In a similar vein to my recent post on the Trump/Carrier “deal”, but with far more professional credibility from the authors – spanning the gamut of journalism, economics, private sector, and government experience, including one author’s (Matthew Slaughter) service on the Council of Economic Advisors for President George W. Bush and current service as the Dean of the Tuck School of Business at Dartmouth – this article, delivered as a letter to President-elect Trump, represents additional logic behind free trade. While my post largely focuses on the philosophy of individual freedom and dangers of government picking winners and losers, the Slaughter and Rees Report lines up several empirical reasons of why protectionism is actually economically harmful and counterproductive. It is worth the read.
I just received an article from the Wall Street Journal that indicated that Carrier has agreed to keep roughly 1,000 jobs in a manufacturing plant rather than shift the employment to Mexico. Rather than celebrate this as a great example of private and public partnership and the deal-making style of Trump that successfully and benevolently puts Americans first, I am going to put a different, and perhaps unpopular, spin on this and call it what I believe it to truly be – arbitrary manipulation and industrial policy developed by government for the benefit of the few at the expense of the many.
Of course, the “saving” of 1,000 jobs is a positive thing on the surface, and it will no doubt lead to declarations of success and subsequently votes for the protectionist politicians who promoted it well into the future. Less visible will be the unintended consequences and foregone opportunities of non-government intervention. I will start with the obvious and work my way to the more philosophical, but just as important, reasons to decry, rather than to celebrate, such government interventions:
- The 1,000 jobs were kept and promoted at a hefty price tag per worker. At a $7,000,000 tax incentive agreement, this works out to $7,000 per job “saved.” This means the rest of Indiana taxpayers are subsidizing this arbitrary policy. No doubt, you will find many lower-paid workers subsidizing their higher-paid brethren. I am sure the Indiana taxpayer could think of a million different things they could do with that $7,000 to help their own careers and families. This is the unintended consequences that are diffused and don’t get highlighted in the media that happens with industrial policy. This is also what happens when rent-seeking corporations get the ear of government officials who control too many of the levers of economic policy. They get to decide how to use our tax dollars and declare it a successful investment with little accountability or visibility to what ends those dollars could have gone to had they left them in our pockets.
- The inability to shift labor to take advantage of wage rate/productivity imbalances leaves costs higher for American consumers in the long-run. Once again, this is government meddling in support of one small class of citizens at the expense of the many.
- Preventing Mexico from taking advantage of their comparative advantages in their specific mixture of labor force participation, wages, and productivity will continue to put pressure on their citizens but not allowing them to grow economically, which further puts pressure on its citizens to immigrate. Being able to take advantage of cross-border trade is mutually beneficial and is not the zero-sum game that protectionists such as Trump believe it to be. The great irony is that plugging one “problem” of imbalanced trade only exacerbates another one of immigration- or at least in the sense that self-described American Economic Nationalists believe trade and immigration to be problems.
- Sustaining or creating new abusive and arbitrary government power to take tax dollars from citizens in support of the few establishes/continues a dangerous precedence. What well-connected company or connected political body will take their turn next in using their connections to politicians to extract resources from the rest of us under the auspices of “America first?” Do we really trust the government to pick and choose these winners wisely and with all of our freedom, liberty, and economic interests in mind? I hope to someday make this a rhetorical question.
- I keep coming back to this point from previous posts – but what right does the government have to tell me as a consumer where I can and can’t buy goods? By implication – browbeating, cajoling, and incenting them to stay (using my money) in America through taxpayer funds is ultimately an act to usurp my rights to buy goods from the provider who can make the highest quality good at the lowest cost and in the end is little more than theft of my resources to support their own arbitrary decisions.
