Globalism vs. Americanism
by Patrick J. Buchanan
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Down at the Chinese outlet store in Albany known as Wal-Mart, Chinese tires have so successfully undercut U.S.-made tires that the Cooper Tire factory in that south Georgia town had to shut down.
Twenty-one hundred Georgians lost their jobs.
The tale of Cooper Tire and what it portends is told in last week’s Washington Post by Peter Whoriskey.
How could tires made on the other side of the world, then shipped to Albany, be sold for less than tires made in Albany?
Here’s how.
At Cooper Tire, the wages were $18 to $21 per hour. In China, they are a fraction of that. The Albany factory is subject to U.S. health-and-safety, wage-and-hour and civil rights laws from which Chinese plants are exempt. Environmental standards had to be met at Cooper Tire or the plant would have been closed. Chinese factories are notorious polluters.
China won the competition because the 14th Amendment’s “equal protection of the laws” does not apply to the People’s Republic. While free trade laws grant China free and equal access to the U.S. market, China can pay workers wages and force them to work hours that would violate U.S. law, and China can operate plants whose health, safety and environmental standards would have their U.S. competitors shut down as public nuisances.
Beijing also manipulates its currency to keep export prices low and grants a rebate on its value-added tax on exports to the U.S.A., while imposing a value-added tax on goods coming from the U.S.A.
Thus did China, from 2004 to 2008, triple her share of the U.S. tire market from 5 percent to 17 percent and take down Cooper Tire of Albany.
But not to worry. Cooper Tire has seen the light and is now opening and acquiring plants in China, and sending Albany workers over to train the Chinese who took their jobs.
Welcome to 21st century America, where globalism has replaced patriotism as the civil religion of our corporate elites. As Thomas Jefferson reminded us, “Merchants have no country.”
What has this meant to the republic that was once the most self-sufficient and independent in all of history?
Since 2001, when George Bush took the oath, the United States has run $3.8 trillion in trade deficits in manufactured goods, more than twice the $1.68 trillion in trade deficits we ran for imported oil and gas.
Our trade deficit with China in manufactured goods alone, $1.58 trillion over those eight years, roughly equals the entire U.S. trade deficit for oil and gas.
U.S. politicians never cease to wail of the need for “energy independence.” But why is our dependence on the oil of Saudi Arabia, the Gulf, Nigeria, Canada, Mexico and Venezuela a greater concern than our dependence on a non-democratic rival great power for computers and vital components of our weapons systems and high-tech industries?
As Executive Director Auggie Tantillo of the American Manufacturing Trade Action Committee compellingly argues:
Running a trade deficit for natural resources that the United States lacks is something that cannot be helped, but running a massive deficit in manmade products that America easily could produce itself is a choice—a poor choice that is bankrupting the country and responsible for the loss of millions of jobs.
How many millions of jobs?
In the George W. Bush years, we lost 5.3 million manufacturing jobs, one-fourth to one-third of all we had in 2001.
And our dependence on China is growing.
Where Beijing was responsible for 60 percent of the U.S. trade deficit in manufactured goods in 2008, in the first six months of 2009, China accounted for 79 percent of our trade deficit in manufactured goods.
How can we end this dependency and begin building factories and creating jobs here, rather than deepening our dependency on a China that seeks to take our place in the sun? The same way Alexander Hamilton did, when we Americans produced almost nothing and were even more dependent on Great Britain than we are on China today.
Let us do unto our trading partners as they have done unto us.
As they rebate value-added taxes on exports to us, and impose a value-added tax on our exports to them, let us reciprocate. Impose a border tax equal to a VAT on all their goods entering the United States, and use the hundreds of billions to cut corporate taxes on all manufacturing done here in the United States.
Where they have tilted the playing field against us, let us tilt it back again. Transnational companies are as amoral as sharks. What is needed is simply to cut their profits from moving factories and jobs abroad and increase their profits for bringing them back to the U.S.A.
It’s not rocket science. Hamilton, James Madison and Abraham Lincoln all did it. Obama’s tariffs on Chinese tires are a good start.
COPYRIGHT 2009 CREATORS.COM
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1 Comment by Tom Piatak on 15 September 2009:
An outstanding piece. Our growing dependence on China is dangerous, and it was not a dependence brought about by those of us concerned with trade deficits and the decline of American manufacturing.
2 Comment by joe johson on 15 September 2009:
I believe buchanan is contradicting himself by opposing the current harmful “trade” progams and favoring protectionism. It’s worse.
3 Comment by John Seiler on 15 September 2009:
Instead of rehashing the old arguments pro or con on protectionism, let’s look how protectionism — assuming it even works — disguises the real problems of the American economy:
* Inflation because we’re not on a gold standard. The Federal Reserve board has spent almost a century debasing the dollar. In 1913, when the Fed was imposed, an ounce of gold was worth $22; now it’s almost $1,000. The title of Ron Paul’s new book is right: “End the Fed.”
* Imperial wars. The Iraq War has cost from $3 billion to $5 billion — so far. The Afghan War costs almost as much — so far. “Defense” spending is $1 trillion a year — if you include all the hidden programs — more than the rest of the world combined. Empires always go bankrupt, often in Afghanistan. We need to End the Empire — bring all the troops home and save at least $500 billion a year that could go to tax cuts.
* Debilitating high taxes. Out here in Taxifornia — 1/9 of the population — the top income tax rate (federal, state, etc.) is more than 45%. New York state taxes are almost as high. No wonder capital is fleeing. You need capital to build modern tire plants.
