Localism and Economic Liberalism: A prolix pontification and an open forum
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MINT-AND-CORN COUNTRY, INDIANA — Contributing to Post Right over the last two months and revealing my “misapprehensions … regarding capitalism” (disdain for, really) and my purported “misunderstandings” thereof, amongst other, more personal (but hardly more offensive) epithets, I’ve frequently been dubbed a Marxist (and been educated), generally by agitator extraordinaire William P.; most recently, had my communitarianism called “nothing more than white washed socialism” by commenter Byron; and, again by William P., been accused of being a protectionist and supporting the tariff.
I’ll not belabor the point too long, for I’ve done so, with little apparent success, too many times already, but I reassert that neither am I any sort of Marxist nor is third-way, localist communitarianism anymore socialist than it is capitalist. Although I am not opposed completely to government intervention in the marketplace (as neither Adam Smith was nor, certainly, modern day “capitalists” are), central planning and government ownership of almost anything are anathema to me, for reasons of economic sensibility, fealty to the Constitution (notwithstanding how ridiculously bad I think it intrinsically is), and localist proclivities.
The placeist tendencies, however, leave me less inclined to try to stand athwart local governments’ attempts to retard the locomotion of “the market” when the people, or the leaders qua trustees, employ zoning ordinances, environmental protection laws, historic preservation, or even far more “Draconian” measures to soften the blow that chain retailers and restaurants land on downtown faces, to reduce environmental impacts, or simply wholly to preclude foreign economic elements from establishing in town. (Although, ultimately, I desire, perhaps deludedly, to see the end of the publicly traded corporation (at least in the retail sector; elsewhere when possible) and the big-box store (whether chain or too-big-for-its-britches independent), I’d be content to see an end to the immense favoritism shown to big business by our quasi-fascistic regime and the rise of a more equitable playing field, at least for now.) I believe in competition, but I disbelieve a) that what passes for a free economy in this nation in anyway resembles a free market and b) that supply-and-demand economics (and, when it is paired with the incredible technological advances (if they are truly so!) that we have made as a society, concomitant materialism) is the be-all and end-all of our existence — moral, cultural, or political, — allying myself with the inimitable Wilhelm Röpke — no foe of free-market economics, he! —, who eloquently asserted the following bits of wisdom:
It is the precept of ethical and humane behavior, no less than of political wisdom, to adapt economic policy to man, not man to economic policy. […T]he market economy is not everything. It must find its place within a higher order of things which is not ruled by supply and demand, free prices, and competition. [I note here that Röpke, who, in my humble estimation, embodies a stupendously admirable, emulative, if not exact, synthesis of Burke and the Distributists, when referring to "a higher order of things", means Burke's "unbought graces", inter alia: "the world of dignity, beauty, poetry, grace, chivalry, love, and friendship, the world of community, variety of life, freedom, and fullness of personality". — NPO]
“We all know what consequences progressive concentration entails . . . . First of all, it destroys the middle class properly so called, that is, an independent class possessed of small or moderate property and income, a sense of responsibility, and those civic virtues without which a free and well-ordered society cannot, in the long run, survive.”
It is utterly unhelpful, and incredibly inaccurate, to suggest that I, Rod Dreher, or Paul Weyrich (r.i.p.) and William S. Lind are Marxists or “functional Marxists” or socialists. None of us — not even Dreher — want a planned economy; we believe in free enterprise, in “the market”, and in freedom from undue burden on our choices, economic or otherwise, by the forces of the Leviathan. But we also believe in limits. Or, as they so perfectly phrase it at Front Porch Republic, “Place. Limits. Liberty.” Not coincidentally did the perspicacious purveyors of that slogan order the words as such. Rather, only in place — in community, in shared culture and space — can we thrive and can we have real liberty (and equality, Professor Fox); only when our passions and desires are limited — by proper moral habituation, by societal and institutional constraints — and rightly ordered can we enjoy aforesaid liberty, which is, properly understood, something as burdensome with responsibilities as it is a means of disenthrallment via “rights” — something that, to be exercised rightly, requires virtue, which hardly can be inculcated in us in a world wherein hegemonic, penny-pinching, deracinated consumerism is, practically speaking, our foremost god; where “creative destruction” is celebrated, regardless of how tremendously it exceeds its proper, relatively constricting bounds; and where “the market” is arbiter of all — what constitutes art, beauty, a proper education, and so on, ad nauseam
Now, I’ve spilled an ocean’s worth of ink on elaborating on where we stand; I’m going to make something of an abrupt change from the specificities of the rant supra, though I shall continue with localism, promising to return particularly to Röpke and this implausible idyll that I have depicted anon. We are not Marxists. We are not socialists. We are not fascists, as the American regime essentially is (in, albeit, a watered down, more liberal form). But William P. did make one point half-correctly, to wit, that I’m a protectionist. I’m not, I don’t think, but this is no issue about which I have set my views in stone. On the contrary, I find myself wanting to support “free trade” and to oppose tariffs, but questioning whether such policies are in the best interest of our communities — and, thus, ultimately, in our own best interests. Lately, reading a couple of the phenomenal works from localist supreme Bill Kauffman, whose iconoclastic histories of American culture and politics are riddled with praise for free-trader Little Americans, I have again found myself recurrently cogitating about the “free trade”-versus-”protectionism” debate and the serious consequences thereof for places, for communities.
