TGIF: Damn Consumers!

Global free trade is about individual, not national, freedom—for consumers and producers who import raw materials, tools, and semi-finished products.

Aside from its role as an aspect of personal liberty, free trade's efficiency benefits have been well-established since the early 19th century. In this respect, domestic and global trade are the same. Trade restrictions disrupt the productive process, making it less efficient and hence less beneficial to consumers. "All that a tariff can achieve," Ludwig von Mises wrote in Human Action, "is to divert production from those locations in which the output per unit of input is higher to locations in which it is lower. It does not increase production; it curtails it." But people's interests are in expanded, not curtailed, production.

Unfortunately, free trade does not enjoy wide support today. Both major parties oppose it. They don't even pay lip service to it. They think buyers, especially consumers, buy the wrong things from the wrong people. Consumers are an unruly and capricious bunch. They prefer less-expensive, high-quality foreign-made products over more-expensive, lower-quality American-made products. What's overlooked is that they also upset American businesses and workers for reasons other than foreign competition, such as innovation and changing tastes. Also overlooked is that if we can get a better deal from abroad, American labor and resources are freed up for other things.

Government policy favors producers (including workers) over consumers and intermediate buyers. This is idiotic since, as Adam Smith pointed out: "Consumption is the sole end and purpose of all production." This doesn't mean that the government should favor consumers. It means laissez faire.

No one has argued for the wisdom of unfettered international exchange than Henry George. In his 1886 book, Protection or Free Trade, George wrote: "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."

This runs contrary to the view of the two major parties, which believe that individual liberty should be tolerated only if it conforms to the "national interest" as they define it.

George added:

If Americans did not want to buy foreign goods, foreign goods could not be sold here even if there were no tariff. The efficient cause of the trade which our tariff aims to prevent is the desire of Americans to buy foreign goods, not the desire of foreign producers to sell them…. It is not from foreigners that protection preserves and defends us; it is from ourselves. [Emphasis added.]

Then comes the killer line: "What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war." 

How does the protectionist respond to that? Any response would repudiate Adam Smith's wisdom. The major point of The Wealth of Nations is that well-being consists not of piles of gold in government vaults but rather of access to goods. Biden, Trump, and the anti-economists they rely on want you to forget that.

A tariff is a tax. But unlike other taxes, the aim is not to raise revenue. The purpose of a protective tariff is to raise prices and limit choice in the domestic market. That's supposed to punish the foreigner and help domestic competitors, but it's an odd way to do it because many other Americans are harmed. Even the intended beneficiaries are harmed. Many imports are not consumer products. They are inputs that American manufacturers need to make consumer products. The tariff raises producers' costs, drives marginal firms out of business, disemploys workers, and degrades the surviving firms' competitiveness internationally. Even the workers in protected industries then face higher consumer prices, offsetting the benefits they expected from the tariff.

As the British free traders used to say: incomes buy more under free trade. That means incomes buy less under protectionism.

Protectionism squanders scarce resources, restricts individual freedom, and hampers the pursuit of happiness. "This is the crux of the matter," Mises wrote. "All the subtlety and hair-splitting wasted in the effort to invalidate this fundamental thesis are vain."

Restricting Production

"At the bottom of the interventionist argument there is always the idea that the government or the state is an entity outside and above the social process of production, that it owns something which is not derived from taxing its subjects, and that it can spend this mythical something for definite purposes. This is the Santa Claus fable raised by Lord Keynes to the dignity of an economic doctrine and enthusiastically endorsed by all those who expect personal advantage from government spending. As against these popular fallacies there is need to emphasize the truism that a government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens’ spending and investment to the full extent of its quantity.

"While government has no power to make people more prosperous by interference with business, it certainly does have the power to make them less satisfied by restriction of production."

Ludwig von Mises, Human Action

"Capitalism" Is about Freedom, Not Capital

 "Why 'capitalism'? Words have an unfortunate tendency to confuse. Free market capitalism is not really about capital, it is about handing control of the economy from the top to billions of independent consumers, entrepreneurs and workers, and allowing them to make their own decisions about what they think will improve their lives. So careless talk about 'taking control of capitalism' actually means that governments take control of citizens.

"But it doesn't sound like it, does it? One of my intellectual heroes, Deirdre McCloskey, complains that the word capitalism gives the misleading impression that it is about the rule of capital, rather than liberating people to make their own economic decisions, which is really what the free market is about: 'Capitalism' is a scientific mistake compressed into a single word, a dramatically misleading coinage by our enemies, and still used by the sadly misled among out friends.' So why do I use it? Because, no matter what we think of it, and no matter which word we would prefer for a system of private property and free markets, this is the word that has become inextricably linked to it, and if its supporters don't fill that word with meaning, its opponents will."

