As usual, the Republicans can’t explain what’s good about economic change. They could benefit from reading a little Schumpeter. They know how to repeat the mantra that capitalism is good. They can’t explain why economic change, coming from either increased productivity or foreign trade, creates wealth. We see the economic harm, the businesses that close and the jobs that are lost. We can’t point to the new opportunities that get created as a result. But those new opportunities are created when we find cheaper way to make things (technology) or cheaper ways to buy things (trade). Schumpeter called it creative destruction and explained why it benefits not just the rich and investors but the average person.Mr. Romney is asked if he still supports trade even though we’ve lost 5 million jobs to foreign trade since 1989. Mr. Romney should say, “That’s fewer new jobs than the economy produces in THREE MONTHS. Foreign trade can’t be the source of our economic challenges.” Unfortunately, Mr.Romney answers like a good mercantilist, an economic position that was first put forward in the 14th century and has been out of favor among economists since 1776 when Adam Smith shot it down. (John McCain–this would be a good place to mention that book you did before).Trade is good, Mr. Romney explains, because we get to sell stuff to foreigners. He claims that the average American family benefits $9,000 a year from EXPORTS because so many Americans work in the export sector.Weird number. Weird idea.

Only a minority of Americans work in the export sector so using the average is a meaningless measure of how the TYPICAL American benefits. The only reason to trade with the rest of the world is to be able to IMPORT. The only reason you export is because foreigners want somethiing for what they send us. If foreigners would only give us stuff for free, we could enjoy their gifts and we could take the people and energy and resources used to produce exports to make something else we like.Trade isn’t valuable because it creates jobs. Trade has little or no effect on the total number of jobs. It changes the kind of jobs we have.But Mr. Romney sounds very presidential — Bill Clinton and both Bushes argued that trade is good because of exports and job creation. It might be the worst economic argument that gets repeated over and over again at every level of politicians. It sells because it sounds reasonable to the average American who doesn’t know much economics. Oh that economic education was better.

Kim,
It’s funny how such a complex subject is reduced to simple assumption based on a flawed deductive logic model. [More sales "exports" = more jobs]. Lets try to apply this to a simple example.Mr Toys has a toy store in Capitolville. Mr. Toys’ items were handmade in his toy shop and, therefore, were quite expensive. Because of the growing popularity of his toys, Mr. Toys had been receiving an increasing number of orders from toy stores in neighboring towns. Due to this, Mr. Toys recently decided to open a second store neighboring Socialville. While Mr. Toys did not sell many toys in Socialville, he discovered that he could employ 50 toy-makers in Socialville for the same as two of his local toy-makers. So Mr. Toys sent two of his loyal toy- makers to Socialville to oversee 50 workers in Socialville. 

Now Mr. Toys can make the amount of toys of 52 toy-makers for the price of 3 local toy-makers. Because of this incredible cut in costs, Mr. Toys lowered his prices enough to compete with major toy companies. So what would Mr. Toys do if he were American?? According to Mitt, the logical answer would be that Mr. Toys would hire people in Capitolville to help run his business. Sounds great right!! Of course it does, cause now Mr. Toys can turn his local toy shop into a distribution center, and employ hoards of minimum wage teenagers with no benefits to move packages. And his toys are now affordable to local consumers but run other small toy-makers out of business. Meanwhile the capitolists down at Capitolville town hall don’t understand why the town is going under when they are exporting so many toys to Europa-ville and Canadaville. And how come all that money their local huge company is making isn’t finding its way into the Capitolville economy.

Well silly capitolists down at Capitolville town hall, the answer is easy. That’s because Mitt down at Bain Capitol suggested Mr. Toys cut costs and increase revenues to help make his IPO more attractive to investors when he takes the company public later this year. And he should do this by opening more factories in Socialville, well as moves his distribution center to Socialville because the town council wants to regulate the pollution his shipping trucks are causing and unionize his workers. So what’s the moral of the story, [exports = outsourcing], “But that doesn’t make any sense!” say the capitolists down at Capitolville town hall. No it doesn’t, but thats what happens. But don’t fret, you can just sell bonds to Socialville to help pay boost you economy.