Seize the Moment 3

For my write-up today on Richard Nixon's 1992 book, Seize the Moment: America's Challenge in a One-Superpower World, I will again quote passages from the book, following each quote with my comments.

1.  On pages 176-177, Nixon discusses what the U.S. should do in response to China's unfair trading practices (i.e., barriers to imports and failure to "protect intellectual property rights"):

"Our response, however, should not be across-the-board tariff increases but rather more discriminating tactics such as blocking China's entry into GATT or cutting back China's export quota under the International Multifibre Agreement of 1974, which regulates all textile imports into the United States.  If we want to have an impact on the changes occurring in China, we should not pull the plug on trade.  Increasing economic progress will bring progress on human rights and civil liberties."

Nixon is a big proponent of free trade in this book, for he believes that this can encourage countries to become more self-sufficient.  He is not naive about free trade, mind you, for, like Pat Buchanan in The Great Betrayal, Nixon argues against the idea that free trade can contribute to peace by making countries economic beneficiaries of each other.  Nixon notes historical examples of countries with mutual economic relationships that went to war with each other, and Nixon thus contends that free trade should not be seen as a substitute for an effective military.  Still, Nixon likes free trade.

Nixon does well to address head-on a question that protectionists have asked: What do we do if other countries are not playing fair?  I don't know enough to evaluate his solutions. I wonder if blocking the entrance of China into GATT would be a short-term solution, since what if China were to behave itself to get accepted into GATT, only to return to its unfair trading practices after being accepted?  Could China then be kicked out of GATT?  Would the World Trade Organization effectively police China's unfair trading practices?  (I'm sure there are answers to these questions, but, as I said, I don't know much about this issue.)

It's interesting that Nixon says that trade with China can encourage its progress on human rights, for Nixon on page 259 argues that the U.S. should not establish diplomatic or trading relationships with Cuba and Vietnam until they "meet specific political and human rights conditions..."  Nixon in his memoirs and in this book often argues that we can encourage progress in Communist dictatorships through cultivating diplomatic and economic relationships with them, rather than leaving them in isolation.  Why does he deem Cuba and Vietnam to be exceptions to this rule?  Incidentally, the next book that I will read by Nixon, Beyond Peace (1994), appears (at least from the back cover) to advocate trade with Cuba.  

2.  On page 265, Nixon responds to the charge that liberal trade policies will result in the outsourcing of jobs to countries where workers are paid less:

"If U.S. corporations located their facilities simply on the basis of lower wages, they would all have moved to Mexico already.  In addition to wage levels, other variables such as output per worker, transportation capabilities, and the quality of human resources are all part of the economic equation."
Nixon probably has a point here.  There are still manufacturing companies that remain in the U.S.  If outsourcing were too lucrative, how would there be any manufacturing companies here?  Perhaps they stay because our infrastructure is better, or for other reasons.  And yet, it seems to me that outsourcing is still a problem.  My understanding is that manufacturing jobs are on the decline in the U.S., and that outsourcing is probably one reason for this.

I wish that Nixon had addressed more extensively in this book the question of what we would do if we had a hard time competing.  Nixon criticizes U.S. agricultural subsidies because he thinks that they give U.S. farmers an advantage over foreign farmers, who are looking for a market for their goods (and need that market for their country to advance economically).  But what would happen to us if loads of cheap foreign crops are coming into our market, in direct competition with the American farmer?

3.  On page 256, Nixon criticizes the way that foreign aid to Africa has been wasted, hinting that free-market capitalism can set Africa onto the road to prosperity:

"Over the past decade, the United States and other Western industrialized countries have injected over $100 billion in aid and credits into sub-Saharan Africa.  Most was wasted because inefficient and corrupt governments refused to put into place policies to provide average farmers and workers with incentives to produce."

Ironically, John Bircher Gary Allen made a similar argument in his right-wing critique of Richard Nixon, entitled Richard Nixon: The Man Behind the Mask.  Gary Allen essentially argued that foreign aid props up socialism and ends up being wasted, and that the best way for impoverished foreign countries to advance economically is for them to embrace the free market.

What stood out to me in what Nixon said on page 256 was that he saw a place for the average farmer in Africa: the average farmer should have incentives to become more productive.  This, in my opinion, conflicts with what I've heard often takes place in the Third World, in the name of capitalism: multinational corporations come into the country, take people's land, use that land for cash crops or mass production, and reap handsome profits, while paying their Third World workers dittly-squat.  Nixon actually argues that it can economically help a Third World country to allow multinational corporations to come in.  Indeed, multinational corporations provide Third World countries with capital and produce a lot of goods.  But I wonder if there is a way for small farmers to be able to keep their land, and to produce enough to be competitive on the global market.  Or should they be competitive in the global market?  What would be so wrong with small farmers producing enough to feed their own country?  Is there a way to make private ownership work for people in the Third World, as opposed to making it work for multinationals?

And yet, I'd like to mention an example that Nixon cites of foreign investment contributing to improved conditions for the poor.  On pages 257-258, Nixon lambastes Apartheid in South Africa, contending that its discriminatory policies are "economically stupid" because they deny blacks "equal economic opportunities" and thus end up squandering their productivity and talents.  But Nixon does not think that American disinvestment from South Africa is the answer.  Nixon states on page 258 that "Many American companies, such as Ford motor company, had financed black housing, schooling, recreation, and health facilities."