* Massive spending and debt. Bush and the Republicans ran up the spending on the national credit card, even during the “boom” years; Obama and the Democrats are continuing the spree during the “bust.” The Chinese, as Pat has reminded us, own $2 trillion of the Bush-Obama debt. Whose fault is that?
* Massive bureaucracy. The U.S. government — including its “independent” state and local satrapies — is the biggest government in the history of the world. You can’t flush your toilet without the interference of the feds in the amount of water used! Every business is choked with regulations. Protectionism means even more regulations.
* Obama’s rush to more socialism. “Cap and trade” and socialized medicine are just the start. One of his worst actions was the Obama regime’s dissolution of the contracts General Motors had with the bondholders, so the Feds and the UAW could be given majority ownership of the company (or what’s left of it). This weakens every contract in the country, making every business, every home, worth less.
In conclusion, the problem for the Albany tire workers doesn’t come from China, but from Washington, D.C.
4 Comment by Scott P. Richert on 15 September 2009:
Actually, Mr. Johson, what Pat Buchanan proposes in this column is not “protectionism” (i.e., tariffs) but a border-adjusted value-added tax, which is what every one of our major trading partners replaced their tariffs with over the past 35 years. We’re the only major industrialized nation that dropped our tariff wall and replaced it with . . . nothing. And Cooper Tire is just the latest company to be lost to such economic madness.
Rockford Institute board chairman David Hartman, no fan of protectionism, has written at great length in Chronicles about the need for the United States to adopt the same border-adjusted VAT favored by our trading partners. You can find many of his articles on this website.
5 Pingback by Buchanan wrong on protectionism « JohnSeilerBlogs.com on 15 September 2009:
[...] on most things. But since he ran for president in 1992, he has advanced protectionism, as in a new column. Some [...]
6 Comment by Derek Leaberry on 15 September 2009:
I confess to having been an absolutist free-trader when I was much younger but age and experience has been a great teacher. Just as America lost much when the vast majority turned their backs on the farm, so America has lost much by outsourcing its manufacturing. One need not support strict protectionism to believe that trade flexibility designed to increase domestic manufacturing is paramount.
A warning. An economy dominated by the therapeutic state, government workers, school teachers, flabby-handed computer geeks, restaurant chefs, sommeliers, Wall Street gangsters and mall securitymen will be one that is antagonistic to conservative values. That is what the future holds if absolute free trade reigns globally. Karl Marx would be overjoyed.
7 Comment by Tom Piatak on 15 September 2009:
Mr. Leaberry @ 6:
The points you make in your second paragraph cannot be emphasized enough. You are on target.
8 Comment by Ed Roberts on 15 September 2009:
“While free trade laws grant China free and equal access to the U.S. market”
It’s actually worse than that, Mr. Buchanan. The Bush state deptartment granted China “Permanent Most Favored Nation” trade status. Chinese manufacturers have absolute immunity to copyright and patent laws. Nike shoes have been counterfeited by manufacturers in China who produced Nike’s genuine shoes, and sold freely outside Nike’s distribution network to the point that the counterfeits can be bought in malls.
Tarrifs aren’t going to hurt the Chinese manufacturers nearly as badly as they will hurt American consumers who have no choice in where their products are made.
9 Comment by Ed Roberts on 15 September 2009:
“A warning. An economy dominated by the therapeutic state, government workers, school teachers, flabby-handed computer geeks, restaurant chefs, sommeliers, Wall Street gangsters and mall securitymen will be one that is antagonistic to conservative values. That is what the future holds if absolute free trade reigns globally. Karl Marx would be overjoyed”
But, Mr. Leaberry, what you describe isn’t what lies ahead for us in the future, it’s what we have right now. There is no free trade now, only government micromanaged trade. If absolute free trade reigned globally, domestic laws which stifle manufacturing for export would have to be scrapped. Were that the case, American manufacturers would have the opportunity to assert themselves as they once did and to become very competitive.
Shoddy Chinese and Indian goods couldn’t dominate world markets by simple virtue of low price. What allows Chinese manufacturers to succeed is their government enforced access to our markets. The governemnt enforcing that access is our own.
10 Comment by Daniel Maxwell on 15 September 2009:
“It’s not rocket science. Hamilton, James Madison and Abraham Lincoln all did it.”
Wow – now thats a star cast of role models! Hamilton also advocated (and got) a tax on whiskey ‘just because’.
11 Comment by C Bowen on 15 September 2009:
I am patiently awaiting the cut in corporate taxes to offset this boon in new government revenues….
If Homer, Bubba, and Joe 6-Pack will rally around the nationalist banner and elect one of our guys, sign me up, but, as Dr. Fleming noted ~9 years ago, to paraphrase, a country with mass access to the Playboy channel, just doesn’t seem to care.
And what do I, of Maine, care anyway? Refrigeration killed the ice industry up this way, so we are left with timber, lobsters, and one exportable product, high end yatchs (and MIC ship contracts, slowly moving South.)
I’ll cast my lost with the free traders–no trees in Asia-Pac. Good luck, Down South–y’all opened the can of worms with restrictions on child labor and all we got was this lousy school system–and a fair amount of adult immigrants.