First, the injuriousness of tariffs and other protectionist measures is almost indisputable (although Dr. Larison and Mr. Buchanan could pretty ably reject just about any assertion that I make, I reckon; not without reasons have I flirted with at least mild “protectionism”). Whatever benefits accrued under Clay’s American System and, more broadly, the Hamiltonian American School’s dominance, the tariff spits in the face of the noble Jeffersonian (and purportedly contemporary conservative) maxim, “Equal rights for all, special privileges for none.” It is favoritism just the same as corporate subsidies, if in a (sometimes) less odious manifestation. This is no screed about the casus belli of the Civil War, and I am no Civil War historian, but, wholly to expound here, I must recall that the Northern-supported tariffs, which harmed the agricultural South, played a role in instigating Confederate actions that incited the War of Lincolnian Aggression. Perhaps most damning now is that tariffs, indeed, again, are subsidies, whereby those who successfully curry the State’s favor enjoy benefits not appropriated to those — one instinctively thinks of smaller and medium-sized firms unpossessed of the capital needed to make friends in high places (which is why I forever shall find my peers at the oasis) — who have not sidled into and seduced in clandestine bedchambers.
So, in the tariff we seem, at least presently, to perceive a most repugnant nature, abhorrent to our belief in both liberty and equality. What, then, of “free trade”? Returning briefly to the passages from Röpke, let us extrapolate that, within a cultural, social, and moral framework wherein economic policy is adapted to man — in a higher order of things not ruled by supply and demand, “the world of community” — free trade is something to embrace as a fairer, more equitable, exceedingly less totalitarian option whereby to accumulate the goods that contribute to leading a good life (though perhaps not the good life), which allows us to specialize in those industrial activities for which we are best suited (an allegedly wise decision to make, and something, wise or not, that is, for now, an unavoidable given). Buuuuuuuut.
First, what amounts to free trade rarely is, with decisions influenced by the same corporate entities who benefit most from tariff policies: It is managed trade that sacrifices environmental protection, our communities, and hard-working Americans’ jobs in the name of suppy-and-demand, efficiency, and corporate and shareholder (decidedly not stakeholder) profits. Second, for all of the reported (though still negligible) increases in “quality of life” for those, say, former Chinese peasants (poor, but at least their own bosses, at least nominally) now stitching denim into Levi’s Signature jeans (available in the States exclusively from Wal*Mart, Target, Kmart, Meijer, Pamida, and Shopko!) are little more than slaves, barely even wage slaves, whose human dignity we callously disregard as we embrace cheaper apparel and offer paeans to the income, hitherto unknown, that these industrious peasants now earn. And they, of course, have jobs once held proudly by American laborers who, judged first as living, breathing implements to be cast aside when they are no longer the cheapest tools on the shelf, rather than as human beings, stripped of their jobs when the “market” deemed them unnecessary. And then we have the environmental degradation that is an “externality” of industrial capitalism, magnified by the fuel required to transport massive quantities of goods across countries and oceans and absent pollution standards in developing nations.
(And lest we poo-poo whiny animadversions against environmental destruction, let us turn to no less an authority on conservatism than Russell Kirk: “The modern spectacle of vanished forests and eroded lands, wasted petroleum and ruthless mining, national debts recklessly increased until they are repudiated, and continual revision of positive law, is evidence of what an age without veneration does to itself and its successors.”)
