What impact did all this have on the U.S.? The best way to answer is in terms of productivity, which is the single most important metric to gauge the standard of living for any country. From 1973 to 1995, output per worker hour in the nonfarm business sector grew at just 1.35% per year. Then in 1995, productivity growth began to accelerate. From 1996 through 2006 it doubled, to an average annual rate of 2.7%.It's this type of growth that makes America the richest nation in the world. This is why our definition of poverty includes households that own multiple tv's and have air conditioning. And free trade doesn't only enrich America, it raises the standard of living of every country that engages with America in these sorts of free trade pacts. It's why Hong Kong is richer than mainland China and why Taiwan, Japan, and South Korea exploded economically over the last 20-30 years.
The importance of this productivity acceleration is difficult to overstate. At the previous generation's growth rate, average living standards required 52 years to double. At the current growth rate, average living standards need just 26 years to double. This carries profound implications for the well-being of all Americans.
We should all be free traders and sometimes we wonder that we're not. And then we walk past that pesky "Fairtrade" cafe at school. To see what else we've posted about free trade & business click here, here, here, here, and here.
- Check out this great defense of the oil industry. These guys are politicians' favorite punching bag and it's a shame they even need a public defense. From the article:
There are two American oil industries. One exists only in the minds of its critics, many of whom are politicians. When prices and profits rise, as happens in a cyclical business, the critics demand new antitrust and other legislation. When prices and profits inevitably fall? Silence.They endured 15 years of below average profits, finally have a few good years, and now Congress wants to nail them for "price gouging." Does anyone even know what that is? Then, rather than easing regulations that would speed up exploration for new oil supplies (and alleviate our dependence on Middle East oil) or build new refineries, Congress adds more hoops (ethanol, anyone?). All of this combines to make gas more expensive. It's a testament to the market and oil companies themselves that the price of gas has remained relatively low. In fact, when taking inflation into account, the price of gasoline has experienced only mild increases since Americans first started putting it into their Model T's.
The other American oil industry exists in the real world. It's intensely competitive, innovative and subject to more scrutiny and tougher antitrust enforcement than any other segment of the economy. And it's adept at meeting the diverse and dynamic needs of American consumers.
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