Monopoly and Competition

The Chinese "yellow peril" was the late nineteenth century menace. And today, write Cecil Bohanon and T.N. Van Cott, the menace is outsourcing. The Chinese and Indians are selling Americans things like computer software at bargain basement prices. But there is nothing special about outsourcing software technology. All that matters is whether the Chinese and Indians sell for less than what current American software producers could earn in their next most lucrative employment. If so, outsourcing enhances U.S. living standards.

Trade with China is beneficial to the U.S. economy, writes Grant Nülle, but grave danger lurks in the area of monetary policy. Beijing is furnishing cheap credit to finance Washington's fiscal deficit and consumer indebtedness in America, accentuating a misallocation of capital and investment priorities propagated by the Fed-backed fiat money. Meanwhile, China's four largest state-owned banks, which together claim 61% of the country's loans and 67% of its deposits, are saddled with mounting bad debts.

Mateusz Machaj, founder of the Mises Institute, Poland, argues that international trade theory isn't a stand-alone topic. It is a practical application of general trade theory to trading between persons from different countries. There is no difference between mobility of factors of production inside or outside a country.

Some distinguished theorists have lately entered into a debate over the merits of free trade after two of them had suggested that "free trade has necessary conditions" and "today these conditions are not met". In particular, they mean that David Ricardo's law of comparative advantage don't hold if the "factors of production" are free to move around, particularly if money and laboring persons are able to move faster than goods. Thus, in a way, this argument says that since people are free to move around, move their money around as well as their goods, free trade is bad. But how can it be that free movement of persons, money and goods is bad for free trade? How can it be that free trade is bad for free trade?

The citizens of the US are not made richer by raising taxes or other barriers to foreign consumption goods, writes Robert Murphy, and this is true whether factors of production are immobile (as Ricardo assumed) or mobile. We should not fear the cost-cutting advancements in data transmission, or the improved skills and education of foreign workers. On the contrary, we should welcome these developments because they mean lower prices for imported goods and services, and hence a higher standard of living for Americans.

The case for free trade is based on David Ricardo’s principle of comparative advantage. Ricardo addressed the question how trade could take place between country A and country B (England and Portugal in his example) if country B was more efficient in the production of tradable goods (cloth and wine in his example) than A.

Writes George Reisman: If we follow the line of Schumer and Roberts, and their avowed mentor, Keynes, and instead of allowing ourselves to benefit from the competition of the rest of the world, seek to impede others' progress, we should not be surprised if we end up finding much of that intelligence and ability turned against us, in producing the weapons of future wars rather than the better and more economical consumers' goods it can and wants to produce and which we want to consume.

With the passage of time, the nature of post-Saddam Iraq becomes clearer, as does the Bush administration's lack of commitment to free-market principles.

No, there are no economic agencies in this country like Gosplan, but the U.S. Government, as well as many state and local governments, engage in central economic planning all the same. As Bill Anderson tells us, in the end, it is still central economic planning and, not surprisingly, it does not work any better here than it did in the U.S.S.R.

Complete privatization will not lead to ideal results, but it will unravel most of the anticompetitive practices that exist in the cable industry. The lesson that we should draw from the results of the Telecommunications Act of 1996 is that efforts to partially privatize the industry are likely to retain those elements of regulations that benefit concentrated interests in business most.