TGIF: Tariffying Trade-Warmonger Trump

"The word tariff, properly used, is a beautiful word. One of the most beautiful words I’ve ever heard. It’s music to my ears." —Donald Trump

The once and possibly future president threatens to wage economic warfare against countries and companies everywhere if they don't knuckle under to his nationalist demands. He promises to impose tariffs on American firms that calculate that moving operations to Mexico or other foreign locations makes good business sense. He's also ready to strike at allied countries that irritate him by, say, slighting the dollar. (Watch or read his economic-policy speech.)

To his credit he promises to lower taxes on investment and to cut the regulatory burden. He also wants lower energy prices, which would be good all around, but exactly how matters. He's no laissez-faire advocate.

At any rate, Trump's determination to restore the American economy to what it was when much of the world lay in ruins after World War II suggests that, despite all the changes since then, he would much do more than de-tax and deregulate. For example, he promises to lure foreign companies here. Again, how? His government would no doubt play an active role in what should be private matters. He's already promising to make the taxpayers pay for business infrastructure projects. As he said about the audio industry, "It’ll be like it was 50 years ago." He won't be able to turn the clock back, but he can do much damage trying.

This is economic nationalism. He sees the world as an arena in which countries—as if they were companies—compete against one another: for one country to win, the others must lose. Powered by this worldview, Trump wants to be the CEO of the company known as the United States.

His vision is dangerously wrong. The world is not an arena in which countries compete with one another, where one nation's gain is the others' losses. That American manufacturers routinely buy foreign-made materials, tools, machines, and semi-finished products demonstrates this. We have a global division of labor in which capital, resources, and all kinds of goods have been able to move across national boundaries fairly freely as market forces require. As a result, world poverty has diminished unbelievably, and Americans are richer than ever. (The rough spots can be attributed to unabated domestic government intervention.) This progress has been in the making for about 80 years, but the liberalization responsible for it has been reversed recently—to the world's detriment.

Trump understands none of this, and he has no incentive to do so. Since entering politics, his demagogic promise has been to wreak vengeance on the world for, as he sees it, taking advantage of the United States. This is his aggrieved-nation shtick. The U.S. government has been the biggest bully since 1945, but Trump would have gotten nowhere politically had he promised to stop throwing America's weight around. Instead, he portrays the United States as a pitiful giant that has been everyone's chump. It's nonsense.

What's foreign to Trump's mentality is any notion of an unplanned, spontaneous market order built on individual freedom and choice, which is at the heart of sound economics. He must see himself as a hands-on CEO who can solve any problem. That's the last thing we need. He should read Leonard Read's "I, Pencil." (The video version is here.)

In a word, Trump is an economic warmonger, a not-too-distant cousin of a regular warmonger. As the old free traders said, "When goods can't cross borders, soldiers will."

It would be one thing if Trump were promising to shrink the government so much that businesses everywhere wanted to flock to these hospitable shores. But his "New American Industrialism" is an old-fashioned industrial policy in which he or his team of experts would pick winners to carry out his glorious vision. Which firms and industries get protected or subsidized and which don't? Those decisions would be made on a political, not an economic, basis. The problem is that Trump and his experts could not know what they would need to know to carry out their plan. Only the free market—through the unhampered price system—can produce that knowledge, which would be widely dispersed, often tacit, and therefore unavailable to a central bureaucracy. Even the great Donald Trump cannot defy the laws of economics.

What would Trump do if other countries tried to make their economies more hospitable to the world's businesses, say, through rigorous liberalization? Would he up the statist ante? The economic nationalist is not likely to back down.

No one should be surprised that Ludwig von Mises—the unparalleled champion of peace through full liberalism—had much to say about economic nationalism. In Human Action, he wrote: "Economic nationalism is incompatible with durable peace.... It is an illusion to believe that a nation would lastingly tolerate other nations’ policies which harm the vital interest of its own citizens."

Trump might endorse Mises's last sentence, but he'd be missing the point. Other countries would respond to Trump's program. If he responds in turn, he will hurt Americans for sure (and perhaps foreigners). Consumers will largely pay the tariffs and, along with import-using American manufacturers, face higher prices. That's the point!

