FLORIDA, March 25, 2012 — The economy has got a lot of people down.
Even though the Great Recession is officially over and has been for several years, it seems as if America is still caught in its clutches. Since the downturn began, public interest in even the most complicated of financial matters has skyrocketed. While politicians and pundits once spoke about social issues before all others, fiscal policy now dominates the discussion.
Aaron Clarey is one of the most outspoken voices to have emerged from the Recession Era. While most might know him as Captain Capitalism, a title which leaves little to the imagination about his philosophy, he is also a fossil hunter and tornado chaser who teaches ballroom dancing.
Only in America, I suppose.
In this first part of our discussion, Clarey explains the concepts of free markets, free tradeand fair trade, shares his views on the idea of free trade benefiting America in the long run, tells us not only about the importance of trade deficits, the impact of NAFTA, and finally, whether or not he thinks that the U.S. manufacturing sector can ever be comprehensively reinvigorated.
Joseph F. Cotto: Today, many people tend to confuse the concepts of free markets, free trade and fair trade with one another. How would you describe each?
Aaron Clarey: Well, technically they all fall under “free markets” though “fair trade” may have a communist/socialist sound to it, if a bunch of hippies and hipsters want to ONLY brew “organic” or “fair trade” coffee and it isn’t at the coercion of the government. Then that is a private, free market company deciding to target a market of people who are, under their own free will, demanding to pay a 500% mark up for marginally better coffee, i.e., it is a free market (nobody is intervening) and it is free trade (nobody is intervening in the trade and transport of the coffee between two countries).
About the only difference is “fair trade” has a certification process by (suspiciously) self-proclaimed certification organizations that if you wish to sell under their label. Certifying it as “fair trade,” you need to meet their standards. However, this is functionally no different than say, ISO-9000 certification.
Cotto: Prominent economists and politicians often say that free trade will only benefit America in the long run. Do you agree with this idea?
Clarey: Free trade, in the long run, will benefit every country in that in its most simplest, broken down sense; you are no longer relegating your people to the trades and wares of one country but all countries in the world. Without trade, Americans would be relegated to Hershey chocolate, never ever getting a taste of Godiva or other superior European chocolates. We would never have had the Japanese auto industry force the American auto industry to build better cars. And if you think Apple products are expensive now, without cheap foreign labor you could expect an I-Pad to go for about $3,000.
The trick is making sure free trade is indeed free and void of market manipulation and government policies that exploit or disadvantage one country over another.
Cotto: Libertarian economic theorists tend to believe that trade deficits are of minimal importance. What is your opinion on the subject?
Clarey: In “theory” yes, because there’s a built in balance of power. If a trade balance gets too out of whack, that will have a NEGATIVE effect on the CURRENCY of country with the deficit. This makes that currency weaker, which means cheaper. This tilts the balance of power back into favor of the country with the deficit because (since that country’s currency is cheaper) now all of its goods are cheaper, including its labor. However, central banks tend to manipulate the exchange rate to give their countries a better edge or advantage.
Recently, with the collapsing Euro, everybody was buying Swiss Francs. So strong did the Swiss currency get, its exports were no longer affordable. The Swiss central bank then purposely attempted to weaken the Franc by setting price controls on its exchange rate. This intervention (as commonly done by central banks) turns the issue of international trade from one of “simple economic theory” to “complex, corrupted, politics.”
Cotto: Since it went into effect during late 1995, the North American Free Trade Agreement has formed a trilateral commerce bloc between Canada, the United States, and Mexico. From your perspective, has this proven to be of benefit for America?
Clarey: Yes and no. Every economic policy is going to have winners and losers. Overall, yes, trade, commerce, consumption and standards of living have improved for all three nations cumulatively, but at the expense of various groups within those three countries. Mexico for example has benefited in terms of employment at the expense of American employees, while Americans have benefited in terms of cheaper prices at the expense of foisting higher prices on Mexicans. Cumulatively, however, it has been of benefit for the NAFTA participants.
Cotto: One of the American economy’s biggest problems is that it produces a decreasing number of material goods. In your opinion, can its manufacturing sector be comprehensively reinvigorated?
Clarey: No, unions are too corrupt, regulation is too suffocating, we have too few STEM and trade graduates, and foreign countries with billions of laborers are only too happy to take advantage of our self-imposed idiocy. Some areas of manufacturing that require highly specialized skills will stay around, but in terms of GM ever becoming an independent, adult, mature “real” company, it’s laughable.
Far-left? Far-right? Get real: Read more from “The Conscience of a Realist” by Joseph F. Cotto
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