Were the idyll that, citing Röpke, I painted even remotely redolent of our contemporary reality, again, our moral, social, and cultural institutions could stand as a bulwark against the rapacious side of “free trade” without condemning us to suffer the deleterious effects of tariffs. Alas, the enduring unholy marriage of capital and power, to which we have tacitly submitted, if not offered hearty obeisance, has so enervated our communities, so completely desiccated our intermediary institutions, that rebuilding the sort of social capital that restraining the vicious side of liberal economics requires is, notwithstanding climactic upheavals (C’monnnnnnn, Peak Oil!), simply impossible to expect to have happen except on a extremely local, piecemeal scale. (And perhaps this isn’t all bad?)
And so we’re left with the invidiousness of “free trade” or tariffs enacted by the selfsame state (with the beneficiaries of both “free trade” and tariffs often complicit) responsible for crushing our vital, once vibrant civic and social institutions; I am tempted to argue in favor of “statist” intervention, as loath as I am to embrace “statism” at all, as short-term means to a worthwhile end. I’m thinking along the lines of Bellocian differential taxation and Geogist land-value taxation, as well as the obviously needed end to corporate welfare and the sort of pro-small-business-friendly policies about which conservatives ceaselessly fulminate out of one side of the mouth whilst kissing the posteriors of corporate chairmen with the other half. But I am all too cognizant of the prodigious inherent risks here, specifically, of continuing to favor big business over small and “mobility” over rootedness all whilst further empowering the Leviathan.
At the core, I’m a Distributist, but I know that the agrarian ideal isn’t coming around any time soon, and I’m looking to reconcile, in a Röpkean fashion, my small-is-beautiful, culturally conservative localism with the realities of today — nothing new, of course, but something about which I’ve thought too much of late to let slide, especially when I’ve been so remiss in tending to this Weblog in the last few weeks. So, I ask readers, whether they share my sympathies or think that I’m a complete blowhard (or both), to offer their thoughts. Can we reconcile free-trade economics to our quaint, but truly conservative, localism? If so, how? Or is “protectionism” the answer? Apologies for the verbosity and open forum: Have at it!
Filed under: Economics, community
[...] I’m still alive — and I’ve written something. Posted on 7 August 2009 by Nathan P. Origer Job plus life plus corrupting neighborhood children = too little writing. I have some fairly well thought-out ideas in the mind and should be getting posts online, here and at Post Right soon. For now, my super-long screed on localism and economic liberalism is here. [...]
I agree with the general sentiments of the article but I disagree with some of the particulars. For example, unless I misunderstand, you’re arguing that protectionist policies may be necessary because of the destruction of intermediary institutions. What I think you’re missing is the organic nature of these institutions. They are formed by pressure on a community. So of course they will be damaged when the state enacts policies that subvert them. To get those institutions back, I think one needs to get rid of the policies that subvert them and then they will develop again because there will be a need for them again.
I think what protectionists don’t understand when they advocate these policies is that the political comes from the social, they seem to have it the other way around. a conservative society will create conservative political institutions, but I don’t think that can happen in reverse. protectionists seem to have a streak of utopianism, in that they believe that with the right policies they can replicate these natural institutions. However, left to their own devices, it seems that people and their communities would begin to pick up those methods of interaction that are a part of human nature. State enacted policies that try to replicate these institutions aside from running the risk of being hijacked by those who want to expand the state and destroy communities, also face the problem of having to understand and manipulate the laws that regulate human interaction.
James, I think I’m pretty much with you. I didn’t really clearly state it, I suppose, but I do, indeed, recognize that these institutions are organic in nature, which is a large part of why I’m hesitant to support tariffs and why, despite suggesting that we may “need” the state, I know that it’s not a good answer ultimately. But, as I meant to suggest when I asserted my fear of the difficult of rebuilding social capital, I can’t help but to fear that we’ve “progressed” so far as to make even our realization of the need for these institutions’ revitalization unlikely. I may be an unduly pessimistic mood.
Also, I may have erred in pairing tariffs and other protectionist measures with the other “statist” ideas offered — the Bellocian and Georgist taxation measures; I think (or at least hope) that a lot of people could get behind these (at least the Georgist land-value tax; the differential tax may be a little too market-interventionist for some) without imposing tariffs. I still fret about environmental degradation and human-dignity violation that we enable with “free trade”. I’m hardly interested, at the same time, in using brute force in the name of “human rights”, so economic punishment of this sort (rathe than, say, the woefully misguided sanctions favored by the US and UN), strikes me as being a possible alternative, one that also keeps jobs in America.