Freedom in the economic sphere, as in all other spheres of life, is in the deepest interest of all citizens. Protectionism and other interference are not. One industry or firm may calculate that if it can win protection from the state, it will prosper even if others suffer. But protection granted to one interest will encourage others to ask for it too. Now the original gain begins to dissolve. As Mises put it in Socialism: An Economic and Sociological Analysis,

A system which protects the immediate interests of particular groups limits productivity in general and, in the end, injures everybody—even those whom it began by favouring.... The greater the protection afforded to particular interests, the greater the damage to the community as a whole, and to that extent the smaller the probability that single individuals gain thereby more than they lose....

[I]f all particular interests were equally protected, nobody would reap any advantage: the only result would be that all would feel the disadvantage of the curtailment of productivity equally. Only the hope of obtaining for himself a degree of protection, which will benefit him as compared with the less protected, makes protection attractive to the individual. It is always demanded by those who have the power to acquire and preserve especial privileges for themselves. [Emphasis added.]

Why would they all lose? Because, as we've known at least since David Ricardo formulated the law of comparative advantage (or what Mises called the law of association), the division of labor and free exchange bring specialization that yields immense gains to all—even when an individual, group, or nation is less efficient than others at producing a whole range of goods.

Trump displays the words Made in the USA onstage. The wiser course is to specialize and to trade with others rather than trying to produce everything. Market price signals, not Trump, should be our guide. If the frontiers were closed to foreign goods, Mises wrote in Socialism, "Capital and labour would have to be applied under relatively unfavourable conditions yielding a lower product than otherwise would have been obtained."

Thus Trump's blustering warfare would shrink incomes and risk conflict by disrupting the signals that channel productive energies to where consumers most want them.

TGIF: National Conservatism's Ominous Economics

National conservatism is objectionable on many counts -- the name in itself tells you that -- but it does pay tribute to free enterprise. A closer look, however, may cause one to doubt its commitment.

The movement's official Statement of Principles includes Principle 6, which begins encouragingly, though predictably tradition-bound:

We believe that an economy based on private property and free enterprise is best suited to promoting the prosperity of the nation and accords with traditions of individual liberty that are central to the Anglo-American political tradition. We reject the socialist principle, which supposes that the economic activity of the nation can be conducted in accordance with a rational plan dictated by the state.

So far pretty good. When people are free to act peacefully, most will engage in the voluntary exchange of goods and services (including labor) to achieve better lives for themselves and their families. In the process they will acquire possessions the security of which is necessary to the pursuit of sustained, even lifelong projects of all kinds (and not only commercial) aimed at that betterment. In other words, free enterprise and free trade take place when we are left free to pursue our broad interests through peaceful social interaction and the division of labor. It's a bottom-up, emergent environment that requires no coaxing from the government. (Historically, nonstate customary law emerged along with production, the division of labor, and trade. It did not wait for wise rulers to create an appropriate legal environment.)

But then the Statement of Principles starts its trek downhill: "[T]he free market cannot be absolute."

This is ominous. First, it's far from clear what that means. It should be obvious that no enthusiast of the free market thinks society ought to consist entirely of money-making. Life is more than production and trade of material values. Everyone knows that.

The sentence suggests to me that, according to the national conservatives (natcons), people -- even when they restrict themselves to peaceful consensual activities  -- can't be completely free of the cold hand of the state. The very rationale of the Statement tells us this. After all, these are the principles of "national conservativism." It's a nationalist movement. Its essential element is protecting the nation-state through the government. The existence of individuals is not denied, but their interests (as they conceive them) are subordinate to something called national interest. Individuals do not exist for their own sake. Therefore, every consideration is to be passed through the national interest filter. At bottom, then, national conservatism is a collectivist project. We cannot forget that, much less hope for an affinity between natcons and libertarians.

The concern with national interest prompts the question: as conceived by whom and by what criteria? The answer presumably is: according to the criteria of those who are elected to and are able to remain in office. The many problems posed by the perverse effects of democratic politics have been well-documented in theory and history. They include the impotence of any one vote, rational ignorance, rational irrationalism, concentrated benefits/thinly spread costs, inflated political transaction costs, apparently benign incrementalism, campaign theatricality, elites' access to power, and limited accountability. So right from the start, the statement poses more questions than it answers. It does little to reassure people who place a priority on individual liberty. In short, it ignores public-choice economist James Buchanan's call for "politics without romance."