4.  On pages 219-220, Nixon appears to take a rather anti-Israel tone, as he defends a "land for peace" approach to the Israeli-Palestinian conflict:

"While we are right to support Israel's survival and security, we would be wrong to back the current Israeli government's extreme demands.  [W]e should understand how the occupied territories came into Israel's possession through the 1967 war.  Aggressive military moves by Arabs created the crisis----perhaps even made the war inevitable----but Israel launched the first attacks.  Former prime minister Menachem Begin said in August 1982, 'In June 1967, we again had a choice.  The Egyptian army concentrations in the Sinai do not prove that Nasser was really about to attack us.  We must be honest with ourselves.  We decided to attack him'.  [T]he Arab-Israeli conflict poisons our relations with the Muslim world and undercuts our ability to cooperate with countries with modernist, pro-Western leaders.  Israel's occupation of Arab lands----and particularly its increasingly harsh treatment of the Palestinians----polarizes and radicalizes the Muslim world."

Nixon is for Israel going back to its pre-1967 borders, while Jordan would possibly administer the West Bank, and Syria the Golan Heights.  Nixon addresses the question of whether this would compromise the security of Israel.  Under Nixon's proposal in this book, conventional offensive weapons would be banned from the territories that are returned to the Palestinians, the returned territories would be a "buffer zone", checkpoints would ensure that weapons are not smuggled into the West Bank for an attack on Israel, and the U.S. would consider an attack on Israel to be an attack on the U.S., and would respond accordingly.  I wonder to what extent this overlaps with and differs from current proposals for a Palestinian state.

I was talking with my brother about Nixon's claim that Israel started the 1967 war.  My brother agreed that Israel attacked first, but he said that it was a pre-emptive strike----that Egypt was planning to attack Israel, for Egypt had been anti-Israel since the 1940's.  This wikipedia article quotes Nasser as saying on May 27, 1967: "Our basic objective will be the destruction of Israel. The Arab people want to fight."

5.  On page 226, Nixon argues that Palestinians in the occupied territories should elect representatives to the peace talks, without Israelis exercising a veto power over their choice:

"...elections should be held in the occupied territories to select Palestinian representatives for the peace talks.  Israeli leaders have insisted on advance approval of those who might serve in that role and on blackballing anyone with any association----no matter how distant----with the PLO.  That is unreasonable.  We did not like negotiating with Stalin or his successors, but since they held power, we had to deal with them.  Unless Israel comes to terms with its enemies, no peace agreement will enhance its security."

The reason that this passage stood out to me was that it reminded me of a question that Katie Couric asked of Sarah Palin in 2008.  Palin was saying that we should support democracy in the middle-east, and Couric then asked about Hamas' victory in a Palestinian election.  What happens when democracy leads to an outcome that the U.S. considers undesirable?  I've wondered how I would answer that question, for it is indeed a difficult question.  I'd probably give an answer similar to what Nixon said about Palestinian elections for representatives at the peace talks: that we should accept the Palestinians' choice, and try to deal with that choice if we can.  That doesn't mean that we should be okay with everything Hamas does----threatening Israel, after all, is wrong.  But part of democracy is accepting people's choice (though whether Nixon consistently did that as President has been debated).

Bruce Bartlett's The New American Economy 2: John Maynard Keynes

In my latest reading of The New American Economy: The Failure of Reaganomics and a New Way Forward, Bruce Bartlett talks about John Maynard Keynes.

One misconception that Bartlett corrects is that Keynes was pro-inflation, for Bartlett notes that Keynes acknowledged dangers in both extreme inflation and also extreme deflation, supporting stable money instead.  Keynes knew of the disastrous hyper-inflation in pre-World War II Germany, as Germany printed a lot of money to pay off its huge war debts under the Treaty of Versailles, resulting in hyper-inflation.

Keynes did support the U.S. government combating deflation through a loose monetary policy, however.  Deflation was a problem during the Great Depression for a variety of reasons----it made debts more of an oppressive burden (Bartlett quoted someone who likened it to having to pay $1.60 plus interest for every dollar that you borrowed), and it resulted in lower wages and people getting laid off as businesses sought to adjust to extremely low prices. 

Keynes preferred a policy of readjusting currency to the government setting prices and wages, for he thought that "the social cost of [the latter] policy was so great that it would threaten the maintenance of liberal democracy, leading to an authoritarian state such as that in the Soviet Union" (Bartlett's words on page 48).  Although Keynes supported government spending to stimulate the economy, he was later an admirer of F.A. Hayek's Road to Serfdom, which criticized the "growth of government...partly as the result of the widespread adoption of Keynesian economic theories" (Bartlett's words on page 57).  Keynes wrote to Hayek that he was "in a deeply moved agreement" with The Road to Serfdom (Keynes' words).

According to Bartlett, Keynes' desire for government stimulus was realized with World War II.  This point intrigued me because of the conservative argument I have heard that the New Deal did not get the U.S. out of the Great Depression, but World War II did.  But, even if that point were granted, World War II arguably got us out of the Depression through Keynesian means----government spending stimulating the economy.

There is much about Keynes that I do not know, but I have gained respect for him through my reading of this book and the last book that I read, Pat Buchanan's The Great Betrayal, which narrates that Keynes shifted from being a free-trader to being a protectionist, even though he was renowned in a society that largely regarded free trade as an orthodoxy.  I used to dislike Keynes because I knew that elements of liberal economic policy came from him, but he was actually quite open-minded and receptive even to views that could be characterized as conservative (i.e., Hayek's).