[...] has returned to blogging with quite a bloggy manifesto on some of my favorite topics – namely, localism, capitalism, and the struggle between free [...]
The trade with China is not Free. The Chinese repress their currency and the workforce. Trading with other countries is important to maintain innovation through competitiveness but not at the expense of hollowing out the jobs of your fellow countrymen or under-mining your country’s security. There is, therefore, nothing wrong with protectionism it just has to be balanced in the interests of competition, job and state security. The latter two are indirectly and directly Public Goods ( no well-paying jobs means decline of the tax base to pay for Public Goods) and traditionally the initial remit of the State.
Bruce:
There is, therefore, nothing wrong with protectionism it just has to be balanced in the interests of competition, job and state security
I like where you’re going with this, but how? I think that’s a tacit converse question that I tried to raise — if free trade isn’t the right way, then how do we make protectionism work without suffering the negative effects?
Nathan,
I am 90% right there with you. Röpke, virtue, community, and a limited government that is of, by, and for the people instead of corporations, lobbyists, and lawyers. I try to put limits on the demonizing of BIG, however. Your position is tenuous when you clamor against big companies on one hand and would seek ways to limit/regulate them, yet on the other hand you clamor when those same companies move their jobs overseas. If, and that may be a very big if, but if a company can succeed without government help, and without externalizing its social and environmental responsibilities to the public, who are you or anyone else to say they are too big for their britches?
I am very much a believer in subsidiarity and localism, but that does not mean we can forgo participation in a global community. To further James’ and Bruce’s comments above, I may have my own ideas about tariffs, but I would not label myself as a protectionist, but as one seeking to even the playing field among other countries that compete unfairly.
American workers and American businesses still need to compete with the products and services of a global marketplace, and I believe we can do so if government would end corporate welfare and enact more sound and efficient tax, regulatory, and monetary policies. This would be creative destruction of an altogether different sort.
Justus:
Your position is tenuous when you clamor against big companies on one hand and would seek ways to limit/regulate them, yet on the other hand you clamor when those same companies move their jobs overseas. If, and that may be a very big if, but if a company can succeed without government help, and without externalizing its social and environmental responsibilities to the public, who are you or anyone else to say they are too big for their britches?
I, as is probably obvious, shall not fully concede this point — because that I think that inherent virtue (perhaps I’m playing a little too loosely with that word presently — in smallness. You do, however, make a fair point — and offer a very important caveat with that “very big if”.
I briefly read your bit about tariffs, and while I’m not comfortable with the fundamental point, where you agree with Kristof about sweatshops, I’m not unaware of the at-least-partial truth in the point, and, more relevant, I think that I probably fall in the same boat as you respecting tariffs. Parity matters.
believe we can do so if government would end corporate welfare and enact more sound and efficient tax, regulatory, and monetary policies.
Sign me up.
[...] Localism and Economic Liberalism: A prolix pontification and an open forum Alas, the enduring unholy marriage of capital and power, to which we have tacitly submitted, if not offered hearty obeisance, has so enervated our communities, so completely desiccated our intermediary institutions, that rebuilding the sort of social capital that restraining the vicious side of liberal economics requires is, notwithstanding climactic upheavals (C’monnnnnnn, Peak Oil!), simply impossible to expect to have happen except on a extremely local, piecemeal scale. (And perhaps this isn’t all bad?) [...]
[...] got it from this really good post by JL Wall over at Upturned Earth, responding to both myself and Nathan about the pitfalls of localism, free trade, and so forth. More on this [...]
Nathan. Ref. Balanced Trade. If this country had a government that hadn’t been captured by the rich then we could certainly erect high tariffs against countries that jerry-rig their currencies as well countries that use tax and subsidy strategies we disapprove of. Distorting the market causes all kinds of problems for both sides. The Sub-Prime Disaster being the classic example to learn these lessons from. Rather than attempting to draw up omnibus trade agreements a one-on-one Partnering approach between two countries seems better to me. Such an approach could encompass comparative evaluation, charitable aid, volunteerism, partnering ventures as well as run-of-the-mill trade. We are going to have to take this approach anyway to get technology passed around quickly for anti-global warming purposes. Can’t pay – can’t have isn’t going to cut the carbon dioxide!
