Editor's Note: The following letter to the editor, written by Mark Brandly, was originally published in the May 1997 issue of the Chalcedon Report. In fairness to the author of the original article, Albert Cronkite, we are including his response to Mark Brandly at the end. However, please note that Mr. Cronkite's rebuttal was not originally published in the May 1997 issue.
I was very disappointed to read Al Cronkrite's article in your January 1997 issue of the Chalcedon Report. Not only does it exhibit a lack of a basic understanding of economics, but it also contradicts the Biblical role of the state as explained by other Chalcedon scholars.
To begin with, Cronkite ignores the fact that free trade benefits all countries involved. When the United States trades with other countries, this increases the amount of goods available for our consumption. By lowering the cost of some goods, we can afford to have a greater level of material goods at our disposal.
If the U.S. restricts the importation of, say, Japanese automobiles, this will stimulate our auto industry. However, and this is the point that Mr. Cronkrite misses, such a trade restriction will necessarily hurt some other industry. In this case, automobile quotas severely damaged logging interests in our northwest states. If we do not buy goods from the Japanese, they do not have the dollars to purchase goods from us.
Mr. Cronkrite would have you believe that when we trade, we "lose both wealth and business capital." A basic truism of economics is that if we measure goods and services AND capital flows, then trade always balances. When the U.S. has a trade deficit (currently at about $10 billion per month), then we necessarily have an equal inflow of capital. A $10 billion dollar trade deficit is offset by a $10 billion capital inflow. We see this inflow when foreign interests build factories here or when they loan our government money to finance their deficit spending.
The point is that free trade may hurt some industries, but it aids other sectors of the economy. The true competition with our auto industry is our timber industry. We have two ways to produce automobiles. We can either send resources to Detroit and get our automobiles produced there, or we can use our resources to grow timber in our northwest states. We can then send the timber to Japan and in return we get new automobiles.
Cronkrite argues that free trade redistributes wealth to poorer countries. In fact, trade restrictions redistribute wealth from unprotected industries to protected industries, and burden consumers with higher prices in the process. They also harm all countries involved in trade.
As for the assertion that "only exploitation results from competition," apparently Mr. Cronkrite does not understand that trade between countries that are inherently unequal in resources or labor skills is extremely advantageous. This is the famous "comparative advantage" argument that dates back two centuries. We can clearly see this when we consider trade between two individuals. Two automobile mechanics may gain some minimal benefit from trading their services, but it's clear that trade between an automobile mechanic and, say, a doctor greatly increases the benefits of trade.
Mr. Cronkrite also confuses free trade with socialism, when in actuality trade restrictions are part of the socialist agenda. Maybe he is confusing free trade with the North American Free Trade Agreement and/or the World Trade Organization. Managed trade (and a 2,000-page trade agreement such as NAFTA is at best managed trade) is not free trade. However, there is no reason to equate free trade with horrendous trade agreements that our government has burdened us with. If Cronkrite wants to attack these agreements, he should not term them "free trade."
The most disheartening aspect of this article though is that it is clearly opposed to your generally sound view of the role of the state in economic affairs. As you have explained: the state "is a minister of God (Rom. 13:1-5); it may not transgress its divinely imposed limits. It may not enforce civil law not imposed by Holy Scripture.''The Bible does give the state any power to restrict private contracts between citizens of different countries. The necessity of private property and the requirement that there be no trade barriers is also explained in another article by Stephen C. Perks.
Chalcedon scholars have repeatedly pointed out the limits of a Biblical state, and the dangers, and apostasy, of statism. The Cronkrite piece promotes a powerful state government determining our economic affairs. Such a view should not go unchallenged. If we allow a government to set the terms of trade with individuals in other countries, what prevents that government from imposing massive taxes on us, regulating every aspect of our lives, forcing our children to attend state-run schools, redistributing wealth, and meddling in the affairs of countries around the world? This piece should be refuted immediately in your Report. I would be glad to write an article explaining the heresies in the Cronkrite piece, although others (Sandlin, Perks, Hans Sennholz, Sheldman Richman) are perfectly capable of making the case for free trade.
In closing, thank you for the fine work you are doing. I am completing my Ph.D. in Economics at Auburn University, and, depending on the job market, I hope to increase my financial support of your ministry in the near future.
In Response to Mark Brandly
At the outset, I want to thank Mr. Brandly for a straightforward critique. I would contend, however, that he may not be fully aware of the plight of the average working American, and that the implications of his "economics" could readily heap untold misery on our people.
Contrary to Mr. Brandly’s assertion, I am not promoting a powerful state government, nor am I promoting high taxes. (There are several other false accusations contained in Mr. Brandly’s letter, but I shall limit my remarks to what I consider the most important.) I am, however, contending that we live in a country that has been heavily marred by pagan intellectuals, and that free trade as it is being practiced at this time in our Nation has questionable motives, and appears to be designed to produce some very undesirable results.