The Great Betrayal 11

I finished Pat Buchanan's The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy.

In my latest reading, Buchanan elaborated on his proposal to have a revenue tariff of 15 percent.  Actually, he doesn't believe that the tariff should be that low for all imports.  For imports that come from countries where workers are paid dramatically less than our workers, Buchanan argues, the tariff should be higher.
Buchanan also talks about tax policy.  In my latest reading, he treats the national sales tax as a good idea, even though he says earlier in the book (on page 295) that "Even a national sales tax would require tens of thousands of IRS agents pouring over the cash receipts of millions of businesses", which is why Buchanan prefers tariffs for raising revenue: with tariffs, the government doesn't intervene in Americans' lives, as it simply collects the tariffs at the ports. 

Regarding the flat tax, Buchanan doesn't want it to allow people who have inherited their wealth to avoid paying their taxes, yet he does support a flat tax for salaries, wages, capital gains, interest, and dividends above $35,000, as that could encourage savings and investment.  Buchanan also supports a corporate revenue tax, which seems to be a tax on the corporations' gross revenue rather than merely their profits.  Buchanan states on page 323: "To provide a break for small businesses, which have created almost all of the 30 million new jobs since 1981, the corporate revenue tax could be raised to 5 percent for large corporations, but the first few millions of dollars of [corporate] revenue could be taxed at 0 percent, 1 percent, or 2 percent."  Buchanan appears to recognize the need for a strong middle class here, which (for him) entails that the rich pay more.  Yet, he also doesn't want to soak the rich.

I found this to be an excellent book.  Reading Buchanan has been a mixed experience for me.  I used to love his red-meat campaign speeches, especially when I was a conservative, and even today I can appreciate his talent as a wordsmith and as an intense orator.  Some of his columns and books, however, have struck me as overly technical and nuanced----which is good, yet not exactly pleasing for me as a reader.  This book, however, was readable and informative----not to mention that it was a substantive defense of protectionism and critique of the arguments that are often made in favor of free trade.  I especially enjoyed his narration of American history, which I could tell is a great love of his.  I first heard of this book over a decade ago.  I was at a Buchanan rally in 1996, and he was saying that he would write a book about the founding fathers and protectionism.  I'm glad I finally got around to reading it!

The Great Betrayal 10

In Freedom from Want, Edward Gresser argues that free trade is good for other countries, such as Cambodia, since it provides them with jobs.  In reading Pat Buchanan's pro-protectionist book, The Great Betrayal, I've wondered how Buchanan addresses the impact of free trade or protectionism on other countries.  Essentially, Buchanan says that we should look out for our own----but he's not particularly racist in making that argument, as he has been accused of being when it comes to other things that he has said and written.  Rather, Buchanan says that we should look out for the African-Americans and Hispanic Americans who are already citizens of the U.S.  Moreover, appealing to Booker T. Washington, Buchanan says that it's wrong to give American jobs to immigrants (particularly illegal immigrants) rather than the African-Americans who are already here.

On one occasion in my latest reading, Buchanan does demonstrate compassion for the Mexicans.  He says that many Mexicans were hurt when their peso was devalued in order to give Mexico a trade surplus, for that lessened the value of their money. 

On an unrelated note, what policies does Buchanan support when it comes to protectionism?  Does he want to slap a huge tariff on imported goods, which many think would be disastrous because of how interconnected the world's economies are?  Buchanan on page 298 expresses support for a gradual revenue tariff: "The tariff could be imposed in stages: 5 percent immediately, 5 percent in six months, the final 5 percent a year later, giving merchants eighteen months to adjust."

Another point Buchanan made that I found pretty cool----even though I cannot find it right now----is that other countries would continue to export their products to the United States, even if we had a higher tariff.  The reason is that we're a good customer base for their products, and they'd make more money exporting to us even when a tariff were added, than they would make not selling their stuff to us at all.  This, in my opinion, highlights a contradiction in protectionist thought: protectionists want tariffs to encourage us to buy American and to rebuild the American manufacturing base, and yet they also want us to buy foreign goods because the tariffs can generate revenue for the federal government----and more right-wing protectionists argue that this would result in a lower tax burden on Americans.

The Great Betrayal 9: Smoot-Hawley

In my latest reading of The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy, Pat Buchanan disputes the idea that the Smoot-Hawley tariff during the Hoover Administration exasperated the Great Depression.  I thought it was cool (and funny) that Buchanan quoted the Ben Stein character's promulgation of this idea in the movie Ferris Bueller's Day Off (see here for the scene).

Buchanan does not think that Smoot-Hawley significantly impacted enough of the economy for it to be blamed for the deepening of the Great Depression.  He states on page 247: "...how much adverse affect could Smoot-Hawley have had on the U.S. economy as a whole, when total imports in 1930 added up to only 4 percent of the GNP and Smoot-Hawley applied to only a third of that, or to 1.3 percent of the GNP?  Is it conceivable that an increase in tariffs on 1.3 percent of the GNP triggered the collapse of five thousand banks, wiped out five-sixths of the stock market, caused a drop of 46 percent in the GNP, and sent unemployment souring to 25 percent?"