Finally, freedom and liberty requires a tradeoff of uncertainty in outcomes that don’t always redound to every individual, but is the only way with which we can grow economically (and in turn emotionally and spiritually) in the long run. The fundamental question then becomes do we want to bequeath to our future generations and children an open and dynamic society where people are free to create the exciting and enriching occupations of the future, or do we want to confine them to the known quantities of the past and present? We shouldn’t demand equality in outcomes, but rather demand the equality of opportunity combined with blind justice – good arbitration when conflicts arise over contracts between free people. Otherwise, we should keep government at a safe arm’s length that is akin to a good and impartial referee who knows a foul when it sees it and has a consistent redress for those fouls irrespective of the player that committed them. Instead, what we have these days is a referee who changes the rules in the middle of a game to the advantage of his favorite and most well-connected players. On this note of equality of opportunity and why it is extremely important, I land with a powerful excerpt from Deirdre McCloskey’s remarkable book, Bourgeois Equality, of which I have written more at length about in a separate post, but for today’s topic pull out this specific section:
The ideas of equality [in the English and Scottish Enlightenment period] led to other social and political movements not uniformly adorable. Hannah Arendt remarked in 1951 that ‘equality of condition…is among the greatest and most uncertain ventures of modern mankind.’ Alexis de Tocqueville had said much the same a century earlier. And Scottish equality has a harsh, even tragic side. It entails equal reward for equal merit in a marketplace in which others, by freedom of contract, can also compete. As John Stuart Mill put it in On Liberty, ‘Society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering; and feels called on to interfere only when means of success have been employed which it is contrary to the general interest to permit – namely, fraud or treachery, or force.’ Yet in the real world, unhappily, if the poor are to be raised up, there is no magic alternative to such competition. An ill-advised and undercapitalized pet store, into which the owner pours his soul, goes under. In the same neighborhood a little independent office for immediate health care opens half a block from a branch of the largest hospital chain in Chicago, and seems doomed to fail the test of voluntary trade. Although the testing of business ideas in voluntary trade is obviously necessary for betterment of the economy (as it is too by non-monetary tests for betterment in art and sport and science and scholarship), such failures are deeply sad if you have the slightest sympathy for human projects, or for humans. But at least the pet store, the clinic, the Edsel, Woolworth’s, Polaroid, and Pan American Airlines face the same democratic test by trade: Do customers keep coming forward voluntarily? Does real income rise?
We could all by state compulsion backed by the monopoly of violence remain in the same jobs as our ancestors, perpetually “protected,” though at $3 a day. Or, with taxes taken by additional state compulsion, we could subsidize new activities without regard to a test by voluntary trade, “creating jobs” as the anti-economic rhetoric has it. Aside even from their immediate effect of making national income lower than it could have been, perpetually, such ever-popular plans – never mind the objectionable character of the violent compulsion they require – seldom work in the long run for the welfare of the poor, or the rest of us. In view of the way a government of imperfect people actually behaves in practice, job “protection” and job “creation” often fail to achieve their gentle, generous purposes. The protections and the creations get diverted to favorites. Laws requiring minority or female businesses to be hired, for example, tend to yield phony businesses run in fact by male whites. In a society run by male whites or inherited lords or clan members or Communist Party officials, or even by voters not restricted by inconvenient voting times and picture IDs, the unequal and involuntary rewards generated by sidestepping the test of trade are seized by the privileged. The privileged are good at that.
I could write my own treatise on Trump’s first 100 days, or I could just link to one that already says exactly what I think written by an eminent University of Chicago trained economist and Hoover Institute fellow named John Cochrane instead.
For today, I choose the latter option. The only addition I would make is that he should look no further than Cochrane when appointing a Chair of the Council of Economic Advisors.
I am reminded of this Far Side cartoon every time I think of the Trump versus Clinton election circus we are doomed to endure for the next few months, followed by 4 years of whatever we get on the back-end of it.
On principle, I believe that voting for the Presidency should never have become, nor is it currently, a binary choice between lacklustre candidates put forward by two parties. I say this only to make the point that the Far Side cartoon, while humorous and somewhat appropriate, isn’t entirely accurate given that we can freely vote for other options or choose not to vote at all. Much of my actual lament today is that the office is as powerful as it currently is in the first place. If the executive office was relegated to its proper constitutional role, this would be far less consequential of an exercise. It is the legislature, through reasoned and deliberative process, that was established with the preponderance of governmental powers and placed in the pre-eminent Article I of the U.S. Constitution. This was a wise decision by the founders, who intended to promote the durability of individual liberty through due process of deliberative and participatory government, as I indicate in another post. This legislative responsibility has been eroded greatly through various executive branch usurpations (i.e the vast proliferation of unaccountable executive agencies) as well as a judiciary that has strayed beyond its boundaries of interpreting law as devised in the Constitution and through laws promulgated through the legislature to a modern-day role in actively creating their own laws out of the judge’s’ own political and personal preferences.
