Henry Hazlitt’s was born in the 1800's, got his High school degree, became a journalist and wrote a book on economics. His book does not apply to the 21st century world market. His book is reviewed by the chapters below. Modern day college educated noble laureates in economics have proven his book false.
Book written in the mid 20th century, misses the mark for the 21st century world economy.
1. The 20th century book points out that it is impossible to have a trade imbalance, free trade is perfect (21st century reality is America has $8 trillion trade deficit with china since 2001)
2. Book point.
When a corporation is taxed it does not buy new machines, it does not hire more people, because you are taking away from its profits…
21st reality Delta and the 4 major US airlines will not decrease prices or increase seats or hire even though they have had recorded $ 4 billion profits and their stocks are up 2000% since 1991…they will be paying out record bonus to their board and executives.
3. According to the book, machines create new opportunities, not destroy jobs.
7900 people Weaving cotton in England 1760 (6 million people)…cotton spinning machine invented and people rioted…27 years later 320,000 people in the spinning industry. ..200 years later 50,000 people with 60 million people, should be 3.2 million jobs
1947 1,300,000 Americans
1993 ..477,000 Americans (1990 earned $9 - $12 hour, which was 3x the minimum wage)
2013 114,000 Americans (exported $19.8 billion in textiles)
Asia exported in 1965 $3 billion in exported textile
1991 $119 billion in exported textiles
2013 $423 Billion in exported textiles
Reality is that machines allow all the work to go to 3rd world countries and destroy jobs in the 1st world counties.
The fetish of full employment
We put our chief emphasis where it belongs-on policies that will maximize production.
A corporation’s policy should be to maximize production…which will always be about minimizing cost, in labor, materials and environmental cost.
A counties policy should be about maximizing opportunity for its citizens to lead a full, safe and happy life without having to rely on government handouts.
Greece,and spain $ 5/hour minimum wage 26% unemployment and 24%
Australia , New Zealand and Germany $18/ hour(6.1%, 5.6% and 5.1%)
Chapter 11. Who’s “protected” by tariffs?
A trade imbalance is impossible. (America has a $8 Trillion trade imbalance with China, since 2001 and the says it is impossible)
This, in fact (if I may here disregard such complications as exchange rates, loans, credits, etc) page 77.
In 2004, Former President Bill Clinton apologized for having imposed free during his first term in office. That policy was "a mistake," Clinton said, and helped destroy Haiti's ability to produce rice and feed its people.
2007, NAFTA was a mistake to the extent that it did not deliver on what we had hoped it would, and that's why I call for a trade timeout."
Nobel Economics Laureate Robert Mundell,” he said. “The United States may have to take a leaf out of the book of Japan, China, and Germany, and have protectionism inside the system.”
Nobel Prize-winning economist Paul Samuelson 1970 “win-win” assumptions about free trade.
2004 Time to rethink free trade. The low-wage, high-innovation economies of China and India, he says, demand a second look. Americans are losing big.
Chapter 12 The drive for exports
It is exports that pay for imports…they must be balanced…the reason for this is elementary…there is no reason to go into the technical details of all this. (he missed the boat on this one)
Everyone benefits from free trade, it might have some unintended consequences.
Those unintended consequences have been the loss of 28 million jobs and 63,000 factories, 41 million people unemployed and a $19 Trillion national debt.
Hazlitt attempts to use Bastiat's Broken Window Fallacy as an educational tool. Condensed as tightly as possible, here it is: Someone breaks a bakery's front window. The people of the town rejoice because the glazier will have business replacing the window. But the baker intended to use the money he just spent fixing the window to buy a new suit, so now the tailor will lose business.
Hazlitt leaves out a couple of other people: the insurance man and the lawyer. The insurance man is important because the baker has been paying casualty insurance premiums to him all the years he's been in business...and now that the baker's window is a casualty of the rock some scumbag threw at it, the insurance man will pay the glazier (and the disaster cleanup company). The lawyer is important because he needs a new suit for work, and the baker WAS ahead of him in line...but now that the baker has to stay at his shop waiting for the insurance-paid glazier to show up, the lawyer can swap places with the baker and get his new work suit that much faster.
The whole book is proof money doesn't circulate in Hazlitt's world. Take the bridge story. Hazlitt's thesis is, if the government spends a dollar it ceases to exist anywhere in the universe. Hazlitt believed that if the government created a job in the public sector building a bridge (which is actually a falsehood - the government hires private-sector companies to build bridges and they buy materials from other private-sector companies) that a job would necessarily be removed from the private-sector labor pool. But consider: There is a river with an Interstate freeway on the east bank and 100,000 acres of level land on the west. Because there is no economical way to take goods from the plat of land to the freeway, the land sits barren and useless. If the government connects the plat to the freeway with a new bridge, factories and warehouses will begin to cover the land and thousands of private-sector jobs will be created. You can't fix everything by throwing money at it, but there are things that can only be fixed by throwing money at them. The secret is being able to tell the difference and, more importantly, being able to tell the people who want projects that won't provide a sufficient return on investment that they can't have them.
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Inches from the ground
We are all inches from the ground