12 Comment by Charles I on 15 September 2009:
I am a zealous but lousy guitar player. I would love to purchase an American made Fender Stratocaster, but guess how much one costs. I’ll tell you; they are $1200.00. There is no way that the American made Strat has an “intrinsic value” of $1200.00. It costs this much because frankly, Fender’s American workers are overpaid. I play a Chinese import “strat” copy; I paid 100 bucks for it, brand new. It is not as good as a real Strat, not by a long shot, but it is serviceable, and it is honestly all I can afford. I used to work in a car factory, on the assembly line, and I was happy to make $15.00 an hour in a non UAW plant. All I can say is that any economy that pays $21.00 per hour to sling tires is an economy that is not long for this world. I do not scorn those laid off Cooper employees. For what it’s worth, I grieve for them, and for our once great nation. But we Americans, hard pressed to make ends meet (and to put fresh tires on our ten year old mini-vans), are simply not going to buy American made tires out of shear patriotism. I agree whole heartedly that free trade leads directly to lower wages. I just don’t see how the American people are going to survive without access to cheap stuff. I certainly don’t “need” a Stratocaster. But I do need tires, and school clothes for my kids, and I will even pay a few extra bucks to buy American when it is feasible. But paying twice the inherent value of a thing is pretty crazy; I just can’t do it.
13 Comment by Joe Napoliano on 15 September 2009:
Break up the big multinational corporations like Wal Mart who have brought in the cheap junk from China in the first place. Create a level playing field by the judicious use of tariffs and do everything to make life easier for the American manufacturer. I stress “American” not some big multinational corporation that has no loyalty to anybody.
14 Comment by John Seiler on 15 September 2009:
Here are some more questions to answer before protectionism is imposed:
How good are the engineers at Cooper Tire? Could they hire better engineers if so many engineers were not employed in the armaments industry? Could these better engineers — if hired by Cooper — design better machines to increase the productivity of Cooper’s workers, thus undercutting the Chinese on price?
What is the percentage of American engineers working in the military-industrial complex? (In the 1960s, it was two-thirds; I don’t know the number today.) What is the percentage of Chinese engineers working in the Chinese military-industrial complex?
What percentage of the U.S. tire industry makes tires for Humvees, trucks, F-16s, etc., for the military? What percentage of these tires are sent to Iran, Afghanistan, etc. and used in the wars?
Does history provide any examples of an empire blowing a large chunk of its money on profitless foreign wars and avoiding bankruptcy?
15 Comment by Chris on 15 September 2009:
Mr Seiler, speaking as an Australian, we have no military industrial complex to speak of and our manufacturing base is still being destroyed by outsourcing manufacture (and services) to China.
The bottom line is, if a company can ship their industrial equipment to China and pay a Chinaman 50c per hour there is no way a US-based firm paying $20 per hour can compete.
16 Comment by John Seiler on 15 September 2009:
@14, Chris: I found this from an ABC News story in May: “The Federal Government on Saturday announced a major expansion of the nation’s naval and air power, but is yet to outline how it will be paid for….But they will come with a price tag that will run into the hundreds of billions of dollars.
Another report had 1,550 Australian Defense Personnel in Afghanistan. That’s the equivalent of about 22,000 Americans, or 1/3 the force the U.S. has there. So that must be a drain on the Aussie treasury. And Australia once had 2,000 troops in Iraq.
As to 50c/hr. in China vs. $20/hr. in America or Australia: There is a way to keep ahead of them, and it’s called capital investment. Better machines, designed by better engineers, can make products cheaper, thus paying higher wages. It’s why we’re still ahead of the Chinese in per-capita income, at least for now. And there is no other way to stay ahead. It’s how Switzerland stays the richest country in the world. But if the engineers are otherwise occupied, as in making armaments for Empire, then the work doesn’t get done.
Buchanan brought up Hamilton, who recently was demolished by Thomas DiLorenzo in “Hamilton’s Curse”; Madison’s tariffs resulted from his experience of the increased nationalism during the War of 1812, itself a folly; and Lincoln’s tariffs provoked the South to secede, leading to the slaughter of 600,000 Americans, 2% of the country.
Also, during the early 2000s, Bush imposed steel quotas for several years, which raised the price for steel to American manufacturers, hurting them, especially the auto industry. Although other factors were the major players in killing GM and Chrysler (mainly the Fed’s boom-bust inflationary mania), the steel quotas played a part.
17 Comment by R. McCabe on 15 September 2009:
Mr. Seiler does indeed raise some good points, but as Chris points out, there are certain global financial realities we can not deny. The question many have is if some labor must shift overseas, why would our government subsidize this behavior (how else could it happen so fast)? Why wouldn’t our government absorb some of this value and pass the savings on to our people, many of whom are losing their jobs in the process?
Other good points are the lack of bureacracy and high taxes in China to start a business.
If someone has a link to a decent article on a VAT, I’d appreciate it. I don’t understand how this affects imports vs. anything made here?
An important hurdle in these arguments is enforcement of environmental protections. If we remove federal regulations, how do we stem obvious forms of pollution (so we don’t become like China in that regard)?
And another point I’ve found is that the labor in our country needs to purge itself of a lot of bad habit, namely, obscenely high wages from labor unions or government gigs. I’ve met guys who pour concrete to make highways who make $120,000 a year in the midwest. That’s ridiculous, and it creates antipathy. Detroit and all those guys haven’t helped either.
18 Comment by Chris on 15 September 2009:
Mr Seiler, Australia has a tiny army, around 30,000 soldiers I believe. Even our small deployments in Iraq and Afghanistan almost broke it. Yes, the government is considering a substantial expansion but that is a possible future, not the reality of the past of present.
Our neighbour New Zealand, with an even smaller military and an almost pacifist disposition has also been ruined by the outsource of Chinese manufacture.
I agree that capital investment can give us an advantage but what’s to stop that new created capital being moved overseas once it has been developed? To paraphrase PCR, free trade is not free trade, it’s the global search for absolute advantage.