All that being said, my ideological principles don’t matter much when the reality is that one of these individuals will become President of the United States, a fact that I can only find comic relief in the Monty Python scene in which the “Constitutionalist” peasant indicates to King Arthur, “well, I didn’t vote for you…” I picture myself in the next four years as an increasing malcontent who mutters throughout the day, “well, I didn’t vote for you…” every time a poor decision is made or every time something else surfaces that demonstrates their unsavory characters. Actually, upon re-watching the entire scene, I think there is a good deal one could use out of the clip as a parody of modern American government.
And while I don’t agree with the enthusiasm in which the author takes in not ever voting, as I still believe that it is an important right to cherish, there is much in a recent commentary in which he quotes David Boaz posted on the Cafe Hayek blog that I think is spot on. I quote the main points that I agree with below:
I’ve heard libertarians say, “We know how bad Hillary is, so the mysterious Trump is a better bet.” But we do know much about Trump. He’s been clear and consistent on a few issues: banning and deporting Mexicans, building a wall around America, banning Muslims, and taking a sledgehammer to the world’s most important trading relationship (between the United States and China). He’s indifferent to federal spending and against entitlement reform. He thinks he doesn’t need advisers or policies or principles. He has no earthly idea what he thinks about taxes, abortion, minimum wages, debt, health care, or most other issues. Most disturbingly, he shows disdain for Congress and the Constitution.
A few libertarians have said that war is the greatest threat to life and liberty, and Trump is less hawkish than Clinton and most of the other Republican candidates. True, he has criticized the Iraq war and nation building and even read a speech proclaiming that “unlike other candidates for the presidency, war and aggression will not be my first instinct.” But he has also promised to “bomb the s– out of” ISIS and “take out their families.” And his ignorance, anger, and impulsiveness about trade and immigration would surely make for rocky international relations.
One of the most useful and simple frameworks I have ever received is a concept I gained in a decision making course taught by the late Professor Kent Womack, one of my favorite professors at Dartmouth College and whom I credit with my own enhanced appreciation for understanding human frailties and the need for humility when approaching large organizations and intractable problems.
I believe this framework can largely explain the appalling lack of praiseworthy and honorable choices that the two-party system has left us with in this election cycle. Since the seemingly going defunct GOP Party is something I am much more familiar with, I can more readily speak to it and fit it within the framework. Trump won most of the primary races by racking up a plurality amongst split votes, but rarely did he win an above 50% majority. His negative ratings, approaching 65%, is unprecedented in presidential election history. I have little doubt in my mind that had he begun this race with fewer choices representing the typical established Republican base, he would not be where he is today. Imagine a scenario in which his only opposition to begin the race was in the persons of Jeb Bush, Marco Rubio, and Carly Fiorina. The race would have likely consolidated on one of those as an alternative to Trump a lot more rapidly than the process of the agonizing and costly whittling down of votes that left us with Cruz and Trump standing in the end. Given this likelihood, Trump’s unconventional campaign and dishonourable and intemperate personality fits the table in the “Good Luck” category. The real challenge for the GOP going forward is that Trump has internalized this “Good Luck” outcome as a direct result of his own special genius – putting himself in the “Justly Rewarded” category, when the truth is much closer to what Bret Stephens from the Wall Street Journal articulated as rolling three double 6’s in a row in backgammon and believing it is a result of your own skill. Trump’s blustery and undisciplined strategy in any other year would result in a campaign going down in a tremendous ball of flames, and may still do so, but this is no ordinary year. In this great tragicomedy, his opponent on the other side is almost as tragically flawed as he is.
This brings me to my own observations of the Democratic side, where even a pre-ordained coronation has taken a tremendously long time given that the Democratic buyer’s remorse continues to play itself out. For such a party stalwart and established candidate to take so long to take control of the primary says as much about the influence of Sanders and his avowedly democratic socialist ideas as much as it says about Clinton’s weakness. (On the topic of Sanders, Daniel Henninger of the WSJ has an insightful piece of the impact of the Sanders’ candidacy in revealing what was already latent in the Democratic Party lurch to the left). Indeed, Clinton’s own negative ratings, which are hovering close to 60%, are not too far off from Trump’s numbers. She would probably be bogged down by Clinton family scandals of the past (cattle futures, Whitewater, Bill’s various relations with staffers and interns), but the fact that Clinton has ongoing current scandals has added additional combustible fuel to the fire.