Buchanan does not cite sources for these statistics, as far as I could tell.  But he does have charts that are based on the Historical Statistics of the United States and the Statistical Abstract of the United States, and these show that the Smoot-Hawley tariff was not as high as many other tariffs in U.S. history, tariffs that (Buchanan argues) coincided with economic prosperity.  Buchanan also refers to economist Ravi Batra's claim that, from 1929-1933, domestic demand fell by a far greater percentage of GNP (98.5 percent) than net exports (1.5 percent).  According to Batra, it's absurd to blame the deepening of the Great Depression on trade policy, when the vast bulk of the problem was in the area of domestic demand.  And Buchanan refers readers to Alfred Eckes, Jr.'s Opening America's Markets, which (according to Buchanan) presents evidence against the anti-Smoot-Hawley rhetoric.  Eckes was chairman of the International Trade Commission during the Reagan Administration. 

But did not other countries retaliate against American exports due to the Smoot-Hawley tariff?  According to Buchanan, countries in Europe, Japan, India, Australia, and New Zealand were going protectionist way before Smoot-Hawley.  Buchanan refers to The Growth of the International Economy, 1820-1960, by A.G. Kenwood and A.L. Lougheed, and Corelli Barnett's The Collapse of British Power.  Buchanan notes, however, that the League of Nations helped bring about a lowering of tariffs "in almost all developed countries in 1928 and 1929" (page 250).  That makes me wonder: couldn't the countries have reinstated protectionism after the Smoot-Hawley tariff, in response to it?

According to Buchanan, the Great Depression was deepened by at least three factors: the effects of the stock market crash in 1929, which included the wipe-out of people's savings and the disappearance of one-third of the United States' money-supply; the Federal Reserve doing "nothing to stop the hemorrhaging or to replace the lost lifeblood of the American economy" (page 249); and Herbert Hoover's dramatic tax increases.

See here for another perspective on Smoot-Hawley.

The Great Betrayal 8

In my latest reading of The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy, Pat Buchanan argues that the time when the United States was protectionist----the late 1860's to 1900----was a time of economic growth, a reduction in the national debt, a fall in commodity prices, a rise in real wages, a growth in exports, and an increase in industrial production that rivaled that of Great Britain.  As sources, Buchanan cites Ravi Batra's The Myth of Free Trade, Alfred Eckes, Jr.'s Opening America's Market, and John Steele Gordon's Hamilton's Blessing, but, for his claim regarding the increase in the Gross Domestic Product and real wages, he mentions the Historical Statistics of the United States.

Moreover, when Warren Harding and Calvin Coolidge restored protectionism, Buchanan contends, there was an increase in manufacturing output, and taxes on Americans were reduced, even as revenue increased.  Buchanan also notes that the distribution of the tax burden became more progressive in the 1920's.  Buchanan cites the book Nation of Nations, David Alderoft's From Versailles to Wall Street, 1919-1929, and Gordon's Hamilton's Blessing.

I decided to take a second look at how Edward Gresser----a proponent of free trade----discusses these time periods in his book, Freedom from Want.  As far as I could see, Gresser does not interact with the statistics that Buchanan cites.  Rather, Gresser quotes critics of protectionism during the nineteenth century, who held that high tariffs penalized the poor and southern farmers on account of high prices (in the case of small farmers, the high prices were for machinery that they needed), and he says that Harding's protectionism left America's World War I allies in a state of economic wreck after the war, which Gresser seems to think was rather cold on his part.

One point that Gresser makes in his book is that free trade helps poorer nations, such as Cambodia.  Buchanan states regarding the protectionist President William McKinley, however, that McKinley did not write his tariff bill to prosper South America (an area that someone back then brought up), for the U.S. was his concern, not the rest of the world (page 214).  I find that sentiment to be rather cold, to tell you the truth.  But I still think that Buchanan's argument about economic growth coinciding with protectionism deserves serious consideration.

The Great Betrayal 7

In my latest reading of Pat Buchanan's The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy, Buchanan agrees with the insights of people who are considered to be villains by a number of conservatives, even as he criticizes the thoughts of one whom several conservatives regard as a hero.

Let's start with the villains.  Karl Marx said that protectionism is conservative, whereas free trade erodes nations and exasperates tensions between the bourgeoisie and the proletariat.  Because free trade accelerates revolution, in Marx's eyes, Karl Marx says that he supports it!

Buchanan, although he disagrees with free trade, says that "Karl Marx is right", for protectionism is conservative, whereas "free trade is raising the levels of antagonism in Europe and the United States----between working families and falling standards of living and national elites reveling in the Global Economy" (page 198).

Another villain in the eyes of the Right is the British economist John Maynard Keynes, who advocated government spending as a way to stimulate the economy.  According to Buchanan, Keynes started out as a "free-trade purist", but he became more of a protectionist during the Great Depression.  Buchanan speculates that "the hard reality of dying factories and foreign danger" contributed to Keynes' change of mind (page 205).  Buchanan actually admires Keynes for standing up for protectionism because he did so when free-trade was practically considered to be an item of economic orthodoxy: "It takes fortitude for a renowned man to concede that he has been wrong, that his critics were right, and then to adopt a position----protectionism----his contemporaries would decry as retarded if not immoral" (page 204).

Meanwhile, Ludwig von Mises is heralded as a hero by many on the Right, especially those who lean towards libertarianism.  Buchanan quotes von Mises as saying that free trade is good because it leads to people living and working wherever they desire as well as eliminates frontier boundaries, thereby getting rid of any need for one country to attack another country.  That means that, as a result of free trade, there would be neither war nor a need for a military, plus the state would not be a "metaphysical entity" (von Mises' words) but simply would protect the peace.  Buchanan scoffs at von Mises' utopianism and appeals to G.K. Chesterton: "When men cease to believe in God, said G.K. Chesterton, they do not then believe in nothing; they believe in anything" (page 201).

