NYT and CATO Institute and some Republicans agree!

It is not often I agree with a New York Times Editorial (some of the Op-eds either) but today’s “America’s Summer of Discontent” is right on the money.

“When analysts and economic historians look back, this summer may well prove to be the turning point in Chinese-American relations, the time when America chose short-range paranoia over rational behavior. From the dozen or so proposals in Congress for across-the-board tariffs against Chinese imports to the Pentagon's rumblings about Chinese military buildups, the rhetoric from Washington keeps escalating. America seems to be on the run, fueled by the false perception that China's rapid economic rise poses an inevitable threat to the United States. By repeatedly demonizing China, Washington risks creating the hostility it fears.”

That is exactly what I have been saying for sometime now about the distant protectionist drum beats, slightly muffled but persisting, right across the political spectrum from Democrats to Republican, including the inaptly named Adam Smith, a Representative from Washington State. Applying the genuine Adam Smith’s approach to trade we get a different take from the Congressman (and his Republican allies). The New York Times editorial puts the issues in perspective.

“The Chinese economic surge has been awesome. If America is going to respond to it reasonably, its leaders - and the public - will have to acknowledge the obvious: China is no longer a second-level economic power that can be bullied around. America's financial stability rests in no small way on the continued Chinese purchase of the government's debt.”

There is no limit to the extent which a misreading of national interest can lead a country into serious errors that damage its national interests. Likewise with individuals. Once a misreading is absorbed, errors follow. Sometimes the consequences of our actions produces benign results; other times they produce a vale of tears. There is no automatic invisible hand correcting our fallacies. To believe that there is, changes Adam Smith’s lonely metaphor into a religious miracle, when in fact it was just a literary metaphor, used sparingly (only three times – and not, please note, about markets).

The prosperity of a trading partner is never a threat to those with which it trades. Voluntary exchange is the alternative to violence both between persons and between nations. Adam Smith taught that. It is surely time others beside the New York Times and CATO Institute understood it too. (Now there is an unusual but welcome alliance!)