Their is much to admire in the Austrian school (from what I know of it) but I can’t shake the feeling that its adhereants are as dogmatically attached to it as much as any globalist.
19 Comment by Brock H. on 15 September 2009:
Chris,
The Austrian school is not devoted to what is today called “free trade.” Real free trade consists of finding the benefits in the given agreement to the economies of all nations involved and their respective working populations. Agreements like NAFTA are made by and for multinational corporations who seek, as PCR apparently once described, the absolute advantage.
20 Comment by John Seiler on 15 September 2009:
@17, Chris; and @18, Brock. The Austrians opposed NAFTA and GATT as “managed trade,” rather than free trade. The agreements advantaged big corporations who could fill out the paperwork.
I stand corrected on Australia, whatever the situation may be there. Same with New Zealand. I don’t know much about either, but I suspect the governments there are attacking their citizens’ productivity much as the U.S. government attacks its citizens’ productivity.
In sum: The U.S. government is one of the most detestable in history, and the last thing I want to is give it more power through protectionism or anything else.
21 Comment by Clyde Wilson on 16 September 2009:
When “tariff protection” was a boon to Northern capitalists and a loss to everyone else, the U.S. had “tariff protection.” Now that “free trade” is a boon to Northern capitalists and a loss to everyone else, the U.S. has “free trade.” The question is not policy, it is “Who Owns America?”.
22 Comment by McCallum on 16 September 2009:
For anyone that cares, Andy Warlick of Parkdale Mills gave a speech years ago which addressed all of these issues in the textile business.
http://www.cotton.org/news/meetings/2002bw/Andy-Warlick.cfm
I grew up in central North Carolina in a town of roughly 1,000 people. Until 1998 there were around 5,500 people employed in Star NC but starting that year the impact of NAFTA started to really sink its teeth into the area. As it stands now, Star has lost those 5,500 jobs and less than 100 people work in town. People are leaving the area in droves, tax revenues are way down (trickle down economics), basic services have fallen apart, and there is a general sense in the area that hope is gone.
I’ve seen this scene repeated in town after town across North and South Carolina. Industry leaves, tax revenues fall, land prices rise to capture revenue, a big Wal-Mart inserts itself in the area and the addiction to cheap (at this time) foreign goods goods starts.
McCallum
23 Comment by S.L. Toddard on 16 September 2009:
“The question is not policy, it is “Who Owns America?”
The political-financial elite owns America and maintains that ownership through their propaganda wing, the corporate media. But I am not sure that it is accurate to characterize them as “Northern”. Are these people not by-and-large rootless cosmopolitans, attached to no people or place whatsoever?
24 Comment by MAP on 16 September 2009:
What we have is the evolution of the class that was put into complete control of the Union for their own profit by the gracious act of Honest Abe. And, so, we are now astonished that they have no concerns about the state of the Union, but only their own accumulation of wealth? But when was this ever different?
25 Comment by Tom Piatak on 16 September 2009:
Brock H. @ 18:
Of course the “Austrian school” is devoted to the free trade being practiced today. Its proponents loudly and angrily denounce anyone who advocates the use of the tariff (or similar measures, like a border adjusted VATT) to preserve manufacturing jobs in the United States. Tariffs on goods coming into America have never been lower than they are now, which is why manufacturing jobs continue to disappear. And the “Austrians” have no solution for this, since they don’t regard it as a problem. Austrian economics is fully compatible with globalism; in fact, globalism is the logical end result of “real free trade,” which its proponents, in their more candid moments, have always admitted. As Bastiat said, the goal of free trade is the “peaceful, ecumenical, and indissoluble union of the peoples of the world.”
26 Comment by S.L. Toddard on 16 September 2009:
“Its proponents loudly and angrily denounce anyone who advocates the use of the tariff (or similar measures, like a border adjusted VATT) to preserve manufacturing jobs in the United States”
I really don’t understand how they can make that argument. If cheaper goods can be made elsewhere using slave labor and whatnot, then those goods can be sold cheaper here than our own and businesses will move there and leave us with nothing.
27 Comment by Tom Piatak on 16 September 2009:
And here is Von Mises: “The operation of the principle of division of labor and its corollary, cooperation, tends ultimately toward a world-embracing system of production. Insofar as the geographical distribution of natural resources does not limit tendencies toward specialization and integration in the processing trades, the unhampered market aims at the evolution of plants operating in a comparatively narrow field but serving the whole population of the earth.” That’s exactly what China wants. As Bill Hawkins told the John Randolph Club a few years ago, China now has the capacity to manufacture everything for the planet.
28 Comment by Harry Wisniewski on 16 September 2009:
The Chinese government decides who wins and losses in the Chinese auto industry. They make capital available to the winners and have been managing the industry throughout it’s growth over the past decade. The Chinese have a national automotive policy and have identified it as a key national industry. The Chinese government sets the rules, decides who competes, and who wins. The influence and control the US government has in the US auto industry pales to that which the Chinese government has in “their” auto industry.
29 Comment by Derek Leaberry on 16 September 2009:
I would like an absolutist free-trader answer this- After the rational benefits of free trade are accounted for, are the deleterious effects accounted for as well? By this I mean that if the industrial decline of Youngstown, Lowell, Detroit, Rockford, Pittsburgh, Flint, Akron, Hagerstown, Kannapolis and hundreds of other towns are included into the equation, with the decline in tax base, the rise of welfare benefits to the displaced workers, the retraining costs for those same workers, the added expense of dysfunctional families, the bulldozing of neighborhoods that are no longer economically rational, and many other negative effects of industrial decline, does America really achieve much in rational economic benefits by absolute free trade? It seems to me that the costs of industrial decline is not worth the stocking of Walmart’s shelves with cheap Far Eastern junk.