--Johan Norberg, The Capitalist Manifesto, 2023

TGIF: The Populist Trap

If you care about individual freedom and general prosperity, you'll want to avoid all shades of populism like the plague. It is economic illiteracy proudly proclaimed and writ large. As an alternative to libertarianism, it is bad in its own right—freedom is not on its agenda—but it is bad also because it is wedded to nationalism. That is, it treats the nation-state—not individuals and their projects—as the fundamental unit. It's ours against theirs. Disregard the hosannas to persons, families, and local communities. It's the nation that matters. 

Don't believe me? Then why do populists always want to interfere with people's right to trade as they wish regardless of borders? Never mind that protectionism holds the seeds of economic and military conflict and that unmanaged global trade is global cooperation.

I'm tempted to say that basically, the populist believes that scarcity is a capitalist plot. (There's some unwitting vulgar Marxism in that.) Populism presents itself as the politics of grievance: "working people" are fed up with an elite conspiracy of elected officials, bureaucrats, and "corporate" cronies who enrich themselves at the expense of ordinary people.

Bailouts and subsidies give the grievance some credence, but it's exaggerated. The unnamed culprit is market dynamism—or freedom. Entrepreneurship, innovation, and consumer sovereignty bring change in the demand for goods, which understandably makes people nervous. The bias favors the status quo. Blacksmiths and assembly-line workers are no longer wanted.

Anyway, since coercive government power is the only way to grab privileges at other people's expense, power itself should be—but never is—the villain. Greedy "Big Business" is the target. No distinction is made between bigness achieved through successful service to consumers and bigness achieved through anticompetitive government interference with market relations.

What is the populists' alternative? They say they want a government that serves working people. Never mind that people produce to consume, not vice versa. How do they intend to get the government and economy they want? Through democracy, though they ignore the elitism inherent in any political system. Politicians in a democratic republic need to cobble together majorities to get elected and reelected, but when in office they have elbow room to set the agenda for the one-size-fits-all program that they decide best serves the people's needs. Since people don't understand economics and are biased against markets and foreigners, the program brings tariffs (which hurt American consumers and workers by raising prices and provoking retaliation), bailouts, and deficit spending financed through the hidden inflation tax. Fiscal restraint is not a priority. Every penny of the budget has a constituency behind it.

We find populist agitation within what is misleadingly called the "right-wing" and "left-wing." On the left, the populists try to counterbalance inane identity politics, which in their view has pushed class politics off the agenda. They seem not to realize that class politics is an earlier form of identity politics; it holds, wrongly, that an inherent and irreconcilable conflict exists between haves and have-nots, between employers and employees, that can only be rectified by making the state more powerful than it is today. Never mind that mass production must come before mass consumption, and markets have wiped out much poverty worldwide. The headline-rich "inequality" red herring will keep everyone distracted.

When a Republican populist (say, J. D. Vance) hears the term economic freedom, he is likely to envision unilateral scope for the sovereign state: specifically, a strong leader who wields tariffs, trade quotas, sanctions, antitrust prosecution (which protects inferior competitors, not consumers), and more in his crusade to strengthen the "U.S. economy" by increasing exports (by muscle if necessary), blocking imports, saving or restoring "American jobs," and punishing businesses that provide superior consumer service. What he doesn't envision is free individuals trading goods, services, and labor with whomever they want, including new immigrants who seek a better life without government permission.

The populist can't tolerate individual freedom because, in his view, that would be chaos. He rejects consumer sovereignty, so he goes with the only thing left: the state. He has yet to learn what has been known at least since the Scottish Enlightenment of the late 1700s: that the best kind of social order is spontaneous order, the order that results from free, cooperative, commercial human interaction, not central planning or industrial policy.

The populists, "left" and "right" point to people's economic hardship, but it never occurs to them that government intervention, of which there is no shortage, could be at fault. Are housing prices too high? They blame immigrants (who improve our lives along with their own), not the myriad government building restrictions. Are supermarket prices rising? Blame corporate greed and ignore the money-creating Federal Reserve. This blindness to government intervention is on display with every issue. The populists never see the straitjacketed markets, only too little democracy. But democracy can't get us out of the mess it's got us into. Virtually everything the government does affects market relations. Yet voters know nothing about economics. They don't even know that prices fall when supply rises.

