Arnold Kling

Setting a Bad Example

Arnold Kling, Great Questions of Economics
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The United States is doing a poor job of leading in economic policy, according to Joseph Stiglitz.

But, while preaching free market doctrines abroad, the US bails out its airlines and increases agricultural subsidies at home. Even before these increases, subsidies to agriculture by the advanced industrial countries were enormous - exceeding the total incomes of sub-Saharan Africa.

The rich effectively close their markets to many goods that represent the comparative advantage of the poor. Argentina's economic position today, indeed, would be vastly different if America and Europe opened their markets to its agricultural goods. The same can be said for country after country in the developing world.

Stiglitz makes an excellent point that our trade distortions consist of more than just tariffs. Corporate welfare, farm subsidies, and other pork are equally bad. Moreover, our willingness to indulge special interests at home regardless of the adverse affect on foreign producers or domestic consumers sets exactly the wrong example for other countires.

Discussion Question. If farm subsidies were reduced and NAFTA was passed under President Clinton, why should the forces of free market economics be suffering setbacks under President Bush?

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