Politicians and bureaucrats, then, would be assigned the task of letting us know when we have, in their judgment, pursued market activities too much. Natcons declare themselves in favor of the rule of law, but remember: the content of the law is as important as due process. It's not enough to be free from decrees handed down on the fly. We also need freedom from duly enacted oppressive legislation, that is, rules that forbid or specify the terms of consensual conduct.

"Economic policy must serve the general welfare of the nation," the statement continues. Clearly, for national conservatives, it's not enough that policy-makers abstain from violating the individual's right to life, liberty, and the pursuit of happiness because through freedom, tradition may fall by the wayside, and the natcons can't have that.

The best explainers of how markets work -- I'm thinking of the Austrian economists -- have shown that the general welfare is exactly what the pursuit of individual welfare in self-regulating markets accomplish. Adam Smith and his best predecessors understood this, even if they got some details wrong.

Let's never forget that strictly speaking, markets don't actually do anything. Only individual human beings act. When they act in a market setting, which is at once economic, legal, and cultural, it's as if people are led by Adam Smith's metaphorical "invisible hand" to do well for themselves by doing good for others. We must supply what others demand because bankruptcy awaits those who ignore others. Barred from government power and forbidden from using physical force and fraud directly, they will seek their own welfare by catering directly or indirectly to consumers. We may not always like what every consumer wants, but as long as no one can initiate force directly or through the state, we can secure ourselves, individually or in association with others, from undesirable influences.

Unsurprisingly, the natcons are dubious about globalism. That word means different things to different people, but the natcons don't like even what libertarians mean: the free movement of people, goods, and money across national lines without government impetus or impediment -- the division of labor writ large. Economists have long demonstrated that global welfare is best enhanced by that route. Significant, though incomplete moves in that direction over the last several decades have gone a long way toward wiping out absolute poverty and infant mortality.

The natcons, like the economic nationalists on the left, lament that "globalized markets allow hostile foreign powers to despoil America and other countries of their manufacturing capacity, weakening them economically and dividing them internally." This is the "hollowed-out America" claim. The problem with the claim is that American factories still produce an incredible volume of goods. What's changed is technology: many fewer people are needed to work in those factories because labor-saving computers and machines are far more productive than people working in jobs that not very long ago were condemned for their mind-numbing drudgery. Jobs that parents once hoped their children would never have to do are now looked to nostalgically by both the natcons and the Michel Moore left.

The Statement goes on:

Crony capitalism, the selective promotion of corporate profit-making by organs of state power, should be energetically exposed and opposed.

That sounds good, but the natcons will have to explain how their policies will avoid crony capitalism. Industrial policy, which is what the national conservatives really want, is an engraved invitation to well-connected business interests to the detriment of everyone else.

More could be said, but you get the idea. The Statement's embrace of free enterprise is hollow indeed. Government intervention, complete with tariffs, import quotas, immigration restrictions, a military-industrial-science complex, and subsidies -- all necessarily constituting de facto central planning -- would be rampant, as would be the lobbying frenzy for special consideration. It's no comfort to know that our rulers would be motivated by the national interest.

TGIF: Economic Nationalism: Elitism in Populist Clothing

My old friend and former American Conservative editor Dan McCarthy gets it all wrong about Donald Trump's "national security" tariffs on aluminum and steel.

Read TGIF at The Libertarian Institute.

TGIF (The Goal Is Freedom) appears on Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com.

Become a Free Association patron today!

TGIF: Tribalism and Economic Nationalism - Cut from the Same Cloth

I have no idea what goes on in Donald Trump’s head, but I can imagine a connection between his refusal to renounce the support of alt-right white identitarians and his rejection of globalism — that is, the freedom of people to trade across national boundaries and to move, consistent with individual rights, as they see fit.

Read TGIF at The Libertarian Institute.

TGIF (The Goal Is Freedom) appears on Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com. Become a Free Association patron today!

TGIF: Trump Nation

Did Donald Trump on Inauguration Day intend to remind us of the European despotisms of the last century?

Who could miss signs? They adorned from the speech from brim to dottle with its invocations of solidarity, unity of purpose, devotion, patriotism, "loyalty to our country ... and to each other," "total allegiance," national striving, nationalism, and assurances that the state would protect us from enemies -- including even those would bestow low-priced goods on us. Then, to boot, he followed it all up with a decree that the day be known as the “National Day of Patriotic Devotion.”