I think that I can get behind that, Bruce. Ultimately, as I note in the screed, I want to support “free trade” — whatever, exactly, that is —, but I want the fairer sort of trade to which your proposals seem to lead.
I guess, wanting to “have my cake and eat it, too”, I’m looking how to make fair trade freer and free trade fairer.
Missing the forest in the trees. Open your head:
http://mises.org/etexts/mises/critique/contents.asp
Your manifold errors aside (for now), read that and tell me you still support interventionism.
My apologies. I have not read the above linked book. I meant to link to this:
http://mises.org/etexts/Mises/interventionism/contents.asp
… and I suppose I should be thankful for getting acknowledged for making one “half-correct” point. Oh arrogance! My debating partner is unable to engage the technicalities of the debate, and I am the one smeared as a half-wit. When you can’t beat ‘em, smear ‘em.
“Perhaps most damning now is that tariffs, indeed, again, are subsidies, whereby those who successfully curry the State’s favor enjoy benefits not appropriated to those — one instinctively thinks of smaller and medium-sized firms unpossessed of the capital needed to make friends in high places (which is why I forever shall find my peers at the oasis) — who have not sidled into and seduced in clandestine bedchambers.”
It’s “dispossessed.”
Tariffs are not the same as subsidies. A tariff is placed on a foreign good for the purpose of raising the price, hence keeping the price of the domestic good artificially higher than it could otherwise be on the unhampered market. A subsidy occurs when government collects tax dollars and hands it over to a preferred industry; it is a transfer of money from the citizenry-at-large to the special interest (in this case, the corporation). Furthermore, a subsidy has the effect of cheapening the good for foreign consumers, because domestic taxpayers foot part of the bill.
Business looking to curry privilege through legislation is nothing new. It is also not uniquely endemic to a capitalist society, but a fact of human nature with respect to human economic life. Capitalist theory is against all such arrangements of privilege.
I do not know of anything invidious relating to free trade that could be solved through government. No government intervention in the economy will stamp out envy from the sinful human heart, any more than it can stamp out hatred through erroneously named, pseudo “civil rights” legislation such as those providing for “hate crimes” and “affirmative action.”
What on earth is jerry-rigging your currency but interventionism?
Bruce, what do you mean?
I object to any country artificially pegging its currency to a low value in order to stimulate its export trade. It is an artificial subsidy. I believe it distorts the market and causes problems. I believe that any other country that is a target of that export trade has a right to defend itself by whatever means it sees fit.
“I object to any country artificially pegging its currency to a low value in order to stimulate its export trade. It is an artificial subsidy. I believe it distorts the market and causes problems. I believe that any other country that is a target of that export trade has a right to defend itself by whatever means it sees fit.”
Well Bruce, I think this a good opportunity to learn about some basic economic fallacies, discredited as they were over the last two and a half centuries. Logical thinking will free you from the yoke of error, as well as your mind from the reflexive policies of cloister you presently advocate.
Before I begin, let me say the following: I also object to currency fixing because it frustrates the market process in establishing purchasing power parity. Free market economists and advocates (Ron Paul being a favorite around here) are in favor of a gold standard. A global gold standard essentially serves as a world currency, safe from the deleterious effects of government induced inflation. (Strictly speaking, there could theoretically be inflation on a gold standard, if, for example, a huge cache of gold were discovered and mineable at a low cost.) Let’s forget about the jargon and esoteric theory for a moment, however, because unless you are familiar with it, it only serves to complicate matters. Let’s focus on the real world effects of undervaluing a currency and your recommendation to fight such tactics with further intervention, namely protectionism through tariffs.
You can think of what China does – pegging its currency to the dollar below what it would be on the unhampered market – as an effective subsidy for American buyers.
Ruminate, if you will, on the following hypothetical scenario. The US dollar, if left floating against the yuan, has an exchange rate of 5:1; so $1 buys Y5. As we know, China does not allow the yuan to float against the dollar – it is pegged, and pegged below the market rate. For argument’s sake, assume it is pegged at 7:1. Now we will imagine the situation an American importer of, for example, toy airplanes, finds himself in. Chinese toy airplanes cost Y50 in the domestic Chinese wholesale market. The American importer believes he can sell these in America for $9.95 each, a healthy profit even after shipping and legal fees, etc. He wants to buy 100,000 airplanes. This will cost him Y500,000 (100,000*Y5 = Y500,000). However, the American importer does not hold Chinese yuan, but USD. He goes to a currency exchanger, and changes enough American dollars to acquire Y500,000 at the fixed rate of 7:1; approx $71,429 (Y500,000/7). What would happen if the exchange rate were 5:1, as it would be on the free market? He would pay $100,000 (Y500,000/5). The savings to the importer is passed along to the consumer, and is, in truth, unquantifiable (here we verge on questions of epistemology… not going there).
