regarding trade policy, “Donald Trump is the more radical of the two candidates, with a vision for tariffs that would turn the clock back nearly a century on economic strategy.” (Remember, the Smoot-Hawley Tariff Law exacerbated the Great Depression.)
Raising tariffs often backfires, because of its “unintended consequences” — in particular, a 10-20% tariff will raise the cost of nearly everything. Trump needs to read Frederic Bastiat’s famous essay, “What Is Seen and Not Seen.” He focuses solely on the benefits of a tariff to protect domestic jobs and ignores the rising cost for consumers.
Trump says he favors tax cuts, but tariffs are actually taxes on imports, which constitutes 28% of GDP and has been rising. Yes, tariffs bring in billions in revenues, but they also raise the cost of the supply chain. As Kamala Harris states, “It amounts to a universal national sales tax.”
Trump also ignores the benefits of foreign competition. Is there any doubt that American cars are better quality and variety because of stiff competition from Japan, Germany and other nations?
Finally, he ignores how open trade and globalization allow other countries like Mexico and China to improve their citizens’ wages and standard of living. If Trump closes the border for Mexican-produced goods, it will only increase the surge of illegal immigrants from Mexico.
Almost all economists agree that protectionism on net balance hurts economic growth and causes a trade war with other countries.
To Learn Why Free Trade Is The Best Policy, Read Chapter 26 of ‘Economic Logic’
Chapter 26 of my guidebook, “Economic Logic,” gives an easy-to-understand explanation for “Globalization, Free Trade and Protectionism.”
“Economic Logic” is THE guide to sound economics, all in one book. It’s ideal for students and adults alike and is used in introductory courses in colleges around the country. It is now in its new 6th edition, published by Capital Press/Regnery.
It is a 738-page guidebook on all aspects of sound free-market economics. It is dedicated to Milton Friedman and Friedrich Hayek. Read the book and see why.
For all the details, including chapter headings, see https://mskousen.com/economic-logic/.
The price on Amazon is $82 plus shipping, but if you order through www.skousenbooks.com, you pay only $44. I autograph each book and mail it at no extra charge anywhere in the 50 states.
“Congratulations on being made America’s #1 Economist in 2024 and being nominated for the Nobel Prize. You have made more of a difference than most published economists.” — Fred McMahon, Fraser Institute of Canada
“Eureka! Skousen has done the impossible. Students love it! I will never use another textbook again.” — Harry Veryser, University of Detroit-Mercy
“Mark Skousen is the only economist I can understand.” — Dr. Lawrence Hayek
“An excellent balance of theory and the real world that no other text has achieved.” — Charles Baird, California State University, East Bay
“Better than any book out there! Skousen presents real business economics in a clear, provocative and logical fashion.” — Ian Mackechnie, University of Wales
“Perfect for any economics student — designed to maximize learning while minimizing monotony. Simple, direct and comprehensive.” — K. Au, Homeschool instructor
“My college econ classes, filled with perplexing theories like the paradox of thrift, GDP and Keynesian fiscal policy, were completely refuted by this excellent free-market textbook. Students, if your professors don’t use this text, get it for yourself so you can really understand the concepts of sound economics.” — Amazon review
Ben Franklin Said It Best
Benjamin Franklin was a devoted follower of Adam Smith and understood the true nature of free trade and protectionism. He wrote, “The statesman who first invented tariffs had the genius of a pickpocket. Most of the statutes, acts, edicts and placards of parliaments, princes and states, for regulating, directing and restraining of trade have either political blunders or jobs obtained by artful men for private advantage under the pretense of public good. In general, the more free and unrestrained commerce is, the more it flourishes. No nation was ever ruined by trade.”
Monday’s Lecture at the Villages, Florida: Back by Popular Demand
I look forward to see many of you at the Orlando Money Show starting today, Oct. 17-19… Then on Monday, Oct. 21, 10 – 11:30 a.m. EST at the Savannah Center, 1545 North Buena Vista Blvd., The Villages, Florida. I spoke there last year and have been invited back to speak on “Permanent Rising Prices: What are the Best Inflation Hedges?” My talk is open to the public. To register or answer your questions, contact Bill Snyder at natemly@gmail.com.
COSM Technology Summit, Oct. 31-Nov. 1, Bellevue Hyatt, Seattle, Washington
This conference is sponsored by George Gilder and the Discovery Institute. I’ll be speaking on gross output (GO) and its significance as a critical supply-side statistic. For more information, go to https://cosm.tech/. To receive a $200 discount, use EAGLE-MS as the Promotional Code when registering.
You Blew it!
The Longshoremen Are the Luddites of Today
By Mark Skousen
Last month, the International Longshoremen Association (ILA) went on strike in ports in Eastern and Southern United States. They quickly came under pressure to settle the strike due to the adverse effect on the U.S. economy, especially in places like North Carolina, which was hit by a devastating hurricane. The Biden/Harris administration was especially worried it would have an ill effect on the November elections.
The focus on the dockworkers and their union leader Harold Daggett was an eye-opener. Not only did they get a huge pay increase (62% increase over six years), but most workers already earn considerably more than $100,000 a year.
Meanwhile, ILA boss Daggett lives high on the hog, earning $900,000 a year, drives a Bentley and owns a 76-foot yacht. Of course, big corporate executives have a similar lifestyle.
But the real shocker was reported by the Wall Street Journal editorial board: “Start with the astounding fact that there were 50,000 or so ILA strikers but only 25,000 or so port jobs. That’s right, only about half of the union’s members are obliged to show up to work each day. The rest sit at home collecting ‘container royalties’ negotiated in previous ILA contracts intended to protect against job losses that result from innovation.”
Sounds like a sequel to the famous film, “On the Waterfront.”
Reason magazine also reports that American ports rank among the least efficient in the entire world. They write, “The ports in New York, Baltimore and Houston — three of the largest of the 36 ports that could have been shut down by the ILA strike — are ranked no higher than 300th place (out of 348 in total) in the World Bank’s most recent report on port efficiency. Not a single U.S. port ranks in the top 50. Slow-moving ports act as bottlenecks to commerce both coming and going, which ‘reduces the competitiveness of the country… and hinders economic growth and poverty reduction,’ the World Bank notes.”
It’s time to clean the deck. And, while we’re at it, Congress needs to eliminate the draconian Jones Act that prohibits the use of foreign-built ships in America. See my “You Blew it” column, “By Jones, What a Disaster” in Is a Financial Hurricane Coming? – Mark Skousen.
