Beware Academics Aiming to Centrally Plan Your Buying Habits

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Let’s be clear that trade isn't war. It's the opposite. War successfully conducted is about individuals killing other individuals, while trade is about individuals striving to meet the needs of other individuals.

Which brings us to a recent New York Times opinion piece by American Enterprise Institute scholars Derek Scissors and Daniel Blumenthal. To say the two aggressively vandalized basic economics in their attempt to demonize the beautiful rise of the Chinese people from desperate poverty would be an understatement. To presume that one column could correct all the misinformation promoted by the duo brings new meaning to fanciful. Books could be written…

But in the interest of somewhat briefly correcting a few obvious falsehoods, it’s first useful to stress that countries don’t trade as Scissors and Blumenthal somewhat thickly suggest in their call for “the United States” to “begin cutting some of its economic ties to China.” More realistically, individuals enter retailers like Walmart of their own free will, and presumably do so because they get a raise every time they darken its doors. The latter is true in no small part because of feverish production by individuals in China.

To state what’s obvious, when we get up and go to work we’re signaling a desire to import. That we could be importing from across the street or from the other side of the world is to make a distinction without a difference. Work is what improves us simply because work is what gives us the means to import. That the production of Chinese workers is so heavily demanded by workers in the United States is a certain sign that production in China vastly improves the lot of American workers. Good. And with Scissors and Blumenthal in mind, it’s a reminder that individuals trade, not countries.

That individuals are the drivers of trade doesn’t seem to mean much to the AEI thinkers. As they see it, government force should be used to limit the right of the American people to advantageously exchange the fruits of their labor with others. And while the bios of the two academics reveal nothing in the way of real-world business experience, they blithely assure readers that if the Trump administration can somehow sever “economic ties to China,” fear not because “there are multiple countries that can substitute for China-based production.” Oh sure, let’s just empower Donald Trump and Peter Navarro to lay waste to billions worth of trading relationships that facilitate the buying habits of billions of people, only for two Washington, D.C.-based academics to guide all this globalized cooperation to countries they deem more suitable for “the United States” to trade with. Aren't conservatives supposed to be for limited government? Can readers imagine, even for a minute, the overwhelming noise coming from the right if a President Hillary Clinton essentially told U.S. businesses to kiss off global business ties painstakingly achieved over the decades in order to support her own foreign policy/trade views? 

But wait, Scissors is a China expert, and Blumenthal is Director of Asian studies at AEI. Yes, and that means what? It means they can propose federally managed trade free of the market pressures that guide (often in rough fashion) producers and investors in a parallel world of profit and loss. In short, Scissors and Blumenthal can call for central planning without having to suffer the horrid consequences of same.

Notable here is that Scissors' bio states that he wrote papers back in 2008 that “chronicled the end of pro-market Chinese reform, and that “predicted economic stagnation in China as a result.” Think about that for a minute. 

You see, around when Scissors was predicting economic stagnation for China (wholly free of the market pressures), actual market actors with real skin in the game were massively expanding their footprint in the very country that Scissors deemed troubled. Thank goodness they didn’t listen to the scholar. At present, and over ten years after Scissors’ prediction made from the most ivory-laden of towers, Chinese consumption now represents $52 billion in annual sales for Apple alone. China’s increasingly prosperous citizens are presently the 3rd largest market for Apple, which is the 2nd most valuable U.S. corporation.

Crucial here is that Apple is hardly unique when it comes to American technology companies profiting from growing Chinese prosperity. 24 percent of Intel’s sales take place in China, 44 percent for Texas Instruments, and 65 percent for Qualcomm.

Away from the technology sector, Starbucks has 3,400 stores in China, and has plans to double store count in the coming years. China is Nike’s #1 country for production of sports gear, and it is the Beaverton, OR corporation’s 2nd largest market when it comes to sales. General Motors sells 1/3rd more cars in China than it does in North America, while Chinese filmgoers purchased $9 billion worth of movie tickets in 2018 versus $12 billion sold in the U.S.

Ok, so Scissors got China wrong. That he did isn't some major revelation. If he truly possessed a sense of where China’s economy was going he’d be known as a billionaire investor, not a Washington, D.C. analyst. Figure that billions were earned by corporations and investors in China since 2008 when Scissors predicted stagnation. But the past is past, and that’s what’s so unfortunate about the policies Scissors and Blumenthal are proposing.

It’s not just that they so innocently presume that “multiple countries” can fill in for China. It’s that they dismiss this massive market for U.S. companies “as the equivalent of less than one-half of 1 percent of gross domestic product.” The problem there is that investors with actual money at work plainly disagree with the scholars. We know this given the basic truth that markets regularly correct downward when talk of trade war with China heats up, and they rally when news comes out indicating the opposite. While Scissors and Blumenthal can loudly support cessation of exchange with increasingly prosperous people from their coddled perches, investors don’t enjoy such distance from reality. They know that if protectionists like Trump, Scissors and Blumenthal actually got their way that the stock market would experience the mother of all corrections.

But wait, Scissors and Blumenthal assure us that a severing of economic ties would “stop intellectual property theft”! Oh well, even if we ignore how incredibly difficult it is for the greatest of business minds to know what is good IP, let alone act on it, the inconvenient truth for the scholars is that as evidenced by how much U.S. production takes place in China in the here and now (think Apple, think Nike, think GM), fear of IP theft is more something that keeps academics up at night than something that worries actual businesses. Getting right to the point, are readers going to listen to Tim Cook and Phil Knight about China, or Blumenthal and Scissors?

Someday Scissors and Blumenthal will explain to the more grounded among us what actual businessmen and women doing real business in China don’t understand, why the Chinese for being Chinese allegedly have a thieving problem, and why a nation so reliant on sales to Americans would want to war with those same people. Until then, trade will be what it’s always been: the picture definition of peaceful exchange as consenting individuals exchange the fruits of their labor with other consenting individuals, all without the guidance of self-proclaimed experts long on opinion, but rather short of any real-world experience.

John Tamny is a speechwriter and writer of opinion pieces for clients, he's editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). His new book is The End of Work, about the exciting explosion of remunerative jobs that don't feel at all like work.  He's also the author of Who Needs the Fed? and Popular Economics. He can be reached at jtamny@realclearmarkets.com.  

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