So what can we observe and infer? Let’s start with the winners from such a policy. The American importer paid almost $30,000 less than he otherwise would have, and the American consumer saved money on her toy airplane purchase. The Chinese manufacturer (and, by extension, his employees) did a deal with an American importer than otherwise may not have been done. All these parties have reason to support continuing the artificially low peg. But who loses? The Chinese consumer of toy airplanes, who has to pay a higher price than he otherwise would, because 100,000 airplanes just left the country (less supply -> higher price). The American manufacturer of toy airplanes also loses, because the Chinese consumer subsidizes the importer’s purchase (pays a higher price). There are peripheral winners and losers as well, but these are the main players.
Next, the all-too-common populist idea of placing a tariff on incoming Chinese goods. The winners and losers are still in place from the original pegging, but we’ve complicated matters with a tax. Now we have to involve the government of the United States, who collects, say, 3% on all imported goods from China. Who are the winners and losers from this tariff? Let’s start with the losers this time around. The American importer loses, because he now has to pay the government in taxation and cannot import as many planes. The American consumer loses because there are less Chinese planes to go around, driving up price. The Chinese manufacturer (and employees) loses, because his orders drop. Now who wins? Not very many: the American manufacturer, because his high labor costs are no longer as prohibitive to manufacturing toy airplanes (whether in fact the tariff will offset cost enough to transfer manufacturing to America is by no means a given). And of course, the government, who skims money off the top, all in the name of protecting Americans, never mind that the number employed in manufacturing toy airplanes is far, far less than those consuming them.
A protectionist tariff, thus, serves primarily to transfer wealth away from private citizens into the hands of government. It creates more losers than it does winners, and, rightly viewed, such action combats folly with folly. Like all interventionist schemes, it serves primarily to advance the cause of government. Who says capitalists are anti-consumer?
Oops, I messed up… the whole thing works if the price of the toy plane is Y5, NOT Y50. sorry!!!
Also, can you clarify this:
“fealty to the Constitution (notwithstanding how ridiculously bad I think it intrinsically is)”
I doubt you can
William P., you return! I’d started to worry, after not seeing you for a couple of days, that something was amiss.
[R]ead that and tell me you still support interventionism.
The entire point of this posting is that I don’t like supporting (certain forms of) intervention, but that I’m not comfortable with “free trade” and “free-market” economic policies as they work presently — by which I don’t simply mean in the convoluted, government-contorted sense, but also, as I make very clear, within a social framework seriously beaten down by the government. I’m not saying that I support interventionism per se, but that I’m uncomfortable with the alternatives and am looking to stir discussion and to hear what others say.
To that tend, though I remain hesitant, for cultural reasons, to go away with any latent or potential support for interventionist policies, I do appreciate the sincere (rather than unnecessarily argumentative and caustic) input, e.g., your example about the toy airplane.
… and I suppose I should be thankful for getting acknowledged for making one “half-correct” point. Oh arrogance! My debating partner is unable to engage the technicalities of the debate, and I am the one smeared as a half-wit. When you can’t beat ‘em, smear ‘em.
What on earth does this even mean? This involves neither arrogance nor my inability “to engage the technicalities of the debate”. Given the lengths to which I’ve gone to address almost every point that you’ve ever made (perhaps not to your satisfaction in most cases) and that a large portion of this posting is dedicated to trying to address exactly why, notwithstanding your charges and thorough explanations of Marxism (which I did appreciate, although it was, I assure you, nothing new to me), I’m not a Marxist. Maybe, I’m what you’ve called a “functional Marxists”, although I’d like to think that the entirety of this disquisition puts the kibosh on that notion.
I’m certainly, by your own definition of the term, not a Marxist. Socialism by no means is my endgame. (http://www.amconmag.com/postright/2009/07/16/i-hear-war-drums/ Second to last post.) And your point is only half-correct, as I’ve made clear, because I’m not a protectionist or supporter of tariffs, but I’m not opposed either, and I’m trying to developed a sensible, well-reasoned take on this issue, one that accounts not only for what you and others have offered, but also environmental and cultural concerns.
