The bad . . .

. . . in with neo-mercantilism.

Last week I listed some of the most promising ideas from President Obama's State of the Union address. There was nothing original in them, of course (it sounded like a watered-down version of what we call Reaganomics), but at least they were based on sound economic theory, thoroughly tested against empirical evidence on a very large scale at the end of the 20th century. Other parts of the speech were not so good. The problems with those parts, which deal with America's place in a globalizing world, have nothing to do with the character of the president. He may be a very likable man, intelligent and caring, hard working, and willing to serve his country, but he is a victim of a bad international economics idea known as mercantilism that sees trade as a zero-sum game.

During his speech, Obama played the nationalistic card on several occasions. The president risked enraging his "progressive" electorate (who are deeply ashamed of America's exceptionalism) in an attempt to gain more support from people whose idea of patriotism is to "buy American." Playing on fears of persistent high unemployment, he tried to manipulate the most economically unsavvy among the independent voters by presenting them with a false choice between multiplying job opportunities domestically and the creation of jobs abroad. Supposedly we must either support government intervention that promotes the former or destroy our middle class (and lose the future) in a process of unilaterally removing trade restrictions. In effect, Obama vowed never to approve a trade agreement that is not supported by special business and labor interests.

The twisted idea that trade is like warfare, where America stands against the rest of the world, was illustrated by drawing a parallel between today's economic realities and the insane space competition against the Soviet Union during the chilliest phases of the Cold War era. But the fallacy runs much deeper-if only there was someone to explain to the president that the purpose of the economy is to satisfy consumer wants and not to create jobs. We work to enjoy the fruits of our labor. Our productive efforts are means to an end, not the goal of our existence. To boast that we shall be better off simply because we double our exports is equivalent to a claim that having Americans sweat twice as much makes an unknown foreign consumer twice as satisfied is in our national interest. Yes, we need to export-but only in order to pay for the pleasure of consuming the fruits of foreign labor. And no, American workers need not fear imports; for while they put the most inefficient sectors of our economy out of their misery, they give the foreign consumer the means to buy from us.

Next week: The ugly.