Alas, one of the conundrums of the Democratic Party is that they lack a deep bench of political talent, having been denuded of a fresh crop of intellectual blood coming from state governorships and state legislatures where Republicans have quietly built majority strongholds in a majority of states. Even with a less developed politician farm system, to use a baseball analogy, the lack of existing party grandees such as Joe Biden, John Kerry, or even an independent run ruled out by Independent Michael Bloomberg has gifted Hillary Clinton with a relatively easy and open path to the Democratic ticket. That being said, Clinton’s gifts as a disciplined (if not exciting) campaigner and politician is leagues above that of Donald Trump, but her own glaring weaknesses likely mean that if she went into this race with a formidable opponent that lacked any of her baggage, she is likely already on the sidelines by now.
But here we are as Americans, captive of bad luck and this destined to be stuck with two hard to love and hard to respect out of any moral and virtue sense candidates that present to us little compelling or worthy choice to hold our highest office in the land. The leader of the free world comes down to two unsavory choices who are where they are today out of a historic combination of bad luck from two parties colliding together. Of course, there are other options and this race does not have to be bi-polar. I will be casting a ballot for the Libertarian Party this cycle, but my reasons for this is a topic of exploration for another day.
Bret Stephens has a biting critique of the GOP in his recent Wall Street Journal op-ed. Stephens, as ever, is able to criticize the party that he aligns with most often with eloquence and forcefulness that I admire. The GOP’s myopia and fixation, to say nothing of the lack of economic soundness and adherence to liberty, small government, and plain moral decency – was a primary source of frustration of mine with the party long before the rise of Trump. The combination of stances on immigration, free trade, and Trump are the main reasons I will be casting a Presidential Libertarian ballot this election season.
Some of the piquant highlights of the article, in which Stephens addresses common canards leveled against Mexico and Mexican immigration are as follows:
Mexico is a failed state. Mexico’s struggles with drug cartels—whose existence is almost entirely a function of America’s appetite for dope—are serious and well known. So are its deep-seated institutional weaknesses, especially the police forces that collude with the cartels and terrorize rural areas.
Then again, Mexico’s 2014 homicide rate of about 16 murders per 100,000 means that it is about as dangerous as Philadelphia (15.9) and considerably safer than Miami (19.2) or Atlanta (20.5). Are these “failed cities” that you don’t dare visit and that should be walled off from the rest of America?
Mexico steals U.S. jobs. Donald Trump recently resurrected this chestnut by inveighing against Nabisco and Ford for shifting production to Mexico from high-cost Illinois and Michigan. Never mind that one reason Ford made the move was to take advantage of Mexico’s free-trade agreements with the European Union and other countries, meaning that opposition to free trade is the very thing that drives business abroad. Then again, Mexico is the second-largest purchaser of U.S. products; the Wilson Center’s Christopher Wilson has estimated that “six million U.S. jobs depend on trade with Mexico.” That is especially true for border states. ‘Mexico is the top export destination for five states: California, Arizona, New Mexico, Texas and New Hampshire, and is the second most important market for another 17 states across the country.’
Illegal immigrants are a drain on the system. This whopper should be sold at Burger King, since illegal immigrants pay billions in state and local taxes, along with about $15 billion a year to Social Security—the benefits of which they are unlikely ever to get back. Entire U.S. industries, agriculture above all, depend on illegal migrants, without whom fruits and vegetables would simply rot in the field.
If there is a drain, it’s Mexicans going home—roughly one million returnees between 2009 and 2014, according to the Pew Research Center, outpacing the number of Mexicans moving north by about 140,000. That owes something to growth and stability in the Mexican economy, which is largely a function of the North American Free Trade Agreement.
This makes Mr. Trump’s opposition to Nafta all the more misjudged. Without it, Mexico could easily have become Venezuela, run by an Hugo Chávez-like strongman, that would have posed a real threat to U.S. security, as opposed to the one in Mr. Trump’s imagination.
My dear friend Adam Goldman, who is an active member of many conservative and Republican organizations (you can see his impressive credentials below the article), has contributed the following article that I believe readers of The Gymnasium will appreciate. Adam is an astute political observer and defender of the Republican Party and its historic big-tent compromising approach that he defends as a natural and necessary component of Federalism and American values. While the libertarian-leaning purist in me personally wants to push the party into one of much more limited government and classical liberal directions, Adam makes excellent observations on the value of the party that exists today, of the two-party system, and illustrates that even the hero Reagan compromised and performed actions inimical to populists on the right. Further, he draws a remarkable contrast between the optimistic and moral approach of Reagan to the brash authoritarianism of Trump. I hope my readers will enjoy this article and comment on it and I hope you value and look forward to contributions from Adam and others for diverse viewpoints in the days to come.