I have to admire Buchanan (a conservative) for being willing to see some good in the thoughts of those who are considered to be villains by a number of conservatives.  I used to read right-wing literature that loved to criticize people for being communists or communist sympathizers, and saying something positive about Karl Marx could land a person on a right-wing blacklist.  But acknowledging that Karl Marx had some valid observations and insights about what went on in the world does not mean that a person supports communism, especially as it was instituted in communist dictatorships.

What Buchanan said about Chesterton stood out to me because it reminded me of the dilemma that was presented before those of us who were in Armstrongism: You either trust in Christ to come to earth and establish a perfect political system, or you trust in human beings to set up their own utopias, which will fail because human beings are sinful and corrupt.  But, according to Armstrongism, you cannot do both.  Whether Chesterton had that mindset or not, I'm not sure.  This article says that he was a Distributist, and Distributism is a political ideology that is critical of both big government and also big business.  A friend of mine, who is a Distributist, said that Distributism is not exactly a political program that is executed from the top down, but it's something done from the bottom up----if more people buy their own property, for example, then there will be less property for big business to get its hands on.  I have much to learn about Distributism.  I will say, though, that Chesterton----even if he may have disagreed with political utopianism----did not seem to advocate throwing up our hands and waiting for Jesus to come back, but he thought that there are things that we can do to make the world a little better.

The Great Betrayal 6

When I was reading Edward Gresser's Freedom from Want, which was a defense of free trade, one question that I was hoping Gresser would answer is whether or not free trade has contributed to the stagnation of wages in the U.S., due to cheaper goods pouring into the U.S. from other countries.  Gresser argued that free trade has resulted in more jobs in the U.S. and also that exports have gone up, but (as far as I could see) he did not comment on American wages.

In reading The Great Betrayal, which is Pat Buchanan's defense of protectionism, one question that I am hoping Buchanan will answer is whether or not protectionism leads to higher prices for American consumers, as free traders contend that it does.

Buchanan has touched some on this question in my reading thus far, but I hope that he'll do so in more detail as the book progresses.  First of all, on page 51, Buchanan states: "Here is another fallacy of free-trade theory: what's best for its consumers is best for a country."  That seems to imply that, just because free trade allows American consumers to buy a bunch of cheap foreign goods, which benefits them because it allows them to stretch a buck, that doesn't mean that free trade is beneficial to the U.S., for it makes the U.S. dependent on other countries as well as undermines American manufacturing.

Second, on page 161, Buchanan mentions Abraham Lincoln's argument that "protecting home manufactures, in the long run, produced lower prices" (Buchanan's words on page 161).  I wish that Buchanan explained Lincoln's rationale for this in more detail, but what I got was this: In Lincoln's time, "shipping expenses added 25-50 percent to the price of goods" (page 161).  For Lincoln, those goods could easily be manufactured in the United States of America----with "good quality", "sufficient quantity", and little labor (Lincoln's words).

Third, on page 177, Buchanan is refuting the free trader portrayal of Adam Smith as an absolutist when it comes to free trade.  According to Buchanan, one of Smith's arguments was consistent with later attempts by the Union during the Civil War to increase tariffs in order to "offset taxes on American manufacturers" (page 177).  The more revenue that the government gets through tariffs, the argument may run, the less that it has to get from taxing American businesses.  And, while Buchanan does not say this, perhaps one could argue that this would result in lower prices, since American manufacturers are not passing the cost of taxes onto their consumers.

Am I satisfied?  Not entirely.  I still think that protectionism results in higher prices.  If a tariff increases the price of foreign goods, my hunch is that American manufacturers will charge only a slightly lower price than that of the foreign goods plus the tariff.  The reason is that businesses try to get by with making as much as they can, while still being competitive, so they won't lower prices more than they have to.  But suppose there is no tariff, and cheap foreign goods flow into the U.S.  In that case, there will be more pressure on U.S. manufacturers to offer cheap goods themselves to stay afloat (which may be hard for them).  In short, I think that the prices of American and foreign goods would be higher for American consumers when there is a tariff, than they would be without a tariff.  And, regarding the argument that, in Lincoln's time, there were high shipping costs that made foreign goods more expensive, the fact is that protectionists wanted tariffs to protect U.S. industry from foreign competition----and foreign competitors were competitive precisely because they could offer lower prices for their products than what U.S. industries were offering.

But perhaps Lincoln was hoping that, as more Americans bought American goods, that would increase American productivity, which would result in a greater supply of American goods and thus lower prices.  Maybe.  But I still don't think the prices would be as low as they would be if a massive amount of cheap foreign goods were entering the American marketplace and competing with American goods.

One thing that has been in the back of my mind as I have read Gresser and Buchanan is this: Protectionists want tariffs because that encourages Americans to buy American and thus saves American jobs.  But, on some level, protectionists are also hoping that Americans will still buy foreign goods, since doing so enables tariffs to flow into the U.S. treasury as revenue for the government.  This looks rather contradictory, to be honest with you.  Interestingly, in my latest reading, Buchanan mentioned a Laffer Curve when it comes to tariffs: if tariffs are too high, then people won't buy as many foreign goods, and that means that less revenue from tariffs will flow into the U.S. treasury.

