A Chequer-Board of Nights and Days

With the sudden jump in unemployment to 5.5% (still relatively mild but certainly noticeably more than the previous 5% figure), fears will naturally increase that the United States is, or will soon be in a recession. And the more such fears increase, the greater the propensity--as Daniel Griswold points out--for public officials to blame free trade for our economic woes.

Problem is that such scapegoating is complete and total bunk:

In recent decades, as foreign trade and investment have been rising as a share of the U.S. economy, recessions have actually become milder and less frequent. The softening of the business cycle has become so striking that economists now refer to it as "The Great Moderation." The more benign trend appears to date from the mid-1980s.

The Great Moderation means that Americans are spending more of their time earning a living in a growing economy and less in a contracting economy. Our economy has been in recession a total of 16 months in the past 25 years, or 5.3 percent of the time. In comparison, between 1945 and 1983, the nation suffered through nine recessions totaling 96 months, or 21.1 percent of that time period.

America's recent experience of a more globalized and less volatile economy has not been unique in the world. Other countries that have opened themselves to global markets have been less vulnerable to financial and economic shocks. Countries that put all their economic eggs in the domestic basket lack the diversification that a more globally integrated economy can fall back on to weather a slowdown. A country that increases trade as a share of its gross domestic product by 10 percentage points is actually about one-third less likely to suffer sudden economic slowdowns or other crises than if it were less open to trade. As the authors of this study concluded:

Some may find this counterintuitive: trade protectionism does not "shield" countries from the volatility of world markets as proponents might hope. On the contrary...economies that trade less with other countries are more prone to sudden stops and to currency crises.

Read the whole thing. The evidence is pretty much indisputable; if it wasn't for liberalized markets and freer trade (we have not, alas, yet achieved free trade), recessions would be more common, longer lasting and more devastating in scope and impact. Thanks to liberalized markets, we are able to augment periods of economic growth and lessen both the frequency and the destructive capacity of recessionary periods. We are not, of course, able to repeal the business cycle but we would not have nearly the economic prosperity and the cushion against the occasional recessionary period that we have now if it were not for free trade.

Just something to remember when you go into the voting booth and consider whether you really want to vote for a protectionist candidate for the Presidency. Not to mention fellow protectionists in that candidate's political party.