Trump’s Erosion of the Legacy of Reagan and the Roots of Modern Authoritarianism
Splinter movements from our twin political parties are nothing new in American history. While it is of utmost concern, considerable examination into Donald Trump’s highly questionable personal and business backgrounds have been undertaken elsewhere and need no further recitation herein. I examine and compare, rather, the rise of the Trump phenomenon to that of the Reagan revolution, through the lens of America’s late 20th century history political culture as well as its Constitutional and partisan framework.
The Republican and Democratic parties are by nature very large businesses that encompass a very diverse range of both the religious and the secular, including both labor and business, and other movements, spread across a continent. For America to enjoy relative benefit of the stability of a two-party system, it must out of necessity subordinate the purist impulses of certain factions within these diverse coalitions. This simple logic of 2 + 0, and not 2+1 or 2+2, is not embraced by many who revile their “establishment” leadership within their respective parties. These rejectionists are imbued with an authoritarian impulse, and when its spokesman meets with a base of support that crescendos in a positive feedback loop, the results can be inherently destabilizing, as the GOP is witnessing this year with the rise of Trump.
Trump has very successfully redirected the Tea Party angst of 2010 from Obama against the Republican party as a whole. By comparison, in 1968 violent counter-cultural and student movements joined to force their way into Eugene McCarthy’s coronation, a moderate Democrat. The assassination of Robert F. Kennedy earlier unglued the Democratic party, temporarily. It became unstable and dysfunctional. The result was the election of their arch-nemesis, Richard Nixon, a flight to stability and a symbol of strength for most voters. The uprising on the furthest flank from the center of the party led to a result in direct contradiction to its stated goals.
In 1996, Pat Buchanan led a similar, but much more orderly, rejectionist insurrection within the GOP. Frustrated with the dilution of Reagan’s supposedly pure vision of conservatism, millions flocked to his side. Memories fade quickly though: Reagan made numerous compromises with Tip O’Neill, his famous “six o’clock” friend, and Democratic Speaker of the House, in order to secure broad tax cuts and increased defense spending. Reagan in turn agreed to raise gas taxes, eliminated the IRS deduction for auto loan interest, raised the Social Security eligibility age, incurred massive deficits, barely made a dent to social welfare spending, lost 200 Marines in a terrorist bombing during a U.N. peacekeeping mission in Lebanon, and signed the 1986 law granting amnesty to illegal aliens without guarantees regarding promised enhanced border security. Republicans under Newt Gingrich made corrective progress over the course of the decade following Reagan’s tenure by reforming welfare and reducing deficits dramatically. This is the essence of the process of America’s constitutional process, which always defies quick solutions, but if permitted its arc always bends toward limiting the Federal power. Nevertheless, President Clinton quickly dispatched his GOP rival Senator Bob Dole, whose campaign emerged gravely wounded from the purist Buchanan-led primary uprising.
The GOP benefited dramatically in 2010 from the Tea Party’s grassroots coalition, which turned out millions of voters only four years following the GOP’s huge losses in the 2006 Congressional elections. For all of the Tea Party’s purity of purpose toward resurrecting a second Reagan Revolution, it forgot its own history: the necessary compromises that Reagan strategically agreed to, and the failed insurgence of Buchanan, who prevailed in a tactical victory but lost the war. It is of no surprise that Pat Buchanan several years ago touted the effectiveness of the “Christian” Vladimir Putin of Russia. Putin in turn, stated his recent admiration for Trump, whom the latter has not yet disavowed.
The roots of authoritarianism are neither peculiar to the right or the left. Trump may be its spokesman on the right today, however tomorrow it is all but certain that the tides of unwritten history will give rise to another on the left. The result is always certain in a two-party political environment, which is that the results of its efforts are always self-defeating.
The banality of Trump is a reflection of the temperament of his supporters, who have neither the disposition nor inclination to consider the long-arc of Constitutional lawmaking. In fact, the very words “Constitutional lawmaking” provoke disdain and anti-“establishment” mockery from his supporters. They view compromise as not only unnecessary but anathematic, despite all mathematical proofs regarding veto overrides, a bicameral legislature, and an independently elected executive (unlike European parliamentarian systems). Comparisons to the rise of Hitler in 1930s Germany are exaggerated, but the impulse to authoritarianism is by no means to be conveniently ignored, despite America being the oldest democracy. The renown historical philosopher Hanna Arendt examined the rise of the Third Reich closely and concluded that in spite of Germany’s position as the most highly technical and educated society in continental Europe, a motivated and large plurality of its citizens were drawn to Hitler’s crudity and demagoguery. How did this occur?