The Great Betrayal 5

In my latest reading of The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy, Pat Buchanan talks about protectionism in antebellum America.

In the early days of the American republic, Buchanan argues, there was a tendency towards protectionism because prominent founders wanted for the United States to be self-sufficient and independent.  The reason was that they had seen what had happened when the thirteen colonies were dependent on the British for certain goods----they could be negatively impacted when Britain imposed high taxes on goods that it shipped to the thirteen colonies!

Like Edward Gresser in Freedom from Want, Buchanan portrays Thomas Jefferson as a free-trader.  Unlike Gresser, however, Buchanan maintains that Jefferson became a protectionist after seeing the pitfalls to relying on other nations such as Britain and France for goods, and Buchanan also presents Jefferson's free-trade stage as a time of naievity.  At the same time, Buchanan notes an ideological motivation for Jefferson's commitment to free-trade: Jefferson wanted an agrarian nation rather than a manufacturing one.

According to Buchanan, Jefferson's agrarian motivation for supporting free trade was taken up by others.  There were southerners who wanted to trade with other countries, and they resented the tariffs.  One reason was that, like Jefferson, they wanted an agrarian nation, and one southerner even contrasted an agrarian culture with the dirtiness and pollution that comes with manufacturing.  (Buchanan remarks that this sentiment was similar to that of environmentalism!)  Another reason was that the southerners wanted to trade with people who actually bought their products (i.e., cotton, tobacco, and rice).  Foreigners like the British bought southern products.  By and large, according to Buchanan, the North did not.  (But I wonder: Wouldn't the North need southern cotton for the textile industry?)

The Great Betrayal 4

I have three items for my write-up today on Pat Buchanan's The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy.

1.  A couple of times in this book, Pat Buchanan, a conservative, seeks to justify protectionism on socially conservative grounds.  Because wages in the U.S. have stagnated, Buchanan argues, married women with children have had to enter the labor force, and the result of that has been "falling birthrates and rising delinquency[,] teenage drug use, alcohol abuse, promiscuity, illegitimacy[,] abortions----and...the high divorce rate among working parents" (page 113).  Feminists such as Susan Faludi would probably question this argument, even though they would most likely agree with Buchanan that the stagnation of wages is a problem.

2.  On page 112, Buchanan has a chart entitled "Average Weekly Earnings, 1960-95 (in 1982 Dollars)", and his source for the information in that chart is the U.S. Bureau of Labor Statistics.  According to the chart, from 1960 to 1970, weekly earnings dramatically went up.  They went down a bit from 1970 to 1975, then they went up slightly from 1975 to around 1978.  From around 1978 to around 1983, they really tanked.  There was a slight bump from around 1983 to 1985.  From 1985 to 1995, there was a decline.  My question is this: Can this decline be blamed on free trade?  John F. Kennedy had free trade policies that Lyndon Johnson held fast to, and weekly earnings went up during that time.  Ronald Reagan had free trade policies, but Buchanan lauds some things that Reagan did that were protectionist.  Under Reagan, though, weekly earnings declined.

3.  Buchanan talks about a desire among some within the elites to erase national borders.  At one point, he refers to Strobe Talbott's vision that "all states will recognize a single, global authority" (Talbott's words, quoted on page 106).  I have two questions.  First of all, if Buchanan is against the elimination of nations, then why on page 113 does he criticize Welsh and Scottish nationalism and ethnic politics?  I realize that he thinks that there are people who are more loyal to their ethnic group than to their country, but doesn't ethnic pride contradict the drive towards the new world order that Buchanan criticizes?  Second, could a one world government actually eliminate some of the problems with free trade that Buchanan talks about?  Currently, companies leave the U.S. because they can pay overseas workers more cheaply, and the wages that are paid to overseas workers provide the workers with a fairly decent standard of living (at least according to Edward Gresser).  But would the disparity between wages here and wages overseas exist if the world had a single currency?  And would overseas companies be able to take advantage of other countries' loose regulations (as compared to what the U.S. has) and out-compete U.S. companies if the entire world had the same regulations?

The Great Betrayal 3

I have three items for today's write-up on Pat Buchanan's The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy.

1.  Edward Gresser argues in Freedom from Want that free trade leads to peace, since people are less likely to attack those with whom they trade.  One thought that was in my mind, which I did not share, was this: Why couldn't a country attack a country with which it has a trading relationship?  Then, it could just plunder the other country's resources, without having to give something of its own to receive them.  There may be something to my thought, but I should also remember that it may cost a country money and resources to conquer and rule another country, and so perhaps trade is better than conquest.

Pat Buchanan disputes the mantra that free trade leads to peace, as he notes examples to the contrary.  Britain engaged in free trade in the nineteenth century, yet it was involved in numerous wars.  The United States was a free-trade zone, but that didn't stop the Civil War.  In 1914, Germany attacked Russia, which bought a lot of German goods, and Great Britain declared war on its customer Germany.  In the 1930's, Japan attacked China and the U.S., though it traded with them.  Hitler invaded Stalinist Russia, a huge source of "food, oil, and raw materials" for Germany (page 61).

2.  One question that is in my mind as I read critiques of free trade is this: Why don't all American manufacturing companies move overseas, if it's so much to their advantage to do so?  The fact is that they don't, for there are still manufacturing plants in the U.S.  Buchanan, at least in my latest reading, does not answer this question head-on, but he does mention advantages for companies that stay in the United States: more productive labor, and also better equipment.  (But why couldn't companies take that better equipment overseas?)  The reason, according to Buchanan, that companies move overseas is that it's cheaper, since the workers can be paid less.  Buchanan (a conservative) also takes a swipe at big government policies that (according to him) oppress companies in the U.S. and encourage them to outsource.

