November 22, 2019

Trump Winning the Trade War Would Make China Stronger, Not Weaker

trump chinaWe don’t win anymore,” said candidate Donald Trump numerous times during his 2016 presidential campaign, referring to America’s trade relationship with other countries. Trump and tens of millions of his supporters hold the protectionist view that trade, like all human relationships, is a war that must be “won.” Rather than exchanges that leave both parties better off, protectionists see trade as a zero-sum game in which one side benefits at the other’s expense.

Fair Trade Over Free Trade

The president has said on more than one occasion that he supports free trade, but he insists it must be fair, meaning that China or other partners reciprocate any relief from tariffs and other burdens placed on their exports. And it is true that China has not treated American exports to China the way America has treated Chinese exports to America.

China has been more protectionist and is likely engaging in some subsidization and/or other government assistance to its exporters, even if it and its effect on America’s trade deficit with China are greatly exaggerated. Americans would be better off with zero tariffs and completely free trade regarding its imports.

Regardless, Trump and his supporters draw completely the wrong conclusion. Persuading Xi Jinping to adopt free trade policies would make China’s economy stronger, not weaker.

Read the rest at Foundation for Economic Education…

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Economics Was Invented to Refute Trump’s Tariff Arguments

twoboatsWhen Adam Smith wrote Wealth of Nations, it wasn’t to refute the “godless socialists” 21st-century Republican voters believe are taking over the world. It was to refute the kinds of protectionist ideas championed by conservatives like Edmund Burke and Alexander Hamilton in Smith’s day, Abraham Lincoln eighty years later, and Trump today.

Bastiat remade Smith’s case in 1848. Henry Hazlitt did so again in 1946. Still, these economic fallacies persist because they offer the victims of other bad economic policies villains they can blame for largely self-inflicted wounds.

The Broken Window Fallacy

Every time a Trump supporter sees “Made in China” on a pair of sneakers, he throws up his hands and says, “Do you see that? They’re stealing our manufacturing jobs.” He then repeats a version of Bastiat’s broken windowfallacy. It goes something like this:

China puts tariffs on our products so our exports can’t compete in its markets. But we don’t put tariffs on China’s exports, making their sneakers cheaper than we can make them here. American sneaker manufacturing jobs go to China, but no Chinese manufacturing jobs come to the United States.

Not only do millions of Americans lose their jobs, say the protectionists, but all of the money they would have spent domestically is instead spent in China. This causes other American businesses to fail, cut production, or not expand as much as they otherwise would. The unemployed American factory worker doesn’t eat out at the local restaurant. The restaurant needs fewer wait staff and cooks, who in turn don’t have money to spend on new clothing, etc.

As Bastiat would say, this is “what is seen.” But their argument ignores what is unseen.

What is unseen is the money American consumers no longer have when the tariffs are put in place. For example, the tariff may result in them paying $200 for the same pair of sneakers they previously paid $100 for. That means they no longer have $100 they previously had after buying the sneakers, which they could spend on other products. Whatever jobs they were supporting with that $100 are now lost.

Read the rest at Foundation for Economic Education…

Trump confirms he’s a Hamiltonian; invokes Lincoln’s protectionist fallacies

GOP-2016-Trump_sham1-725x483Is Donald Trump reading this blog? If so, he’s not grasping that Trump Isn’t Hitler; He’s Hamilton and Reality Check: Trump’s Platform is Identical to Lincoln’s weren’t meant to be supportive of his mercantilist economic ideas. Maybe that’s on me, the writer.

Regardless, Trump invoked both Hamilton and Lincoln, starting at about the 10:30 mark, during a speech yesterday. He quotes Lincoln saying, “The abandonment of the protective policy by the American government will produce want and ruin among our people.”

Like all protectionists, Trump seems to have no idea about the concept of opportunity cost. He posits that tariffs on foreign imports will bring back manufacturing jobs, which he says “the nation” desperately needs. But it never occurs to him that when millions of Americans buy sneakers made in China for $100 instead of sneakers made in America for $200.00, they create other jobs with the $100 they save.

Trump’s speech confirms several of the arguments I make in my latest book. One can draw a virtually straight line from the Federalists, through the Whigs, to the Republicans. Obviously, there are nuances over such a long period, but the core tenets of protectionism, crony capitalism and central banking never cease to be the foundation this house is built on.

More importantly, these are the core tenets of true conservatism in the British-American tradition, since  before the dawn of the industrial revolution. You can call Trump a lot of things, but “not a real conservative” just doesn’t hold water. Free markets, individual liberty and limited government are classical liberal ideas that have only resided within the conservative movement recently and have never been very welcome. That’s because they are all anathema to the conservative worldview that any change, from within or without, threatens to break the barriers between society and man’s dark nature.

The creative destruction of the market, the free movement of labor, capital and goods, and Jefferson’s libertarian principle that the government should be limited to “restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement” is the opposite of conservatism. That’s why Hamilton feared and loathed Jefferson; that’s why Trump fears and loathes the free market. He’s a true conservative, like Hamilton, Lincoln, Coolidge, Hoover and the rest.