Hitler exploited four themes that motivated ordinary Germans: the loss of the German middle class’ purchasing power due to hyperinflation from post-war debt, the loss of international prestige and status (due to the Versailles Treaty’s disarmament clauses), and impatience with the new, inexperienced fledgling democracy in Berlin which could not produce a consensus regarding which policies ought to address these crises. The fourth theme tied together the previous three, which blamed these crises squarely upon the “establishment”. Hitler further stoked fears of an establishment “conspiracy” against ordinary Germans by gradually amplifying xenophobic rhetoric of a Jewish fifth-column, which reflected old mythologies from the Middle Ages which still resonated.
The goodwill of the majority of America’s people and the strength of its community organizations, whose Protestant and Catholic spokesman have weighed in recently against Trump, all but guarantee that the horrors of the Reich will never be repeated here. However, for the Tea Party to successfully overcome its impulse to authoritarianism and regain its focus on continuing the Reagan revolution, it must re-embrace the Constitutional process, and unequivocally denounce demagoguery. It begins with an honest self-assessment of its own disregard for Reagan’s principles, which follow.
Reagan’s speech, manners, and civility always shamed his occasionally crude, low-minded opponents with a forceful appeal to moral reasoning. For Reagan, the goal was never “winning” at the expense of anyone. For Reagan, winning was a tide that lifted all boats, including those of the left. For Trump, personal wealth is the goal for not only himself but for his supporters. Reagan, on the other hand, felt the tide of rising wealth that lifted all boats was merely a means to an end. The end was not wealth, but security and a realization that God desires to bless those that are His. That financial security can then be used to bless the world and lift millions out of poverty and oppression. Reagan believed that America should lead in that effort. Trump has cast his vision for America as merely one of acquiring more goods and personal wealth and self-satisfaction, a shallow appeal at best to consumerism. By contrast, Jesus taught an entirely different paradigm of the reason for wealth, as a means to a different end altogether. At the risk of hyperbole, we can conclude that Reagan’s economic vision is consistent with that of Jesus of Nazareth, although I’m sure Reagan’s humility would most certainly preclude his agreement to such notions.
For the foregoing reasons, we can safely conclude that the character and values of Reaganism stand in diametric opposition to that of Trump. What is more, we can rest assured that Ronald Reagan himself would very likely have absolutely nothing to do with someone of the persona of Donald Trump.
Adam Goldman is current Board Member and former Vice President of Florida Right to Life, a founding member of the Center-Right Coalition of Central Florida, serves on the Central Board of James Madison Institute, and served on the statewide Florida steering committee of the Mitt Romney campaign.
Yes, the would be trade war General Donald Trump is included in those that need these lessons. Whether he actually believes his own tirades against Mexico and China or whether he finds them politically astute given his blue collar base is beside the point, the lesson on the virtues of free trade are in constant need of defending – like a garden that is surrounded by malevolent spreading weeds that are aggressive but thoughtless.
This Neighborhood Tale from Cafe Hayek is one Orwellian dystopian view of the topic that asks the obvious question – why should government backed by freedom-hating voters decide what I get to consume and where I get my products from? Drawing the arbitrary consumption boundary to the United States is really no different philosophically and morally than drawing a consumption boundary around my neighborhood. When one paints it in this light, then the restrictions on individual liberty and punitive tariffs becomes quite the sophistry.
Another highly insightful and thought provoking entry on the topic comes from the American Enterprise Institute constructed video debate between Trump and Milton Friedman on the topic. Of course, Friedman having passed away some years ago we don’t get the pleasure of Friedman actually destroying Trump’s immature trade arguments in real time, but the artful creation of AEI does the job well enough.
A key phrase from Friedman in the video montage that I particularly enjoy (at the 2:00 minute mark) summarizes the topic of free trade quite well, “When I look at the legislation it always seems to me that the legislation is enacted to benefit a small group at the expense of the large group. Free trade is a way of benefiting a large group at the expense of the small group. But, politically, a small group always speaks with a bigger voice.”