The populists find industrial policy more to their liking than freedom. That's central planning—economic and social engineering, "picking winners"—without nationalization. It's subtle socialism, and it has the same flaws. No one can know enough to plan the economic interactions of billions of people. Anyone delusional enough to think he and some "experts" could manage that task should be laughed off the stage. Aside from the knowledge problem, the incentive problem will always plague us. We know what Lord Acton said about how power corrupts. But power also attracts the already corrupted.

But aren't the populists at least antiwar? Sometimes. They tend to oppose U.S. participation in the Ukraine-Russia war—now. But they can't be relied on. They tend to favor arming Israel in its Gaza onslaught. As nationalists, they always present a potential for conflict, these days with China and Iran. We saw that in Trump's term as president. He cannot be counted on to dismantle the trip-wire alliance system, and he's enthusiastic about the de facto alliances with Israel and Saudi Arabia. Think of the arms sales! That's good for American workers, right?

Let's not forget the link between border security, which populists demand, and the drug war, which they also love. That link offers populist leaders many opportunities for bloody intervention south of the border. One more thing we can be sure of: the populists do not see global trade as a peace-maker, or trade restrictions as a source of conflict. Globalization, even without a government role, is a dirty word. I see no reason for comfort here.

Even when the populists oppose wars (did Trump oppose any?), it is not so that the taxpayers can keep their money and spend it as they like. No, the populists stand with progressives: they want to transfer the money from the Pentagon and CIA to domestic departments. Details may differ, but that's all.

The best reason to oppose war and the preparation for it, aside from the obvious one, is that they require a bloated, intrusive government, battalions of bumbling bureaucrats, and the diversion of scarce resources from consumers to military contractors. Populists just want to redistribute the bloat.

It may be that the "right-wing" populist leaders are phonies and don't mean what they say. Some in the "left-wing" tribe say that about Trump and his running mate, Vance. Maybe that's true. But if they are liars who stand for something else, we can be certain they don't stand for shrinking the state and expanding individual liberty. That's not on the menu these days.

Tariffs Violate Freedom

Debate goes on over who suffers from U.S. tariffs. Biden and Trump, for example, think U.S. tariffs on Chinese goods hurt China, not Americans. This is nonsense. Even if they hurt Chinese producers (who can sell their goods elsewhere), the tariffs still hurt Americans. Whatever the Chinese do, prices in America for the relevant consumer and producer goods, imported and domestic, will rise—that's the point of the tariff—and choice will shrink. Here's what Henry George had to say in Protection or Free Trade:

If Americans did not want to buy foreign goods, foreign goods could not be sold here even if there were no tariff. The efficient cause of the trade which our tariff aims to prevent is the desire of Americans to buy foreign goods, not the desire of foreign producers to sell them.... It is not from foreigners that protection preserves and defends us; it is from ourselves.

He also wrote:

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. [Emphasis added.]

 

TGIF: Culture without Romance

"The entire history of the human race, the rise of man from the caves, has been marked by transfers of cultural advances from one group to another and from one civilization to another."

So said economist, social philosopher, and historian Thomas Sowell in a 1990 speech titled "Cultural Diversity." (Watch it here. I also recommend this lecture by Nigel Biggar.) By cultural diversity Sowell did not mean the still-fashionable sense of that term. He has in mind what might be called culture without romance, echoing James Buchanan and the Public Choice school's economics without romance. What does Sowell mean?

Paper and printing, for example, are today vital parts of Western civilization–but they originated in China, centuries before they made their way to Europe. So did the magnetic compass, which made possible the great ages of exploration that put the Western Hemisphere in touch with the rest of mankind. Mathematical concepts likewise migrated from one culture to another: Trigonometry from ancient Egypt and the whole numbering system now used throughout the world originated among the Hindus of India, though Europeans called this system Arabic numerals because it was the Arabs who were the intermediaries through which these numbers reached medieval Europe. Indeed, much of the philosophy of ancient Greece first reached Western Europe in Arabic translations, which were then re-translated into Latin or into the vernacular languages of the West Europeans.

That shines a different light on how many people think of Western culture. It is something that the cultural anti-immigrationists seem completely ignorant of. Setting out to protect from change a culture that is a product of centuries of unplanned and spontaneous cultural imports seems strange indeed.

Sowell's point is also a blow to the woke warriors. In light of what he's saying, we have no choice but to pronounce the purported crime of cultural appropriation pernicious nonsense. As someone said, the history of man is a history not of cultural appropriation but rather of cultural appreciation. Thank goodness for that.

