Applied Economics: Globalization and Trade
Course Schedule — Fall Term 2023 – version of October 16, 2023
Class meets Mondays at 5:30 PM CDT at 333 S Wabash #2700 or via internet.
Instructor: Chuck Metalitz
Session 1– October 09: Review of fundamental economic principles as presented in Progress & Poverty. Take-home opinion questionnaire. Overview of the course. Protection or Free Trade is the only book that Henry George wrote twice. It’s also the source of many of his most durable quotes.
Session 2– October 16: Protection or Free Trade chapters I-VI (pages 1-59).
- George’s main criterion for evaluating trade policy.
- Why ordinary people, who for most purposes can rely on (or ignore) advice from experts, need to understand the principles determining the distribution of wealth.
- The role of special interests in determining public policy.
- Evaluating evidence regarding social issues
- What protection implies about labor.
- Appropriate geographic scale of protectionist policy.
- Implications of religious values for trade policy.
- Practical attitudes of protectionists to protection.
- George’s error regarding aviation.
Session 3– October 23: Protection or Free Trade chapters VII-XI (pages 60-111).
- “Production” includes trade, transportation, “middlemen” who assist in getting product to the final consumer.
- Relation of “tariff for revenue” to “free trade.”
- Difficulties of administering a tariff.
- What economic class controls government.
- Effect of restrictions and regulations on business structure.
- Evidence that tariff is not needed for revenue.
- Advantages of bounties over tariffs, as a way of encouraging particular industries.
- Tariffs are clumsy and extravagant.
- Effect of a tariff to protect one industry on other industries.
- Which industries are likely most able to get themselves protected.
- Why it is impossible for a tariff or bounty to encourage all domestic industry.
- The ultimate protection is boycott.
- What relative cheapness of an imported product says about how domestic labor should be employed.
Supplementary: to help appreciate the complexity of modern international trade regulations, browse https://ustr.gov/trade-agreements/trade-investment-framework-agreements and/or https://tinyurl.com/w338ww (the original url for this link is https://www.cbp.gov/sites/default/files/assets/documents/2023-May/April%202023%20Customs%20Broker%20License%20Exam_1.pdf) and/or (https://www.progressivepolicy.org/publication/trade-policy-equity-and-the-working-poor/ or https://reason.com/podcast/2023/08/10/why-we-cant-have-nice-things-the-ghosts-of-protectionism-past/)
Session 4– October 30: Protection or Free Trade chapters XII-XV (pages 112-152).
- Inherent contradiction of “balance of trade” concept.
- Economic significance of farmland owned by foreigners.
- How the use of money as a measure of trade confuses our evaluation of trade.
- How high wages affect productivity.
- What high rate of interest shows about return to labor and capital.
- How any country which does not trade with other countries can increase its wealth.
- Possible future potential of solar energy.
Supplementary: (a) Handout on comparative advantage
(b)Find one or more credible recent estimates of the percentage of US farmland (and/or agricultural land) owned by foreigners, and their home countries.
Session 5– November 06: Protection or Free Trade chapters XVI-XX (pages 153-223).
- Effect of protection on mined or agricultural products on the price of mineral or agricultural land.
- Manufactures are the result, not the cause, of growth in population and wealth.
- Criterion for determining when to establish a particular industry in a particular place.
- In particular cases long distance transport may be part of the most efficient way to produce things.
- Bribes and lobbying as part of the cost of production.
- Unavoidable effect of protection on other industries (and similar impact results from tax subsidies).
- Every additional protectee lessens encouragement of other protectees.
- Why only monopolies (including holders of unique mineral deposits or key patents) can profit from protection.
- What the landowner contributes to the production process.
- The ultimate beneficiaries of protection.
- Why people endorse protection even tho it would not benefit them.
- Why manufacturing grew in the western US even tho products from the eastern US, where manufacturing was already established, were sent west free of tariffs.
- Effect of protection on production of exports.
- Example of American shipping.
- Why import of cheap products cannot reduce US wages.
- Effect of importing workers willing to accept lower wages.
- How industries which endorse protection treat their employees.
- Effect of a subsidy to wages on the wage employers need to pay.
- What can effectively raise wages.
- Why abolition of protection should best be done overnight, rather than gradually.
- Why with regard to workers, any disaster is better experienced immediately than dragged out over years.
- Abolition of protection simplifies government and makes other reforms easier.
Supplementary: Find a modern example of a US company or industry which has suffered due to protection of other industries on which it depends.
Session 6– November 13: Protection or Free Trade chapters XXI-XXV (pages 224-276).
- Greater difficulties of earning a living in HG’s time despite multiple increases in production of wealth, illustrates that protection, or increased production, does not raise wages.
- Inequality lessens production.
- Increase of “work” is not what’s desired, but increase of wages.
- Effect of free trade on production of wealth and on wages.
- Labor may benefit from unions, or from laws increasing wages, but the benefits are necessarily limited.
- Abolition of other burdens on labor (monopoly, bad currency, standing armies, war, corrupt government,etc.) could temporarily raise wages but private collection of land rent is “the robber that takes all that is left”.
Supplementary: Do you believe that it is more difficult for the average worker with no special skills or connections to make a living now (2023) than it was in HG’s time (1886)? Why?
Session 7– November 20: Protection or Free Trade chapters XXVI-XXX (pages 271-332).
- Convenience of slaveholding compared to private collection of rent.
- Effects of improvements in production on price of goods and price of land.
- How industrial advance affects wages, and effect on wages of technology allowing production without labor.
- Two self-evident principles that must be respected.
- How the reform would simplify government.
- Advantages of the reform described.
- Trade restrictions could be justified for “public health or morals,” nothing else.
- Adam Smith was constrained by his situation not to endorse the single tax, but the physiocrats were better positioned for it.
- Affluent folk, with leisure and education to control public education and public opinion, benefit from unjust distribution of wealth.
- The poor have difficulty appearing respectable and being heard.
- Examples of abolitionists, who were unpopular before emancipation.
- In Britain, landholders control the government and abolition of tariffs increased the value of their privilege.
- Among socialists “there is a disposition to seek a special cure for every ill, or else…to imagine the only adequate remedy to be something which presupposes the absence of those ills.”
- [Sevareid principle]
- HG’s proposal is “the simple plan of removing restrictions and giving labor use of its own powers.”
- Socialism at least opposes prejudice against foreigners, but encourages governmental direction and interference.
- HG agrees with the socialists about control of natural monopolies
- individuals or private enterprises are most appropriate where competition is feasible.
- Having government redistribute wealth presupposes pure government.
- In summary, HG proposes: Abolition of trade restrictions + single tax + government control of natural monopolies = true free trade.
Session 8— November 27: International Trade and Development to Serve US Interests. Discussing how developed country governments and corporate interests extract wealth from developing nations. Text or reference videos
to be determined (Michael Hudson and/or John Perkins) Take a look at this video interviewing John Perkins.The first 20 minutes covers the important stuff.
Session 9– December 4: Immigration.
- Where are the migrants coming from?
- What are their motives and means?
- How is trade involved?
- What are policy options?
Readings and/or watchings to be determined.
Session 10– December 11: Wrap-up and deal with any leftover issues, such as
- Dependence of US military power on non-US sources
- Relative importance on services in the economy today vs. in 1886
- Georgists and the federal income tax
No taxes at all, and a pension to everybody.