30 Comment by S.L. Toddard on 16 September 2009:
What an excellent piece.
31 Comment by John Seiler on 16 September 2009:
@28, Mr. Leaberry. Well, I’m not an “absolutist” free trader, absolutist being too strong a word. But I favor cutting tariffs to zero on everything – also, getting rid of GATT and WTO, which as I noted earlier are not “free trade” but managed trade. (Also, cutting taxes to zero, beginning with the income taxes. End the IRS.)
I was born in Detroit and grew up in a suburb, Wayne, of which 1/6 is a Ford plant. I moved away in 1982, just after I got out of the U.S. Army, because unemployment was 16% and there were no jobs. Some reward for my service to the country. So I know the situation well.
But please check what I wrote earlier in on this blog item. Even if protectionism did work, you can’t have economic growth with 1,000% inflation in the 1970s, which pushed the middle-class into upper-income tax brackets, where we still are; massive new bureaucracies; an all-out assault on the family; and massive new regulations — such as affirmative action — assaulting the productive.
Now, here’s a question to all your protectionists: Do you really want to give Obama even more power? Because that’s what protectionism means: giving the president more power over the economy, including your life.
And when the auto industry gripes about tires costing too much, then they’ll get tariffs on foreign cars. Then car buyers will say cars cost too much, so the government will have a new “cash for clunkers” program, this time pushing Government Motors’ new Green Obamamobile. And so on, until America is Yugoslavia with Green Yugos (if we aren’t already).
Realistically, what can we do now to help the middle class economically? I submit there is one thing: “End the Fed,” as Ron Paul says in his new book of that name. Doing so would be a major blow against the financial gangsters Dr. Wilson keeps reminding us have always been running things.
32 Comment by Clyde Wilson on 16 September 2009:
#28. Mr. Leaberry, you are making a big assumption in stipulating that “free trade” is the cause of the evils you describe. I can think of a lot more potential causes including an unrepresentative political system and a decline in national character.
33 Comment by Brock H. on 16 September 2009:
Tom Piatak @24:
You have the Austrians mixed up with the Chicagoans or Friedmanites as I sometimes call them. As Seiler reminded us, the Austrians opposed NAFTA and GATT 15-16 years ago as MANAGED trade agreements rather than free trade agreements. There are tribunals set up for the exact purpose of scolding and correcting any nation which is even thinking of violating the sacred golden cow of the multinational corporations first, workers last principle embodied in those two agreements. Does that honestly sound like FREE trade to you?
34 Comment by Harry Wisniewski on 16 September 2009:
The goal of the rootless business elite in Detroit and Shanghai and elsewhere is simply to make everyone a thoughtless consumer of stuff. They think man’s end is to consume, dispose, and consume some more.
35 Comment by robert m. peters on 16 September 2009:
On a cold, late November day in the Tensas Basin of northeast Louisiana, I, as an eleven-year-old, thought to see, no, I saw, an Ivory-Billed Woodpecker, supposedly extinct. I reported it to my vocational agriculture teacher who wrote it up and sent it to the ornithologists at LSU. The evaluated the report, one supposes, and replied some months later that I had either seen a Pilated Woodpecker, the still living cousin of the Ivory-Billed or I had made the story up. (The area in Arkansas in which some were supposedly sighted several years ago is just up the flyway from the old bottoms which I was in as an eleven-year-old.)
Well, I am going to play the role of the folks at LSU. I hold that “free trade” has been extinct for a long time. Its reported sightings and the damage which it has alleged to have done are either a case of mistaken identity or someone has made the story up.
36 Comment by Etienne Gervaise on 16 September 2009:
Some wags claim that fat-cat unions busted manufacturing in the USA. Others claim that environmental regulations are to blame. Some think that manual labor is too demeaning, and such parents send their ever-dwindling offspring off to Enormous State University where they can study useful sciences like psychology and sociology which will prepare them for the grim reality of working for county government for 30 odd years and a retirement at taxpayers’ expense.
My suggestion to remedy said reality is this: export union agitators, enviro-weenies, Jewish lawyer agitators, abortionists, race-baiters, and left wing college professors to the rest of the world so we can screw up their productive capacities, just like we did our own. Oh yes, and export lots of Virginia bright leaf tobacco for population control.
37 Comment by Tom Piatak on 16 September 2009:
Brock H. @32:
Yes, I am aware of the Austrians’ opposition to “managed trade.” As a practical matter, it doesn’t make any difference at all. All the “managed trade” treaties lowered tariffs, and the review boards they set up are to ensure that adherents to the treaties do not resort to non-tariff trade barriers. The practical effect of lower tariffs is what we have seen: massive outsourcing of manufacturing jobs overseas, and the communities devastated by the disappearance of manufactuing jobs, as Derek Leaberry so eloquently describes in post no. 28. So long as manufacturers can find lower wages abroad, and pay no price for brining their goods into our national market, we can expect this to continue. And whenever anyone argues that we should return to the traditional trade policy of the United States–tariffs–the Austrians are quick to denounce him and to defend the practical results of NAFTA, GATT, and all the rest. (I will also note that even though Lewrockwell.com often runs columns by Pat Buchanan and Paul Craig Roberts on foreign policy, that site does not run columns by Buchanan and Roberts criticizing free trade).
