Free trade and the high price of Decadence

[idlisambar]

Interesting article from a site I recommend -- http://www.economyincrisis.com. It highlights one of the many problems with the prevailing logic of free trade. Though the practical irrelevance of comparative advantage arguments can be demonstrated in countless ways, this simple thought experiment is good for demonstrating that economic efficiency (narrowly defined) is a poor basis for trade policy.

The myth reigns that, whatever may be said about the political case against free trade or its collateral damage, serious economics answered the economic case in its favor long ago. The interesting thing, from the point of view of post-autistic economics, is that if one knows where to look, this is not only not true, it is not true even within the neoclassical framework.
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Begin a thought experiment with two wholly protectionist nations living side-by-side. Trade is forbidden. Make one a “decadent” nation that values short-term consumption over long-term. Make the other, a “miser” nation, the opposite.


http://www.economyincrisis.com/modules/news/article.php?storyid=51

[starroute]

1. It reminds me of something I read once

Probably back in high school or college social studies, I read something which said that in the Middle Ages, lending money at interest was considered a sin because most loans went to noblemen who would spend the money frivolously and then not be able to pay it back. But starting in the Renaissance, lending money became a good thing because the loans went to businessmen who would use them to build up their businesses, pay them back with interest, and still come out ahead.

Only whatever I read never explained why things had changed or what assurance there was that they wouldn't change back.

It seems as though we're now back into the Medieval situation. People max out their credit cards for luxuries they can never afford to pay off. Farmers are caught in a system where they have no choice but to take out loans every planting season, and go broke if the harvest fails. And the entire United States is behaving like a profligate medieval lordling.

As I recall, the medieval solution for not being able to pay off your debts was to arrest and torture any available Jewish money-lenders. Leaving out the Jewish money-lender part, I wonder if there's some underlying social equation where torturing people is the final answer to debt.