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Debate:Does "free trade" increase wealth rather than simply redistribute it? (view source)
Revision as of 03:50, January 21, 2007
, 03:50, January 21, 2007no edit summary
From a global perspective, free trade certainly increases the overall amount of wealth in the economy. By eliminating barriers to trade, governments encourage members of the economy to specialize in doing whatever they do best and then trading to fulfill their wants and needs. When trade is efficient, a firm can focus its production capability entirely on the area in which it has a comparative advantage. Thus, opportunity costs are minimized and each firm is as productive as possible. Production will be greater, and production costs will be lower than they were without free trade. However, it is crucial to realize that this analysis is from a global rather than national point of view. Free trade certainly does redistribute wealth, and it is quite possible that free trade will benefit the economy as a whole, but harm a specific nation by redistributing wealth away from that nation. Free trade can put industrialized nations such as the United States at a disadvantage relative to less developed nations. Businesses in the United States are heavily restricted by health, labor, and environmental regulations. This often makes production in less developed nations less expensive than production in the US. While free trade is optimal from a worldwide perspective, it may be very dismal from our point of view. EWJ
From a global perspective, free trade certainly increases the overall amount of wealth in the economy. By eliminating barriers to trade, governments encourage members of the economy to specialize in doing whatever they do best and then trading to fulfill their wants and needs. When trade is efficient, a firm can focus its production capability entirely on the area in which it has a comparative advantage. Thus, opportunity costs are minimized and each firm is as productive as possible. Production will be greater, and production costs will be lower than they were without free trade. However, it is crucial to realize that this analysis is from a global rather than national point of view. Free trade certainly does redistribute wealth, and it is quite possible that free trade will benefit the economy as a whole, but harm a specific nation by redistributing wealth away from that nation. Free trade can put industrialized nations such as the United States at a disadvantage relative to less developed nations. Businesses in the United States are heavily restricted by health, labor, and environmental regulations. This often makes production in less developed nations less expensive than production in the US. While free trade is optimal from a worldwide perspective, it may be very dismal from our point of view. EWJ
Mr. Schlafly's arguments carry great weight from a global perspective. The People's Republic of China is a prime example both of Mr. Schlafly's defense costs argument, and of EWJ's argument about the effects of varying levels of regulation in different countries. However, within a stable society wherein all commercial entities are bound by the same regulations, free trade is increases the wealth of all financially competent members of society. In fact, free trade increases wealth by redistributing it to parties who can make more effective use of it. As an example, let us begin with the production of crude oil. The employees of a crude oil company can only utilize an infintesimal portion of thier total productions for thier personal needs. Thus they sell it to a power plant for standard currency, thereby creating wealth for themselves. The workers at the power plant only need a tiny portion of the power they produce, so they sell the power to individual homes and businesses. Each of these homes or businesses uses the power to create wealth either in the form of personal enjoyment or industrial production. All parties involved in this series of transactions end up wealthier than they begin. Obstacles to free trade would only hinder this creation of wealth. Chirs J.
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