August 03, 2016
Many folks remember Thomas Friedman as the person who argued that Germany would insist that Greeks work less as a condition of getting new loans. They may also remember him as the person who doesn’t know that in a free market, when an item is in short supply, the price is supposed to rise. This is why he can continually complains about shortages of skilled labor even though the pay of skilled workers is not rising.
Economics may not be Friedman’s strong suit, but he is back at it again today complaining that Hillary Clinton doesn’t have an economic growth strategy. He notes that she is promoting infrastructure investment, both as a way to generate demand and also provide a basis for further growth, but then argues that her pledge to give small businesses easier access to credit will come up short:
“To do that, though, would run smack into the anti-bank sentiment of the Democratic Party, since small community banks provide about half the loans to small businesses, and it is precisely those banks that have been most choked by the post-2008 regulations. We need to prevent recklessness, not risk-taking.”
Okay, so Thomas Friedman is arguing that the big problem facing small businesses is that they can’t get credit, and the main reason for that is those nasty Dodd-Frank regulations that are handcuffing community bankers. That’s an interesting argument. Let’s see if that fits what the small businesses themselves say.
The National Federal of Independent Businesses has been surveying small businesses for more than thirty years. Here’s the latest statement on credit conditions from its June report:
“Five percent of owners reported that all their borrowing needs were not satisfied, 3 points above the record low reached in September 2015. Thirty-two percent reported all credit needs met (up 1 point). Only 2 percent reported that financing was their top business problem.”
Hmmm, doesn’t sound like the anti-bank sentiment of the Democratic Party is posing a big problem for these folks. Oh well, got to give Mr. Friedman credit for trying.
There is another point Friedman makes in his piece that is worth correcting. He calls the Democrats “anti-trade.” Presumably the basis for this is the opposition to the Trans-Pacific Partnership (TPP).
I know Mr. Friedman is an important person by virtue of his column in the NYT, but he still doesn’t get to have words mean whatever he wants them to mean. Being opposed to the TPP is not the same as being “anti-trade,” it is being opposed to a specific trade deal which likely does more to increase protectionist barriers than reduce them.
The TPP includes extensive provisions increasing copyright and patent-related protections. These are protectionist measures. They create monopolies that allow companies to charge prices that are several hundred or even several thousand percent above the free market price. (They also might make life-saving drugs unaffordable for millions of people, but we’ll just stick to the economics here.) Copyrights and patents lead to the same economic distortions and inefficiencies as tariffs of the same size. It doesn’t matter that we call them “intellectual property” the impact on the market is the same.
Furthermore, the TPP imposes a corporate friendly regulatory structure that has nothing to do with trade. It also creates an extra-judicial process for foreign investors (or foreign subsidiaries of U.S. corporations) that will effectively over-ride U.S. law.
To refer to people who oppose the TPP as “anti-trade” is simply name-calling. Perhaps Friedman may want to reconsider his opposition to Donald Trump.
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