It’s “dispossessed.”
Nah, it’s “unpossessed”; I was using the predicative, rather than transitive. Some of those who are unpossessed of capital and influenced may have been dispossessed of what they previously had had, but I’m including those who never had sufficient capital and influence to “play the game”, so to speak, in the first place.
Tariffs are not the same as subsidies. A tariff is placed on a foreign good for the purpose of raising the price, hence keeping the price of the domestic good artificially higher than it could otherwise be on the unhampered market. A subsidy occurs when government collects tax dollars and hands it over to a preferred industry; it is a transfer of money from the citizenry-at-large to the special interest (in this case, the corporation). Furthermore, a subsidy has the effect of cheapening the good for foreign consumers, because domestic taxpayers foot part of the bill.
You’re right, and I chose my words poorly. Tariffs and subsidies are, by and large, functionally the same, insofar as tacking tariffs on imported goods benefits domestic industries producing the same goods — usually, again, those industries (or firms) that have sufficient sway to have desired tariffs enacted. Instead of taxing the citizenry-at-large and transferring the money to a preferred firm or industry, as the subsidy does, the tariff compels the citizenry-at-large to pay more for foreign products or to pay more than they’d have to pre-tariff, but maybe less than they’d have to post-tariff, on the domestic alternative.
Business looking to curry privilege through legislation is nothing new. It is also not uniquely endemic to a capitalist society, but a fact of human nature with respect to human economic life. Capitalist theory is against all such arrangements of privilege.
No argument here, save my unwillingness to use the words “capitalism” as a synonym for all free-market economic theories (though I don’t mean to suggest that you’re doing this).
I do not know of anything invidious relating to free trade that could be solved through government. No government intervention in the economy will stamp out envy from the sinful human heart, any more than it can stamp out hatred through erroneously named, pseudo “civil rights” legislation such as those providing for “hate crimes” and “affirmative action.”
I agree with all of this (save, maybe, the first sentence). I have no faith in government’s ability to “stamp out envy from the sinful human heart”. I merely suggest that, possibly, some forms of intervention, both short- and long-term (and some more problematic than others) may help to create limitations that make rebuilding our local and personal cultural and social institutions more possible. I also acknowledge that intervention has played a tremendous role in destroying these institutions and that any potential form of intervention that I may endorse could backfire just the same, which is why I ended the post without signing on the dotted for “free-trade” or “protectionism”.
Also, can you clarify this:
“fealty to the Constitution (notwithstanding how ridiculously bad I think it intrinsically is)”
I doubt you can
The Constitution, Federal statutes, and any treaty, however heinous, into which our government enters comprise the supreme law of the land, right?
I believe in the rule of law. Ergo, I swear fealty to the Constitution.
However, I believe for multiple reasons that it’s an inherently problematic document. The selfsame Supremacy Clause to which I refer is, in my view, seriously troublesome. Dyed in the wool localist/anti-Federalist who I am, I don’t like that state and local laws (which I realize would become problematic if someone sought to apply them, under a different version of the Supremacy Clause, other localities or states) lack equal standing, but international treaties do. A particularly troublesome current potential treaty: http://www.amconmag.com/article/2009/sep/01/00026/
The vagueness of the Necessary and Proper Clause, too, is something that find to be particularly troubling. Moreover, the underlying centralizing tendency of the document strikes me not only as being conducive (especially given the N&PC) (obviously) to the expansion of Federal powers, at cost to the States, beyond the powers expressly delegated thereto, but also promotive of excessive buttressing especially of the executive.
Beyond these points, inter alia, the ease with which now-too-vague language (and I’m not just talking about “the keep and bear arms”) permits for radically absurd “interpretations” — e.g., “Penumbral rights” — terrifies me.