38 Comment by Jeremiah Whitmoore on 16 September 2009:
Some wags claim that fat-cat unions busted manufacturing in the USA. Others claim that environmental regulations are to blame. Some think that manual labor is too demeaning, and such parents send their ever-dwindling offspring off to Enormous State University where they can study useful sciences like psychology and sociology which will prepare them for the grim reality of working for county government for 30 odd years and a retirement at taxpayers’ expense.
My suggestion to remedy said reality is this: export union agitators, enviro-weenies, Jewish lawyer agitators, abortionists, race-baiters, and left wing college professors to the rest of the world so we can screw up their productive capacities, just like we did our own. Oh yes, and export lots of Virginia bright leaf tobacco for population control.”
It could be the avarice of the company executives to cut labor costs and pass the savings onto themselves. It could explain why in 1982 CEO to worker pay was 42-1 and in 2005 it was 411-1. It could even be that these same executives fund politicians to do their bidding and even have -ensconced in academia- raving lunatics known as “Economics Professors.” They may even have good-looking, articulate, ivy-league educated news hosts and reporters to spread their global free-trade message 24/7 on the news channels they own.
39 Comment by Jeremiah Whitmoore on 16 September 2009:
Apologies, Prior post was @35, Etienne Gervaise.
First two paragraphs are his.
40 Comment by Brock H. on 16 September 2009:
Tom @36,
Never heard an Austrian exalt, support, or even defend NAFTA or GATT. However, I grant you that I have also never heard them (and I have read Human Action by Mises himself) support even the smallest tariff, whether it be as a means of raising money to support the government or economic protection. On the contrary, they denounce them vehemently. And such a policy is alien to American tradition, as tariffs and excise taxes were the only means of funding the federal government before the War for Southern Independence. Agrarian liberalism, not Austrianism, defined American economic policy during the days of the Republic.
But certainly you are not being taken in by Buchanan’s constant shills for the age of tariff protection from the war against the South to the Great Depression? ‘Twas not the age of Americanism, Tom. It was the beginning – the first phase – of the takeover of the American economy by the elite Yankee big business-banking-financier class. The current age of globalism is the second.
41 Comment by John Seiler on 17 September 2009:
Over on TakiMag.com’s blog, Mr. Piatak wrote on Sept. 16: “Both Paul Craig Roberts and John Derbyshire keep reminding us that the government sector is prospering while the rest of America suffers. Further support for this view came today in a Reuters article, noting that Washington, DC is the preferred home for wealthy young people. In fact, of the 50 counties in the United States with the highest percentage of people aged 25-34 making over $100,000 per year, sixteen of them were in the Washington area, and only two counties not near Washington or a state capital made the top ten. In the past, the key to wealth was manufacturing, which often arose in proximity to natural resources or waterways. Today, the key to wealth is proximity to government. ”
When I was growing up in a working-class suburb West of Detroit in the 1960s, I remember reading articles about how the two wealthiest per-capita counties in America since the 1910s had been Oakland and Macomb counties, where the auto executives lived North of Detroit. In the 1970s, the suburbs of D.C. started rising up the list, and today dominate it.
The wealth of the country was siphoned off from the producers and sucked into the giant and metastasizing sewer-swamp-black hole on the Potomic.
Protectionism would add armies of more $100K-plus salary bureaucrats in Washington. So how exactly are we helped?
42 Comment by robert on 17 September 2009:
“Protectionism would add armies of more $100K-plus salary bureaucrats in Washington. So how exactly are we helped?”
Once the enemy was massed in a central location, we could build a wall around it, start patroling the boarder and put signs up that would strike a blow for civilization such as the one Dante described outside the vestibule of Hell: ” Abandon Hope all Ye, Who Enter Here” or even quote our very own Poet who said: “Good Fences Make Good Neighbors.”
43 Comment by Tom Piatak on 17 September 2009:
Mr. Seiler:
In its heyday, protectionism did not create an army of bureaucrats. The federal government financed by the tariff was small and unobtrusive. The federal government did not begin to grow until we replaced the tariff with the income tax as the principal source of revenue for the government, a move advocated by American free traders, and the decline of the tariff has hardly caused a decline in government. Whatever the theory, in practice, free trade has produced more government in this country, and the great cities that rose to prominence behind tariff walls–such as Cleveland (where I live) and Detroit (where my parents and sister live, in Oakland County)–are eclipsed by the great cities created by government, including, preeminently, Washington, the richest metropolitan area in America.
44 Comment by R. McCabe on 17 September 2009:
Mr. Seiler, thanks for bringing Tom Piatak’s brilliant observation over here. I rarely get over to Taki’s Mag and probably spend too much time here reading anyway.
As to your question, I think VATs are something that need better (simpler) explaining, as I read one of Mr. Hartman’s articles going over some tax proposals, but it wasn’t exactly clear to me after how they worked.
I think the general idea is that the economic realities of today, both given the U.S.’s lack of an economic border and the rest of the world’s economic fences, indicate that the U.S. is too highly dependent on imports and that it’s not an accident. As Peter Schiff has tried to explain other times, if you forget about the money, what do we actually make here that can be traded (in our case to pay down our debts) to other countries for all these things we import? You can’t export the kinds of services done by jobs that have tried their best to replace our former manufacturing jobs. You can export cars. You can’t export hamburgers or caramel macchiatos. Heck, you can’t even bring them on planes anymore.
A VAT may not do anything to Washington D.C., (most proposals are revenue neutral) but it might help shift our country away from a GDP that is composed of 70% Consumption, much of which is financed by debt-based purchases. Over time, we will probably lose jobs to foreign shores no matter what, just as we would to capital improvements/improved technologies, but the question is how to keep the international playing field as level as it can be and how to return that stream to a leak rather than a gush. I do not think people are advocating out-VAT’ing other nations or a “zero job loss” policy.