3.  This third item is actually not from my latest reading, but from a previous reading.  Why does Buchanan think that it's better for the U.S. to have manufacturing jobs as opposed to a large number of service jobs?  On page 58, Buchanan states:

"Manufacturing is the key to national power.  Not only does it pay more than service industries but the rates of productivity growth are higher and the potential of new industry arising is far greater.  From radio came television, VCRs and flat-panel screens.  From adding machines came calculators and computers.  From the electric typewriter came the word processor.  Research and development follows manufacturing."

For Buchanan, manufacturing generates research and development, which coincides with economic growth.  I think that it's also important to recall what Arianna Huffington said: we need manufacturing jobs because how can we export stuff if we're not producing it?

The Great Betrayal 2

There were a variety of points that Pat Buchanan made in my latest reading of The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy:

----Buchanan argues that Japan's economic miracle in the 1960's was due to its protectionist policies, as Japan allowed for domestic development by shielding it from foreign competition.  That may be so, but, the way Buchanan tells it, Japan still had some interaction with other countries prior to the economic miracle in the 1960's.  Japan imported from the U.S. "mineral fuels and animal and vegetable products", while also exporting a lot (page 31).  Could that have set the stage for the economic miracle, by providing Japan with wealth and capital?

----Buchanan believes that there was a negative aftermath to President John F. Kennedy's free-trade policies: a reduction in "America's share of world industrial exports", even as Europe's share was rising; trade deficits; and a decline in American industries, such as radio- and TV-manufacturing, antifriction-bearings, machine-tools, and American automobiles.  Buchanan narrates that a number of Republicans supported Kennedy's free-trade policies (except for some stalwarts, like Barry Goldwater), and yet there were many politicians who later wanted a quota system to offset their negative consequences.  But President Lyndon Johnson said no.

----In the same way that Edward Gresser in Freedom from Want sought to argue that free trade should be embraced by liberals because it's a liberal value, conservative Pat Buchanan seeks to demonstrate that protectionism is something that has been supported by prominent conservatives.  Buchanan acknowledges that President Ronald Reagan pursued free-trade policies----with the shoe industry, for example----and the result of that was a decline in the American shoe industry.  But Buchanan notes that Reagan was concerned about the impact of free trade on American workers prior to his conversion to free trade, and that Reagan as President pursued protectionist policies that protected Harley-Davidson and imposed quotas on the import of Japanese cars, resulting in a resurgence of the American automobile industry.

----Like Gresser, Buchanan looks at the trade policies of America's founding fathers.  Buchanan notes that America in her early days could have followed the free trade Gospel by sticking with what she was good at----growing tobacco and other products----while importing things that other countries were good at----products from manufacturing.  Instead, she built her own manufacturing base, one reason being that she wanted for America to be self-sufficient in terms of developing her own military supplies.  And she did not hesitate to use tariffs.  When British ships were "dumping goods in U.S. ports to kill the industries begun during the War of 1812...Madison imposed a protective tariff" (page 52).

----Buchanan argues that "free trade" policies in their current form are neither consistent with the free market, nor are they fair.  In the aftermath of Kennedy's policies, Europe and Japan had tariffs that inhibited U.S. exports from making the same gains that they themselves were making.  There are countries in which the government actually gives their businesses an advantage by subsidizing them, which is not a free market.  And there are countries that devalue their own currency, which results in a trade deficit by making our goods in their countries more expensive, even as their goods in our countries somehow become cheaper.  (But I don't know how their devaluation of their currency makes their goods cheaper in our countries.)

The Great Betrayal 1

I started Pat Buchanan's The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy.

Buchanan begins his book with a story about a lady who worked at a Fruit of the Loom plant and helped to support her family with the money that she earned from that job, but then the plant closed down.  Buchanan then went on to cite statistics about the decline in real family income, the increase in the share of wealth that is held by the top 1 per cent of families, the drop in the percentage of Americans who work in manufacturing, and the increase in the number of people who work at Wal-Mart.  This all is in a chapter entitled "The Two Americas", which would later become a phrase that Democratic Presidential candidate John Edwards used when talking about poverty.  And Buchanan wrote about the top 1 percent a little over a decade before the Occupy Movement, which often refers to the top 1 percent.

Buchanan confessed that he used to be a free-trader, even when Democrats (such as John F. Kennedy) were the ones peddling it, but some in his family confronted him about his position because they saw the devastation that free trade was wrecking on communities----as companies had to close down due to their inability to compete.  Now, as Buchanan looks back on the free trade policies of the 1950's-1960's, he questions their rationale.  The Eisenhower Administration, for example, heralded free trade as a way to gain allies in the Cold War against Communism, but Buchanan does not think that free trade was even necessary to get countries as allies: after all, many of these countries were already afraid of Communism, and so they were already with us!

