Sheldon Richman uses this Freeman article to undertake a task that seems to be all too easy these days: exposing NYT columnist Paul Krugman for the statist and bad economist he is.
The latest Krugman gaffe is his recent column regarding America’s trade with poor nations. In it, Krugman asserts:
"In fact, it’s hard to avoid the conclusion that growing U.S. trade with third world countries reduces the real wages of many and perhaps most workers in this country."
To this, Richman expertly reminds the reader of the concept of comparative advantage, something Krugman allegedly believes in but seems to ignore in his claim anyway. Krugman’s prescription for this perceived problem? To his credit, he doesn’t call for trade restrictions. Rather, he uses this as yet another excuse to clamor for….surprise! "strengthening the social safety net." In other words, an expansion of the already massive welfare state. Richman responds accordingly:
"We must not do what Krugman proposes. While he insists he does not want trade interfered with, his call for "strengthening the social safety net" would in fact require interference with trade. Welfare-state programs, which have their own perverse political dynamic, require financing through taxation. Taxation confiscates resources that would go toward creating new productive ventures, i.e., opportunities for the very people Krugman wants to help."
Richman counters with his own recommendation:
"It (government) should undertake the wholesale deregulation and desubsidization of the American economy. The way to make adjustment to economic change as swift and painless as possible is to maximize workers’ options, self-employment included. And the way for the government to do that is to stop interfering with market activities. Every existing tax, regulation, subsidy, and trade barrier is a disadvantage to smaller and potential competitors and a protectionist privilege for incumbent firms. To the extent that the government — unwittingly or not — inhibits competition through intervention, it harms workers. The more precarious a worker’s situation is, the more he’s harmed."