I would also hope that any such proposals would include an entire tax code simplification. The complexity is more of a burden than the levels.
45 Comment by John Seiler on 17 September 2009:
@42, Mr. Piatak: I certainly would favor trading income taxes for tariffs, though I hate both. (And under King Lincoln, of course, we had both.)
@43, Mr. McCabe: You brought up the VAT replacing the income tax.
The problem with both the above ideas — tariffs or the VAT (or, to add another, the so-called “Fair Tax”/national sales tax) — instead of an income tax, is that we’d still end up getting the income tax *again*. You know how it would work: just like after 1913. First, just a “small” tax of 1% on “millionaires” to fund something emotional, such as handicapped parking spaces. (Out here in Taxifornia, we actually have a 1% surtax on millionaires, dedicated to pay for mental health programs. California fruit and nut jokes welcome.)
Next, it would be a small tax of 2% on the “well to do,” those making $250K or more, to pay for “health care for the poor,” or the “war on…,” or some such thing. Then everybody would get income taxed again, on top of the VAT, the tariff, or the Fair Tax, or all of them.
I don’t know how much Chronicles types can do to help this country, but let’s not repeat the 20th Century.
46 Comment by robert on 17 September 2009:
Mr. Piatak, Pat Buchanan and others have much to contribute to this ancient ox-cart debate about manufacturers. Most men desire to make things and they are not mistaken about this as a rather natural means of creating wealth as opposed to simply consuming it. But modern manufacturing jobs were created for slave labor and all the kings horses and all the kings men cannot put that fact together again. The migration from independent,poor, peasant, farmer (described recently in Chronicles by Tom Landess) to modern factory existence was first women and children, then the desperate but still free farmers, then the folks back from war, then the breaking of the unions who first helped and then hurt the working class, by opening the old border once patroled, new factories South of the Border, then on to China now opened, and the questions old and new, with only one consistent beneficiary.
47 Comment by Clyde Wilson on 17 September 2009:
Esteemed Mr. Piatak at #42. There is a contradiction in your observation. The tariff as a source of government revenue and the tariff as protective of domestic industry work in contrary directions. It was traditionally free traders who wanted the tariff as the support of the government. Under real free trade it is a fair consumption tax. “Free traders” advocated the income tax as a remedy and rectification after decades of “tariff protection” had drawn wealth from the farmers to the plutocrats. Not to mention the plutocrats’ vast direct and indirect subsidies from the government and their complete control of the currency and credit of the country. I would certainly prefer subsidising an industrialist who actually makes something to subsidising a bureaucrat, but in either case it is robbery by legislation.
48 Comment by Tom Piatak on 17 September 2009:
Prof. Wilson,
I do not see the contradiction. The Tariff Act of 1789 had as its stated purposes “the support of government,” “the discharge of the debts of the United States,” and “the encouragement and protection of manufactures.” There is no reason a modern tariff could not fulfill all three of these purposes again.
49 Comment by John Seiler on 17 September 2009:
#47, Mr. Piatak. Except that, if you put a tariff on top of the existing massive taxes and bureaucracy, and the inflating Fed, the whole house of cards would collapse even faster than it already is.
50 Comment by Tom Piatak on 17 September 2009:
Mr. Seiler,
I agree with Buchanan’s proposal, which includes reducing other taxes in connection with putting more taxes on imports. In fact, I recommend Buchanan’s book on trade, “The Great Betrayal,” to everyone: it is a beautifully written and powerfully argued book.
51 Comment by John Seiler on 17 September 2009:
This has been a great discussion. I want to bring up something people maybe haven’t thought about: American exports. Yes, there area a lot of them, although overshadowed by the massive imports. I happen to live in a place, Orange County, Calif., that exports much more than it imports. Our top exports are medical devices, and communications switching devices (Broadcom and Conexant being the biggest companies), in both of which areas we lead the world. Major manufacturing for these firms is done right here and around Southern California.
So, if we get in a trade war with China, or whichever country, and they put up tariffs on America, then we’ll get hurt first and worst. Pat Buchanan mentioned “the Chinese outlet store in Albany known as Wal-Mart,” a great turn of phrase. But in China it’s common for the grandparents to take care of the children while the parents work. What if grandma needs a pacemaker from Orange County, but can’t get it if a trade war starts? She dies, the family’s situation is badly damaged, and an Orange County pacemaker worker is standing in an unemployment line. Unemployment here already is at record levels. Do you want to make it worse?
The situation is similar to before 1861, when the North benefited from tariffs that were paid by the South. That dispute was decided by untold violence. This time, it will be decided by who pays the most bribes to Obama and the other Democrats and Republcians. I suppose that’s an improvement.
52 Comment by Chris on 17 September 2009:
Mr Seiler, the Chinese probably couldn’t afford the pacemaker in the first instance. There is little demand in China for American high-tech goods yet there is seemingly unending demand in the US for cheap Chinese junk.
It should also be added, that China, Japan and South Korea are mercantilist countries that put substantial upfront and hidden barriers to goods being imported into their countries while the US opens its borders to all of their goods. At the very least this inequity should be addressed.
53 Comment by C Bowen on 17 September 2009:
I am all for reducing restrictions on native labor protections–there are plenty of good manufacturing/textile jobs the 12-18 crowd should be doing here at home, so moms can be home with their children, hundreds of thousands saved on college accreditation, and immigrants/cheap labor need not be imported.