Another common bogeyman of the protectionist is the trade deficit. To the protectionist, this is a pernicious sign of unfair trade practices. The problem with this simplistic view is an assumption that those dollars will exist in a permanent vacuum of no escape. Eventually, those dollars will have to be spent on something, which is most often re-invested back into the United States. Friedman also observes that trade surplus countries are often driven by the lack of savings opportunities in their own countries, driving them to invest in countries such as America where investment opportunities are better.
“When I look at the legislation it always seems to me that the legislation is enacted to benefit a small group at the expense of the large group. Free trade is a way of benefiting a large group at the expense of the small group. But, politically, a small group always speaks with a bigger voice.” – Milton Friedman
Another brilliant quote that I want to call out is when Friedman uses a quote (7:35 minute mark) from the classical American economist Henry George (circa 1890) that, “It’s a very interesting thing that in times of war, we blockade our enemies in order to prevent them from getting goods from us. In time of peace we do to ourselves by tariffs what we do to our enemy in time of war.”
AEI provides a fuller version of Henry George’s arguments on the inanity of protectionist policies in their text, which I have copied below. I find the similarities between Trump’s proposed 45% tariff and the 47% tariff of George’s day that President Grover Cleveland was attempting to lower an amazing coincidence.
Trade is not invasion. It does not involve aggression on one side and resistance on the other, but mutual consent and gratification. There cannot be a trade unless the parties to it agree, any more than there can be a quarrel unless the parties to it differ. England, we say, forced trade with the outside world upon China, and the United States upon Japan. But, in both cases, what was done was not to force the people to trade, but to force their governments to let them. If the people had not wanted to trade, the opening of the ports would have been useless.
Civilized nations, however, do not use their armies and fleets to open one another’s ports to trade. What they use their armies and fleets for, is, when they quarrel, to close one another’s ports. And their effort then is to prevent the carrying in of things even more than the bringing out of things—importing rather than exporting. For a people can be more quickly injured by preventing them from getting things than by preventing them from sending things away. Trade does not require force. Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade.The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.
Can there be any greater misuse of language than to apply to commerce terms suggesting strife, and to talk of one nation invading, deluging, overwhelming or inundating another with goods? Goods! what are they but good things—things we are all glad to get? Is it not preposterous to talk of one nation forcing its good things upon another nation? Who individually would wish to be preserved from such invasion? Who would object to being inundated with all the dress goods his wife and daughters could want; deluged with a horse and buggy; overwhelmed with clothing, with groceries, with good cigars, fine pictures, or anything else that has value? And who would take it kindly if any one should assume to protect him by driving off those who wanted to bring him such things?
“God laughs at men who complain of the consequences while cherishing the causes.” – Jacques-Benigne Bossuet
With the ongoing American Presidential election drama proceeding apace, I can’t help but connect to the quote uttered by a 17th Century French theologian to those that support Donald Trump. Their mistaken views that this self-declared outsider (that really is just the ultimate insider masquerading as an outsider, as Kim Strassel puts so well in a recent WSJ op-ed) will buck the establishment will end in a certain epic let-down.
Trump supporters naively support this outsider campaign as some form of, “sticking it to the man.” This is their cause celebre, their “cherishing of the causes.” There is no doubt a certain amount of glee in watching the party “establishment” watch helplessly as Trump continues to go from victory to victory. Meanwhile, their support is of someone who has no scruples in the way that he conducts his life, business, language, treatment of others, or marital affairs, nor does he have any specific guiding philosophy other than doing whatever it takes to serve his own interests. Thus, there are millions of well-meaning people being duped out of some mistaken sense that somebody needs to go in there and clean house in the henhouse. What they fail to see is that they are not sending in a fox to do the job, they are sending in a strutting rooster that will do nothing more than add more fights, feces, and more chickens into the coop. They are enjoying the ride and the vicarious voicing of their fears through the adult version of a bully while thinking very little of the ultimate consequences. If Trump happens to make it all the way to the White House, it seems to me to be an easy prediction that his followers will fall into one of two future camps. Either they finally see Trump for what he is: a grubby and self-serving cult of personality-inducing fraud that has absolutely zero concern for their needs, or they will continue to bury their heads into blind support of someone who clearly does whatever serves his own ego and ambitions and nothing more. What is certain is the consequences of their support will not be vindication and support of their own causes. What is certain is that the consequences will be the certain loss of any civic probity or decency in our affairs of state.