Where the hell are we? And what year is it?

Read the full TGIF at The Libertarian Institute.

TGIF (The Goal Is Freedom) appears on Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com. Become a Free Association patron today!

Orwell on Nationalism

From George Orwell's Notes on Nationalism:

All nationalists have the power of not seeing resemblances between similar sets of facts. A British Tory will defend self-determination in Europe and oppose it in India with no feeling of inconsistency. Actions are held to be good or bad, not on their own merits, but according to who does them, and there is almost no kind of outrage -- torture, the use of hostages, forced labour, mass deportations, imprisonment without trial, forgery, assassination, the bombing of civilians -- which does not change its moral colour when it is committed by ‘our’ side . . . The nationalist not only does not disapprove of atrocities committed by his own side, but he has a remarkable capacity for not even hearing about them.

HT: Glenn Greenwald, who HT'ed Hume's Ghost

Interviewed on Antiwar Radio

Scott Horton interviewed me on Antiwar Radio yesterday. You can listen here.

That Mercantilist Commerce Clause

The Commerce Clause of the U.S. Constitution has been used to justify a wide expansion of government power, from antidiscrimination laws to drug prohibition to a ban on guns near schools. In objecting to use of the Commerce Clause for such remote purposes, some constitutionalists rely on a particular historical interpretation of both the Clause and the Constitution as a whole. Could that interpretation be wrong?

The rest of this week's TGIF column, "That Mercantilist Commerce Clause," is at the Foundation for Economic Education website.

Cross-posted at Liberty & Power.

Progressive Illiberalism

"The Progressive movement, which dominated the American scene in the years from the turn of the century to United State entrance in World War I, was not primarily a liberal movement," writes Arthur A. Ekirch Jr. in his magisterial work The Decline of American Liberalism. "[I]n contrast to former American efforts at reform, progressivism was based on a new philosophy, partly borrowed from Europe, which emphasized collective action through the instrumentality of government."

Read the rest of my latest TGIF column, "Progressive Illiberalism," at the Foundation for Economic Education website.

Cross-posted at Liberty & Power.

Jeffersonianism Interred

For historian Arthur A. Ekirch Jr., the decline of American liberalism tracked the rise of nationalism and the corporate state, the intimate alliance between business and government. He equates liberalism -- libertarianism -- with economic freedom and property rights for the common citizen, not just for an aristocracy. From the relative, though imperfect, laissez-faire periods of the Jefferson and Jackson presidencies, the United States moved almost unswervingly to become what Albert Jay Nock would call a "Merchant-state" in which the central government heavily intervened on behalf of particular business interests, hampering the independence and progress of upstart competitors as well as workers. For most people, this is what the word "capitalism" would come to denote.

The Civil War was the great impetus in this direction....

Read the rest of this week's TGIF column, "Jeffersonianism Interred," at the website of the Foundation for Economic Education.

Cross-posted at Liberty & Power.

Smoot to Hawley to Hoover

From Daniel Gross:

In coming months, we're sure to hear a great deal of talk tarring Sen. Harry Reid and Rep. Nancy Pelosi as the present-day incarnations of Sen. Reed Smoot and Rep. Willis Hawley, the sponsors of the disastrous Smoot-Hawley Tariff of 1930. But Smoot and Hawley were both Republicans. And so was the president whose signature turned the bad legislation into a disastrous law. The protectionist gene may no longer be dominant among Republicans, but it's still an important part of the GOP's DNA.

Read the rest at Slate.com.

Economic Nationalism, Enemy of the People

"With the 2006 election, America appears to have reached the tipping point on free trade. . . . Anxiety, and fear of jobs lost to India and China, seems a more powerful emotion than gratitude for the inexpensive goods at Wal-Mart. The bribe Corporate America has offered Working America -- a cornucopia of consumer goods in return for surrendering U.S. sovereignty, economic security and industrial primacy -- is being rejected." So writes conservative commentator Patrick J. Buchanan in his post-election analysis. Buchanan may be right. Free traders -- those who reject the bogus idea of a "national economy" -- should be nervous.

The rest of the latest TGIF column is at the Foundation for Economic Education website.