Can We Blame the Record Trade Deficit for Global Warming, Too?

An Associated Press story today on the latest trade deficit numbers noted as an aside, “The trade gap has set new records for five consecutive years, a period when the country lost more than 3 million manufacturing jobs.” 

Thoughtful people can disagree about the long-term implications of the trade deficit, but there is no evidence that the trade deficit itself is responsible for the recent drop in manufacturing employment.  

Manufacturing employment has been on a downward trend, not because of imports, but because of soaring productivity in the sector. In fact, overall manufacturing output in the United States continues to increase. American factories can produce more with fewer workers because the remaining workers are so much more productive.  

During the 1990s, the trade gap set new records for seven years in a row (1994–2000). That was also a period of robust domestic growth in which the country added almost a quarter of a million manufacturing jobs.  

As for the most recent string of record trade deficits (2002-2006), one could also describe that period as one when: 

… the real output of American factories grew by 14 percent.    

… the country added a net 6 million new jobs.   

… the unemployment rate fell from 5.8 percent to 4.5 percent.   

… annual real GDP grew by $1.5 trillion, or 15 percent.  

… the net household wealth of Americans grew from $38.8 trillion to $55.6 trillion.  

As I’ve written recently in a Cato Free Trade Bulletin, the reality behind the trade deficit numbers is more multi-faceted than the public discussion in Washington would lead us to believe. 

IMF Wants to Confiscate Portion of Gold Holdings

International bureaucracies are infamous for bloated budgets, and the International Monetary Fund certainly is a good example. Its headquarters are plush, its staff enormous, its pay extravagant, and salaries are tax free. Nice work if you can get it, as the old saying goes.

Unfortunately for the IMF, nations today generally are avoiding the organization, meaning the bureaucracy isn’t collecting as much “income” from its loan portfolio. So the IMF created a committee to review its financial future. Not surprisingly, this IMF-approved committee did not decide to shrink the IMF staff. Instead, it came up with a novel scheme to seize a portion of the national gold reserves held by the IMF. If a private bank decided to seize depositors’ funds to maintain the country club memberships of management, there would be appropriate outrage.

Hopefully, this proposal to loot the gold reserves will be met with similar scorn. A column in the Wall Street Journal reviews the issue:

And the IMF seeks a new wellspring of funding to support the expansive lifestyle to which it has become accustomed. A Committee of Eminent Persons was assembled to find the money.  …The Committee emerged with a proposal to use 13 million ounces, or an eighth of the gold stockpile [stored at the IMF], to establish an IMF endowment, an independent income stream for the Fund in perpetuity.

But this isn’t really the IMF’s gold. The bullion belongs to the U.S., Germany, Brazil, Ghana and other nations. More than one-quarter of it belongs to developing countries. If the IMF is allowed to open the door to this vault, fears of new missions and unrestrained spending will be confirmed. The gold and the gain it can bring should be returned to national treasuries.

India’s poor could do more with the $1.5 billion that is rightfully theirs than the IMF. …A staff of 500 instead of 3,000 and a budget of $400 million instead of $1 billion would be easily sustained by the investment income on the Fund’s $10 billion of existing reserves.

New at Cato Unbound: Ruut Veenhoven on Increasing Happiness

If you’re tired of hearing about how modern life is making us miserable, today’s Cato Unbound essay by Ruut Veenhoven, director of the World Database of Happiness, will come as a gust of fresh empirical air. Veenhoven says the most recent data show an increase in average levels of self-reported happiness in the United States and European Union, and that we’ve seen a much more dramatic increase in the number of years people can expect to live happily.

The number of Happy Life Years has risen in all Western nations over the last decade. This comes as no surprise, since life-expectancy has increased in all nations and average happiness has increased in most nations. What is a surprise, however, is the size of the gains. Over the last 33 years, no less than 6.2 additional Happy Life Years were added in the EU, 4.5 in Japan, and 6.2 in the U.S. This increase in overall quality of life is unprecedented in human history.

If you really think life in liberal market democracies is getting worse, the data tell a different story.

False Suspicion and Cold Comfort

A post on the Washington DC/Metro Area Flickr users group has touched a nerve with readers of DCist, who are sharing stories of similar experiences in the comments.

D.C. area photographer “Yonas,” taking pictures in the Gallery Place Metro station, caught the eye of Metro Police who found it suspicious. They demanded identification and subjected the photographer to questioning.

This offends me about five different ways, but it provides a good opportunity to illustrate how suspicion is properly generated — and, in this case, how it is not properly generated — using patterns. The same concepts apply to the cop on the beat and the high-tech search through data.

I testified to a Senate Judiciary Committee hearing on data mining earlier this year regarding searches for terrorists and terrorism planning:

Pattern analysis is looking for a pattern in data that has two characteristics: (1) It is consistent with bad behavior, such as terrorism planning or crime; and (2) it is inconsistent with innocent behavior.

In … the classic Fourth Amendment case, Terry v. Ohio, …  a police officer saw Terry walking past a store multiple times, looking in furtively. This was (1) consistent with criminal planning (“casing” the store for robbery), and (2) inconsistent with innocent behavior — it didn’t look like shopping, curiosity, or unrequited love of a store clerk. The officer’s “hunch” in Terry can be described as a successful use of pattern analysis before the age of databases.