In terms of the historical narrative that Buchanan tells, much of it overlaps with what I read in Edward Gresser's pro-free trade book, Freedom from Want.  Buchanan, like Gresser, talks about how Woodrow Wilson sought to reduce the tariff yet still wanted an active government, which required revenue, and so Wilson supported an income tax.  Buchanan also notes that Republicans for years tended to be the protectionist party, whereas Democrats leaned more towards free trade, a point that Gresser emphasizes in his attempt to portray free trade as a liberal virtue.  Buchanan, however, sees nothing virtuous about it, for not only does free trade undermine American companies, but it also challenges American sovereignty, which was why a number of Republicans in the late 1940's opposed the ITO, a body that decades later was resurrected as the WTO.

One difference between Buchanan and Gresser is that Buchanan calls Thomas Jefferson a protectionist, whereas Gresser quoted a statement by Jefferson that supported freer trade.  I'll see how Buchanan portrays Jefferson later in the book, but I wouldn't be surprised if Jefferson believed in trade yet did protectionist things.  Jefferson had strong ideological beliefs, yet he could be pragmatic.  As President, he gave a green light to the Louisiana Purchase, for example, even though he initially thought that he needed to jump through hoops for that to take place.

Freedom from Want 2

In my latest reading of Freedom from Want: American Liberalism and the Global Economy, Edward Gresser talked some about the history of trade and protectionism.

Gresser made the point that trade is good because other countries make some things better and more efficiently than we do, and we make some things better than other countries, so it's beneficial to all sides to let them stick with what they're good at and to trade.  Moreover, according to Gresser, protectionism makes foreign goods more expensive, with the result that consumers have less money to spend on other goods, thereby hurting the economy.  Gresser also points to places that tried to be self-sufficient and to cut themselves off from the outside world----Sparta, North Korea, etc.----and he believes that we should not want to be like them.  I'd like to see better arguments for why a country should not try to be self-sufficient, and yet I can see Gresser's point that we're better off importing certain things.  Coffee comes to my mind.

Gresser then talks about American history.  As Gresser notes, trade was a significant part of America's early days.  The Declaration of Independence criticizes the British for hindering the thirteen colonies' trade with other countries, the American flag consisted of imported goods, Thomas Jefferson promoted free trade as something that would be conducive to prosperity, and Thomas Paine thought that trade would lead to peace.  But Gresser says that there were strong protectionist voices, such as Daniel Webster, Henry Clay, the Whigs, and later the Republicans.  Like the leftist critics of free trade today, protectionists in America's history feared that free trade would drive down American wages because American workers would have to compete with foreign workers (in this case, in Europe), who were poor because they were not paid much.  But another reason that protectionists liked tariffs was that they were an easy and convenient source of government revenue, and the Whigs and early Republicans supported public financing (of infrastructure, for example) as a way to stimulate the American economy.

Moreover, whereas Lou Dobbs presents outsourcing as a devastating outcome of corporate influence on the U.S. government, Gresser notes that protectionism in America's history tended to coincide with a relationship between government and business interests----since the special interests back then were the businesses that wanted to be protected from foreign competition.

It will be interesting to read Pat Buchanan's The Great Betrayal to get his take on protectionism and free trade in America's history.  I wouldn't be surprised if some of the Founding Fathers supported trade as a general principle, while also practicing protectionist policies every now and then.  Such inconsistency or pragmatism is possible, for Ronald Reagan was believed to be a free trader, and yet, as Phyllis Schlafly states, he "imposed tariffs on motorcycles to protect Harley-Davidson and on electronic products from Japan" (see here).

Lou Dobbs' "War on the Middle Class" 4: Free Trade

In my latest reading of War on the Middle Class: How the Government, Big Business, and Special Interest Groups Are Waging War on the American Dream and How to Fight Back, Lou Dobbs criticized free trade and outsourcing.

Regarding free trade, Dobbs argues that the current system is not balanced, for we (by which I mean the U.S.) buy other countries' goods more than they buy ours, resulting in a trade deficit.  Not only are our tariffs lower than that of some of our trading partners, but there also are many in some of these countries who are too poor to buy our products.  Moreover, Dobbs contends that NAFTA has not ameliorated poverty in Mexico.  Dobbs also talks about how the World Trade Organization infringes on American sovereignty.  On page 105, Dobbs states, "The WTO is currently assisting Wal-Mart in taking on state policies, by helping the world's biggest retailer get concessions opposed by local governments."

Regarding outsourcing, Dobbs states that it has resulted in the export, not only of manufacturing jobs, but also of the service and tech jobs that free trade was supposed to create in the United States.  Arianna Huffington made the same point in Third World America, blaming this problem on the United States' lack of competitiveness in education.  According to Dobbs, the jobs that will have the greatest demand include waiters and waitresses, janitors and cleaners, food preparers, hospital workers, cashiers, customer-service representatives, retail salespeople, general and operational managers, and postsecondary teachers----jobs that cannot be outsourced.  Dobbs does not believe that the jobs that people get after losing their manufacturing jobs pay as much, and Dobbs holds that, notwithstanding the cheap goods that free trade has provided to people in the U.S., employees in the U.S. are not better off, and that is due to the stagnation of their wages.

I'm planning on reading more about free trade after I finish Dobbs' book: Edward Gresser's Freedom from Want: American Liberalism and the Global Economy, and Pat Buchanan's The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy.  My impression (and I am open to correction) is that the former book defends free trade from a liberal perspective, whereas the latter critiques it.  I'm curious about how free trade has impacted the United States and the rest of the world, and what the solution could be.  While Dobbs is probably correct that free trade has resulted in the stagnation of wages, do we want to create a situation in which other countries are no longer a market for our goods (at some level), or prices go up due to protectionism resulting in lower productivity?