 

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Reality Check: Trump’s Platform is Identical to Lincoln’s

Publication1Donald Trump’s criticism of Judge Gonzalo P. Curiel is only the latest of his positions denounced by the Republican Party establishment. They’ve opposed him throughout his campaign for his protectionist stance on trade, his immigration policies and his hostility towards the First Amendment, among other things.

All of this has been decried as “not conservative” and contrary to the party’s principles. Ironically, the so-called “Party of Lincoln” doesn’t recognize in Trump’s platform all the basic elements of Lincoln’s.

American’s tend to see history as a struggle between heroes and villains. Lincoln has been placed firmly in the hero category because of his widely misunderstood Emancipation Proclamation and for winning the Civil War. But when you get past the slavery issue, what’s left of Lincoln’s politics sounds a lot like Trump’s. They didn’t change significantly from the time of Lincoln’s first political speech:

“Fellow-Citizens: I presume you all know who I am. I am humble Abraham Lincoln. I have been solicited by many friends to become a candidate for the Legislature. My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank. I am in favor of the internal improvement system, and a high protective tariff. These are my sentiments and political principles. If elected, I shall be thankful; if not it will be all the same.”

Lincoln was then a member of the Whig Party and it was a coalition of former Whigs and abolitionists that formed the Republican Party in 1854. And while there is no reason to doubt Lincoln’s personal opposition to slavery, it was Henry Clay’s “American System,” a repackaging of Alexander Hamilton’s platform, that defined Lincoln’s politics for most of his life.

Politically, the alliance with abolitionists allowed proponents of protectionism, internal improvements and a national bank to achieve the electoral success that had eluded them since 1800, when Jefferson’s victory rang the death knell of the Federalist Party.

“Internal improvements” was the language of the time for what we now call “infrastructure.” Prior to Lincoln’s administration, most roads and other infrastructure were privately funded and built. Both the Federalists and the Whigs had lost elections for sixty years largely for promoting government infrastructure and high tariffs. With Lincoln’s victory and the subsequent fifty-year dominance of the Republican Party, that trend completely reversed.

Lincoln ran on and executed his plans to subsidize railroads and other infrastructure. Trump wants to do likewise. Lincoln ran on and executed his plans to raise tariffs significantly in order to protect domestic manufacturers from foreign competition. Trump also wants to do likewise.

Trump has been criticized as dangerous to the First Amendment because of his continual attack on the press and threats to “open up our libel laws” as president and sue reporters who criticize him. Lincoln had him beat; he threw reporters in jail, just as the Federalists did under the Sedition Act during the 1790s.

While the issue of a central bank has been settled since 1913, it is noteworthy that Trump has lined up with libertarians in supporting an audit of the Federal Reserve. But he has given no indication he opposes its existence.

But what of Trump’s most controversial position, to deport 11 million illegal aliens? Certainly, Lincoln never supported anything like that, right?

Wrong. Until the day he died, Lincoln supported and actively sought to execute a rather bizarre plan by today’s standards, but widely supported at the time, called “colonization.” Promoted since the early 18th century, the idea was to free the slaves and then subsidize their emigration to Liberia (created for expressly that purpose), the West Indies or South America. Colonization was yet another Whig plank Lincoln inherited from his political idol, Henry Clay. In Lincoln’s own words,

”I can hardly believe that the South and North can live in peace unless we get rid of the Negroes. Certainly they cannot, if we don’t get rid of the Negroes whom we have armed and disciplined and who have fought with us, to the amount, I believe, of some 150,000 men. I believe that it would be better to export them all to some fertile country with a good climate, which they could have to themselves.”

In fairness, Lincoln was a supporter of foreign immigrants, opposing the anti-immigrant Know Nothings. But on the charge of racism, Lincoln has far more to answer for than Trump. Trump has repeatedly separated his professed admiration for people of other races with his staunch opposition to illegal immigration. Lincoln made no bones about his view that black people were inferior.

The media and Republican Party leadership has characterized Trump’s campaign as a departure from both the Republican Party’s principles and conservatism itself. In reality, it’s exactly the opposite. Trump’s platform not only represents a return to the founding principles of the Republican Party, but to the long held positions of conservatives in the British-American tradition.

Laissez faire markets and open borders have always been positions traditional conservatives staunchly opposed as a threat to the order and stability their entire philosophy is centered around. The Republican Party was born advocating tariffs and higher government spending. It has never changed those policies in practice, despite free market rhetoric in recent decades.

Trump’s success should come as no surprise. His economic ideas have had the support of truly conservative voters since the days of Alexander Hamilton. That’s why it is a somewhat futile exercise to look for a “true Republican” or a “true conservative” who departs significantly from Trump and can win. Voters seeking free markets, small government and individual liberty should look instead to Gary Johnson and the Libertarian Party.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.