Recall that after 9/11 people were questioned and even arrested for taking pictures of bridges, monuments, and buildings. To common knowledge, photographing landmarks fits a pattern of terrorism planning. After all, terrorists need to case their targets. But photographing landmarks fits many patterns of innocent behavior also, such as tourism, photography as a hobby, architecture, and so on. This clumsy, improvised [pattern analysis] failed the second test of pattern development.

Photography on public property will almost never be suspicious enough to justify even the briefest interrogation. Photography is a serendipitous activity so it appropriately gets wide latitude. (Other facts could combine with public-location photography to create a suspicious circumstance on rare occasions, of course.)

It bears mentioning that regulations allow photography in Metro stations, but I don’t find regulation of this kind terribly comforting. It reminds me of Prague shortly after the Velvet Revolution, where I observed that people were consciously coming to grips with the revolutionary idea: “All that is not forbidden is allowed.” The prior state of affairs had been the opposite, “All that is not allowed is forbidden.” I hope this latter rule is not in force on our subways or anywhere else in this country.

Let’s Get One Thing Straight

As Washington gears up to reauthorize the No Child Left Behind Act (NCLB), you can expect to hear a lot of over-the top-rhetoric. “NCLB is working.” “The law is underfunded.” Things like that.

And then there’s this gem uttered yesterday by President Bush:

It’s really important for the citizens to understand that I’m a huge believer in the public school systems. I believe our public schools have really made America.

Now, a lot of the crazy rhetoric we’re going to be subjected to during reauthorization is going to need refutation, but let’s get one thing straight right off the bat: Public schooling — especially the super-centralized, big-government public schooling enshrined in NCLB — did NOT make America. That is a myth that’s been perpetuated to prop up failed public schooling for far too long, and it’s about time people stopped putting up with it.

As I discuss at some length in Why We Fight: How Public Schools Cause Social Conflict, and Marie Gryphon explains in detail in Our History of Educational Freedom: What It Should Mean for Families Today, public schooling imposed from above is not how education was delivered in America until relatively recently. During the nation’s colonial and Founding periods — when the United States was literally made — education was delivered almost exclusively through private and voluntary means and it worked very well. Indeed, that was the case until almost the end of the nineteenth century, when the progressive movement finally started closing the door on parental freedom and imposing centralized control over education.

And that’s when things started to really go downhill.

Centralizing control of education at higher and higher levels, and forcing all Americans to support public schooling with their tax dollars, has spurred constant fighting and done nothing to improve educational outcomes. Whether it’s been battles over the teaching of human origins, prayer in schools, multiculturalism, book-banning, sex education, phonics and whole language, or numerous other issues, government schooling has divided Americans while simultaneously giving government officials and bureaucrats a virtual, suffocating monopoly over American education.

What really built America is something quite the opposite of compulsory, centralized public schooling. Freedom — not big government — is what built this nation, rewarding hard work, driving innovation, attracting millions of immigrants to our shores, and unifying diverse ethnic and religious groups through their common desires for liberty and prosperity.

Freedom is what really built America, and it’s time that people stopped giving public schooling credit for its success.

If You’re in North Carolina …

I’ll be speaking tomorrow at the Security and Liberty Forum hosted by the Privacy and Technology Committee of the American Civil Liberties Union of North Carolina and the Department of Computer Science, UNC-Chapel Hill.

That’s Saturday, April 14, 2007 from 1-5 p.m., Chapman Hall on the UNC Campus.

Behind China’s Headline Export Numbers

China overtook the United States in the second half of 2006 to become the world’s second leading exporter of goods. That fact, contained in a new report from the World Trade Organization and trumpeted in headlines around the country this morning, is bound to further rile up skeptics of America’s growing trade with China.

Although the United States exported more goods ($1,037 billion worth) in all of 2006 than China (which exported $969 billion), figures for the second half of the year show that China has now claimed the no. 2 spot behind Germany.

For those of a mercantilist mindset, to whom trade is all about exporting more than you import and more than the other guy, this news is guaranteed to be alarming. But the real news is nothing of the sort.

First, China is bound to move up in the world rankings of trade. It represents 20 percent of the world’s population, it is surrounded by thriving, trade-oriented economies, and its increasingly open and free economy has been growing at double-digit rates for more than a decade. We should welcome the news that China is more integrated than ever in the global economy.

Second, the United States continues to be a trade and export powerhouse. U.S. exports of goods grew 14 percent between 2005 and 2006, and surpassed $1 trillion for the first time ever. When combined with the $387 billion in services Americans sold abroad last year, we remain the world’s no. 1 exporter.

Third, most of the goods that China exports are in fact designed and in large part made in other countries, including the United States. “Assembled in China” would be a more accurate label than “Made in China” for most of its exports. More than half of China’s exports are made in foreign-owned factories. The most sophisticated components in the computers and other consumer electronics exported from China are in fact made in Japan, South Korea, Taiwan, the United States, and other, more advanced economies. China has become the final link in a deepening global supply chain. (For more detail, see my 2006 study on U.S. trade with China.)

Finally, trade is about more than exports. It’s about, well, trade. We export for the purpose of getting back things of even greater value. Americans benefit at least as much from imports as we do from exports. The $2.2 trillion in goods and services we imported last year make our lives better every day.

As author P.J. O’Rourke summarized in his terrific new book, On the Wealth of Nations, “To give [Adam] Smith’s case against mercantalism in extreme concision: imports are Christmas morning; exports are January’s MasterCard bill.”