Patrick J. Buchanan, in "The Great Betrayal", says that free trade was "born of rebellion against church and crown, free-trade ideology is a first cousin to Marxism, i.e., a secularist faith embraced by intellectuals in rejection of the world they lived in, the world of empires and nation-states." He goes on to say that free trade, as it is practiced today, began some twenty-five years after the death of Adam Smith, and has no relation to the Free Market System which Adam Smith proffered. He further states that free trade "is about who we are, what kind of country we shall be, whether the United States will endure as an independent republic or be melded into the Global Economy of a new world order in which the nation-state is a relic of a dead past."
An interesting aside to this discussion is the fact that the founders of our Nation provided it with an extensive array of checks and balances which were designed to protect the people from being exploited by their own government. I would contend that some of those same checks and balances are needed to protect us from exploitation by International Corporations whose tentacles now control the actions of our own and other governments.
There is great danger in assuming that theory, though highly rational, will in practice produce what is intended. The reasonableness of Communism has seduced thousands of intellectuals whose faith and tenacity in its doctrines has wrought untold misery and death to millions.
Mr. Brandly’s contentions are theoretical. George Soros, in an Article published in the February, 1997 Atlantic Monthly says, "Economic theory is an axiomatic system: as long as the basic assumptions hold, the conclusions follow. But when we examine the assumptions closely, we find that they do not apply to the real world."
In that light, consider some of the results of the situations Mr. Brandly posits: He states that Free Trade benefits all countries involved by increasing the goods available for consumption, and in some cases lowering their cost. Those might be results, but there are others.
- American industries that are enjoying higher wages than their foreign counterparts are placed under heavy pressure and the forced lowering of wages results in a decrease in the standard of living. In Mr. Brandly’s analogy of trading services between a doctor and an automobile mechanic it is easy to see the benefit of a few transactions of this sort. However, if the doctor were to maintain an extended competition with the automobile mechanic as we are doing with foreign trade, the pressure on the doctor’s higher standard of living would result in his immediate departure from this barter.
- The dislocation of entire industries that results from cheaper overseas production costs causes a diminution of the breadth of American Industry that restricts the variety of jobs available to American workers.
- Because our system of free trade is very similar to the analogy of the doctor Mr. Brandly uses, we are experiencing a diminished standard of living. Real wages are going down. The American standard of living has already fallen several notches from its former position of first in the world. During the 1950s, America was considering going from a 40-hour standard week to a 35 hour week because of our excellent productivity. Today, the young men and women I know are working 60-hour weeks with both husband and wife contributing to support the home.
- Trade with emerging economies often results in the exchange of high quality merchandise for shoddy and poorly manufactured items. Since our standard of living is higher and our costs are higher, these items tend to sell at inflated prices bringing an inequitable exchange of wealth to the exporting nation.
I seriously question Mr. Brandly’s unabashed contention that competition between the logging industry and the automobile industry results in an economic advantage to our. This is indeed a result of unfettered free trade. However in practice, such a competition is impossible, and the results produced by this chaos are that workers in the automobile industry lose their jobs, and we lose a valuable and not entirely replaceable resource. It is apparent in this transaction that the results of some free trade are neither desirable, predictable, nor controllable.
We need to consider the intangible value of the commodities we are placing on the world market. Timber is a precious resource, technology is of inestimable value, losing control of our Nation’s debt is deleterious to our sovereignty, and the loss of strategic military industries has decimated our defenses.
American businesses spend millions of dollars on marketing research. Finding and developing markets is a costly and expensive procedure. It is the utmost foolishness for America to freely give away its markets. Tariffs have historically been used as a method of receiving remuneration for access to lucrative markets. Our founders believed in them, and our Nation was prosperous when they were used. This whole other side to the Free Trade debate is, of course, another subject which is seldom mentioned in current debate. Patrick J. Buchanan’s book "The Great Betrayal" is an excellent source of information on this.
I would heartily agree with Mr. Brandly on the deplorable nature of the NAFTA and GATT agreements. However, I would disagree with his implication that these agreements are in no way connected with free trade. Returning to Mr. Brandly’s mechanic and doctor analogy: as I have already illustrated, continued barter between them would result in pressure on the doctor to equate his high cost services to that of the lower paid mechanic, tending to produce equity. The same forces result from free trade between economies with unequal standards of living. The trend would be to level the living standards of world workers — a Socialist objective.
It is my belief that free trade as it is being conducted in America is part and parcel of pagan global government and economic forces that would bring an evil fascist tyranny to America and the world. These secular intellectuals and power brokers are antichrists and surely do not need the inadvertent cooperation of God’s people.
For several decades I have watched the human and business results of free trade as it has been practiced by our Government. It is difficult to watch entire American industries close their doors as they are forced out of business by overseas competition, and even more difficult to see the uncertainty and chaos that results from the displacement of workers that formerly held these jobs. I would contend that the theft of a man’s peace and time should involve similar penalties to the theft of his goods.
Theories and propositions that are propagated in the ivy covered buildings of our colleges and universities can be foisted untested on middle America with great detriment. The tragedy is that those who cavalierly purport them seldom suffer under their inequities. We need to be sure that the results of our doctrines and propositions will not produce the Devil’s chaos.
Albert P. Cronkrite
June 29, 1999