"Much that became part of the culture of Western civilization," Sowell continued, "originated outside that civilization, often in the Middle East or Asia." (Emphasis added.) Imagine that!

The game of chess came from India, gunpowder from China, and various mathematical concepts from the Islamic world, for example. The conquest of Spain by Moslems in the eighth century, A.D., made Spain a center for the diffusion into Western Europe of the more advanced knowledge of the Mediterranean world and of the Orient in astronomy, medicine, optics, and geometry. The later rise of Western Europe to world pre-eminence in science and technology built upon these foundations, and then the science and technology of European civilization began to spread around the world, not only to European offshoot societies such as the United States or Australia, but also to non-European cultures, of which Japan is perhaps the most striking example.

Sowell then drew an inference that today gets him in trouble with some people: "The historic sharing of cultural advances, until they became the common inheritance of the human race, implied much more than cultural diversity. It implied that some cultural features were not only different from others but better than others." (Emphasis in original.)

Better? Oh my! Are you allowed to say that? Won't that hurt some people's feelings, especially those of some prominent well-paid Western intellectuals? Sowell then showed what a good praxeologist he is by employing the tools of purposeful human action:

The very fact that people—all people, whether Europeans, Africans, Asians, or others—have repeatedly chosen to abandon some feature of their own culture, in order to replace it with something from another culture, implies that the replacement served their purposes more effectively...."

Example: "Arabic numerals are not simply different from Roman numerals; they are better than Roman numerals." How can we know this?

This is shown by their replacing Roman numerals in many countries whose own cultures derived from Rome, as well as in other countries whose respective numbering systems were likewise superseded by so-called Arabic numerals.

It is virtually inconceivable today that the distances in astronomy or the complexities of higher mathematics should be expressed in Roman numerals. Merely to express the year of American independence–MDCCLXXVI–requires more than twice as many Roman numerals as Arabic numerals. Moreover, Roman numerals offer more opportunities for errors, as the same digit may be either added or subtracted, depending on its place in the sequence. Roman numerals are good for numbering kings or Super Bowls but they cannot match the efficiency of Arabic numerals in most mathematical operations—and that is, after all, why we have numbers at all.

But doesn't "our" culture—out of respect for our ancestors—deserve preservation by the state? Tradition! Sowell isn't buying it.

Cultural features do not exist merely as badges of “identity,” to which we have some emotional attachment. They exist to meet the necessities and forward the purposes of human life. When they are surpassed by features of other cultures, they tend to fall by the wayside, or to survive only as marginal curiosities, like Roman numerals today. [Emphasis added.]

He elaborates:

Cultures exist so that people can know how to get food and put a roof over their head, how to cure the sick, how to cope with the death of loved ones, and how to get along with the living. Cultures are not bumper stickers. They are living, changing ways of doing all the things that have to be done in life. [Emphasis added.]

It's common sense: "Every culture discards over time the things which no longer do the job or which don’t do the job as well as things borrowed from other cultures. Each individual does this, consciously or not, on a day to day basis." (Emphasis added.)

Languages take words from other languages, so that Spanish as spoken in Spain includes words taken from Arabic, and Spanish as spoken in Argentina has Italian words taken from the large Italian immigrant population there. People eat Kentucky Fried Chicken in Singapore and stay in Hilton hotels in Cairo.

But in 1990, like today, "This is not what some of the advocates of 'diversity' have in mind."

They seem to want to preserve cultures in their purity, almost like butterflies preserved in amber. Decisions about change, if any, seem to be regarded as collective decisions, political decisions. But that is not how any cultures have arrived where they are. Individuals have decided for themselves how much of the old they wished to retain, how much of the new they found useful in their own lives. In this way, cultures have enriched each other in all the great civilizations of the worlds.

De-romanticizing culture could be a big step toward junking illiberal and demoralizing identity politics and so-called social justice.

TGIF: On the Pursuit of Happiness

The most remarkable phrase in the Declaration of Independence, whose anniversary we just celebrated, is the pursuit of happiness. Looking back 248 years, that phrase may strike the modern ear as strange for a political document. But it apparently did not seem that way to Americans in 1776. The second paragraph told the world:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

The term among these indicates that Thomas Jefferson and the Second Continental Congress did not think that life, liberty, and the pursuit of happiness were our only unalienable rights. But the pursuit of happiness made the brief enumeration, which speaks volumes.