If a tariff is required to employ the idle, then so be it (even if I doubt it.)
But I suppose it’s easier to wave a flag then lay it all out.
#47 If you want to make the case that the dubious imposition of the Constitution in place of the Articles is legit, and defend one of the first pieces of legislation–go right ahead, but appreciate how silly it looks to argue that the generation who fought for independence had in mind, replacing one oligarchy with another.
I lean Loyalist, contra Dr. Wilson, but he defends the honor and intellect of the people of that generation.
54 Comment by Clyde Wilson on 18 September 2009:
#47. The language about protection of manufactures in the early law was merely an appeal to “incidental protection.” The purpose of the tariff was revenue, sufficient to eliminate the need for any other taxes. Obviously, past a certain point, an increase in the tariff results in a decrease in the revenue, since the purpose of a “protective tariff” is to reduce imports and shift consumption to domestic manufacturers, who are thereby guaranteed sales and a margin of profits up to the cost of the tariffed import. The tariffs were revenue tariffs up until 1828, when, after intensive lobbying and bribery by the industrialists, along with intense propaganda about “Americanism,” a near 50 per cent tariff was instituted with a long list of items individually tariffed as designed by the industrial lobbyists for specific advantages. Except that raw materials and specilised products imported by the industrialists were EXEMPt from any tariff. Very obviously such legislation is partial and counter to free enterprise. Among other things it discourages new competitors, foreign or domestic, to established tariff-protected corporations. “Tariff protection” inevitably means bribery and deception in the design of complex legislation.
What is now falsely called “free trade” is just another example of the evil inaugurated by the tariff protectionists of the 19th century. If one believes that free enterprise is generally the most fair and productive form of economic activity, then one may assume that the tariffs of the 19th century actually retarded American expansion, great as it was because of the energy of the people and the great natural resources. How can charging everyone higher prices lead to greater prosperity? It can only shift money from the consumer to the protected producer.
55 Comment by Clyde Wilson on 18 September 2009:
The notion that tariffs were designed to protect American labour has always been a fraud, a propaganda ploy for public consumption. At the same time that the Lincolnites put in the “protective tariff” that lasted until FDR they also passed a contract labour law by which the government facilitated bringing in gangs of low-paid labour from Europe and China. If one wanted to protect American labour then it was necessary to control immigration, which labour leaders then understood. The industrialists also spearheaded abolition of slavery in the South because they believed
that cotton could be produced more cheaply with “free labour.”
At the same time they pushed for giving away as much of the public lands as possible for free, mostly to themselves, because land sales were the second largest source of government revenue. Decreasing the revenue from lands gave an excuse for increases in tariffs and other taxes to benefit the plutocracy.
The history of American state capitalism goes back a long way and to restore Harding/Coolidge protectionism is too superficial a remedy.
56 Comment by Tom Piatak on 18 September 2009:
Prof. Wilson, the question is not whether all was right with the 19th century GOP, but whether tariffs, or somehting like them, like a border adjusted VAT, might help stem the decline of manufacturing in America. Despite the theory of free trade economists, the historical record shows that they did work: behind tariff walls, we not only funded the (small) federal government, but also became the greatest industrial power on earth. Protectionism helped make Germany an industrial power as well. By contrast, Britain stubbornly clung to free trade during her long decline. Today, history seems to be repeating itself, as rising Asian countries, which protect their home markets by a variety of means, are beginning to surpass the United States, which is clinging to free trade dogma as stubbornly as Britain did. I am not suggesting that tariffs will cure all our economic problems, but continuing our current trade policy–which features the lowest tariffs in American history–is a sure road to ruin.
57 Comment by John Seiler on 18 September 2009:
If high tariffs are imposed, California’s economy will be ruined even more than it already is. 10 million Californians will flow out, reverse Okies, settling next to you, teaching your daughters Valspeak and your sons surfing. Like, you know?
58 Comment by Clyde Wilson on 19 September 2009:
Tom at #55. I am with you that we need to see to the country’s industrial base and present policy is very wrong. I think the VAT adjustments brought forth by Mr. Hartman and Chronicles may well be of great merit. What I object to is Mr. Buchanan’s blithe assumption, made here and many other times, that past American prosperity and industrial might were due to tariffs. This is bad history and bad economics. Further, let is suppose that we see an increase in our industrial capacity through good policy. The corporations will import their engineers and skilled workers from the bottomless pit of Asian manpower. “America” will show better statistics but America and Americans will not be helped very much.
(The way chasing bandits in Afghanistan is”defending Amnerica.)”
This is no longer the country it once was.
59 Comment by M.A. Roberts on 19 September 2009:
Tom Piatak #24: “Of course the “Austrian school” is devoted to the free trade being practiced today. Its proponents loudly and angrily denounce anyone who advocates the use of the tariff (or similar measures, like a border adjusted VATT) to preserve manufacturing jobs in the United States. Tariffs on goods coming into America have never been lower than they are now, which is why manufacturing jobs continue to disappear. And the “Austrians” have no solution for this, since they don’t regard it as a problem. Austrian economics is fully compatible with globalism; in fact, globalism is the logical end result of “real free trade,” which its proponents, in their more candid moments, have always admitted. As Bastiat said, the goal of free trade is the “peaceful, ecumenical, and indissoluble union of the peoples of the world.””
Exactly!
60 Comment by Andrew G. Van Sant on 19 September 2009:
I was among the 200 or so people present at the official launch of the Asheville Declaration. I knew we were doomed when I noticed that the label on the Confederate Battle Flags handed out by the Southern Party said “Made in China.”