The first thing to note is that Jefferson did not write that we had a right to happiness, but only the right to pursue it. Legal scholar and historian Carli N. Conklin of the University of Missouri School of Law states in "The Origin of the Pursuit of Happiness":

[T]he pursuit of happiness is not a legal guarantee that one will obtain happiness, even when happiness is defined within its eighteenth-century context. It is instead, an articulation of the idea that as humans we were created to live, at liberty, with the unalienable right to engage in the pursuit.

Through historical investigation, Conklin shows that contrary to common belief, the phrase was no "glittering generality" (in Carl Becker's phrase) back them but rather was a term of substance.

I trust no one will take seriously that the omission of property from the list of examples means that Jefferson et al. thought property unimportant. Of course, it did not mean that. We know that the people behind the Declaration understood the deep importance of private property to life, liberty, and the pursuit of happiness. A possible reason for not listing it is that property was often used differently from the way we use it today. While we say, "That's my property," an 18th-century person might say, "I have a property in that," although today's usage was hardly unknown back then. James Madison, who was not a member of the Continental Congress but who had a lot of say about property, used the word both ways. However, here are examples of what he called "the larger and juster meaning" of the word:

[A] man has a property in his opinions and the free communication of them. [Emphasis added.]

He has a property of peculiar value in his religious opinions, and in the profession and practice dictated by them.

He has a property very dear to him in the safety and liberty of his person.

He has an equal property in the free use of his faculties and free choice of the objects on which to employ them. [Emphasis added.]

In a word, as a man is said to have a right to his property, he may be equally said to have a property in his rights.

It's widely known that Jefferson and other founders were deeply influenced by John Locke, the 17th-century philosopher who did so much intellectually to usher in the age of liberalism. Locke, who himself was inspired by the ancient Greek philosophers' focus on happiness, or eudaimonia, invoked the pursuit of happiness. Already, the term had a long and esteemed pedigree.  (Jefferson was also influenced directly by the Greeks. He wrote in a letter, "I too am an Epicurean.") Locke's Essay Concerning Human Understanding (1690; Book II, chapter XXI, section 52) says this: 

As therefore the highest perfection of intellectual nature lies in a careful and constant pursuit of true and solid happiness; so the care of ourselves, that we mistake not imaginary for real happiness, is the necessary foundation of our liberty. The stronger ties we have to an unalterable pursuit of happiness in general, which is our greatest good, and which, as such, our desires always follow, the more are we free from any necessary determination of our will to any particular action, and from a necessary compliance with our desire, set upon any particular, and then appearing preferable good, till we have duly examined, whether it has a tendency to, or be inconsistent with our real happiness: and therefore till we are as much informed upon this inquiry, as the weight of the matter, and the nature of the case demands; we are, by the necessity of preferring and pursuing true happiness as our greatest good, obliged to suspend the satisfaction of our desires in particular cases.

But a puzzle arises. In his influential Two Treatises of Government, Locke referred to "life, liberty, and estate," that is, property, and not the pursuit of happiness. Why Jefferson, without a challenge, switched to "the pursuit of happiness" has been much discussed by scholars over the years. I am certainly not qualified to render a verdict. On why Jefferson made the switch, Carli Conklin writes,

The most persistent explanation offered is that Jefferson was
uncomfortable enough with slavery to want to avoid perpetuating a
property ownership in slaves by including an unalienable right to property in the Declaration.

If that is so, we might wonder if Jefferson's immortal phrase all men are created equal was his way of assuring the future demise of slavery. He had included a condemnation of slavery in the Declaration but had to remove it to make the Declaration acceptable to the Southern colonies. We also can see from his Notes on the State of Virginia that he knew slavery was wrong: "I tremble for my country when I reflect that God is just: that his justice cannot sleep for ever."

Finally, we surely can chalk up a point for Ayn Rand, the novelist/philosopher who made the rational pursuit of happiness—self-interest—the foundation of her Objectivist ethics and politics. She has been a lone voice in this endeavor. People who find the free market repugnant—and most who do not—never tire of equating self-interest with "selfishness," that ugly-sounding word that Rand herself used in a book title just for its shock value. The equation, however, is invidious. It suggests that other people necessarily are impediments to one's happiness and thus one should sacrifice one's happiness at least to some extent. But why would anyone believe that "selfishness"—making the most of one's life by holding it as one's ultimate value—entails the disvaluing of other people? It's crazy on its face. Rand, like the ancient Greeks, understood that he who cares about only himself demonstrates that he doesn't care enough.

A belated Happy Fourth of July!