Then we have, going beyond intrinsic shortcomings, various amendments that have only worsened things. I think, particularly, of the Fourteenth, Sixteenth, and Seventeenth (and the Eighteenth, the repeal of which is about the only good thing that I can say about FDR) Amendments.
re: dispossessed vs. unpossessed. I realized your point shortly after I posted, but I do not believe unpossessed is a real word.
re: tariffs and subsidies being functionally “the same.” No, unless you mean that they both frustrate a market economy. Otherwise, they are actually functional opposites.
re: my half-wittedness. Announcing that I’ve made one single point correctly, nay half-correctly, is basically calling me a half-wit. If I were insecure, I might take it personally.
re: the invidious spiel. I cannot but help think that you poorly chose your words again, because you cannot possibly have any disagreement with the first sentence and then agree completely with the latter. (invidiousness is caused by envy (this is tautology); envy is incurable by government; hence, government cannot address any invidiousness, resultant of the free market, or for that matter from anything.)
re: the Constitution. It’s not a perfect document, but it is remarkably excellent. Even if there were such a thing as a perfect document, it would not stop an aspiring dictator from altering its original meaning under clever apologia. It isn’t the framers’ faults that our modern elected officials disregard their original intent. (Part of it, namely the duping of the public, is attributable to the evolution – and deliberate misuse – of language, to be sure.) You don’t have to like it (speaking of which, I’d never swear fealty to anything I thought was “ridiculously bad,” though I’m hoping this is an exaggeration), but to criticize it in such brash ways, given the story of political history, makes you sound like the apotheosis of ignorance.
re: interventionism. I could perhaps sympathize with the interventionist if the interventions accomplished, even partly, their main concerns. They quite simply don’t. Deficit spending does nothing to make a recession shorter. Inflation does nothing to lower unemployment in the long run. Tariffs hurt far, far more people than they help. “Progressive” taxation is regressive. Price controls create scarcity. Socialism spreads nothing but misery.
re: your socialism. I did not mean to call you a Marxist (socialist, communist) in the same way that I would Barack Obama. You are obviously not a communist ideologue. But you, and that yahoo Dreher, advocate policies that demand the same things as socialism. You might think that your intentions absolve you from guilt on this count, but I do not. Why is the radical left – promoters of ultimate equality – economic equality – so close to the radical right in practice? Because in order to enforce this equality they must result to draconian, radical right measures.
re: the environment. Notwithstanding your apparent lack of comprehension that the environmentalist movement is the modern day vehicle for the socialist movement, really, alarmism regarding the environment is just that – alarmism. There is no such thing as anthropogenic global warming. Get used to that fact, and then you can start embracing capitalism instead of this childish fence sitting. Keep your head open and I think it’s only a matter of time before I convert you to “economic liberalism.” I think we might even be on friendly terms one day in the future, pending an apology to Mr. Levin.
P.S.: Most glaringly, I need a life.
William (You dropped the P and changed your URL?)
I must apologize, for I’m preparing for a long drive to the East Coast and need to get to sleep, so I’m not going to reply to this in depth, though I may try to if I find enough time while in the DC area. (Thus, I must apologize for a dearth of postings to keep you on your toes/aggravated and for a failure, again, to reply in depth).) I do want to cover a few quick things, though.
1. re: “dispossessed” versus “unpossessed”: It’s a real word, but not I’m not sure if it’s a legitimate word, which is to say that I’m not sure, were it not so suitable to my purposes, that I’d be willing to employ it. (Of course, other, better, more concretely legit words exists, but I’ve formed a habit of using it.)
2. re: “invidious”. You’re right here. I’m not sure why I went with that word, not having made the direct connection between the word and “envy”; thanks for the lesson; I was shooting for the common (as common as it is in everyday language, anyway) use regarding inciting resentment or anger, but failed to adhere to the stricter, more accurate use of the word. Thank you for the correction.
3. re: Constitution. ” It isn’t the framers’ faults that our modern elected officials disregard their original intent” I certainly agree with that. I’m still of the camp that wishes that they’d revamped the Articles, as they were commissioned to do, rather than having scrapped it for something new. Surely, even if you ultimately disagree, you, having expressed sympathy for my agrarian/localist vision (but noted the impossibility of it), you can appreciate the sentiment.
4. re: environment. I’m not convinced that anthropogenic global warming exists. I’m not convinced that it doesn’t, either. I tend to prefer to err on the side of caution; more important, my “environmentalism” is much broader than that: It’s become somewhat cliché, but I’m a “conservationist”, rather than an acid-dropping environmentalist. I find common ground in some shared belief with environmentalists, but I’m quite wary of them, generally agreeing, perhaps not as passionately, with your assessment that environmentalism is a vehicle for socialism.
5. re: economic liberalism. Don’t you get it? I want to be one, in the sense of Röpke “liberal conservatism”. I do believe that free trade is the way to go, rather than protectionist measure, but, again, I still long, perhaps deludedly, for the cultural and social (rather than governmental/political) institutions and framework that Röpke praises. It may be an enduring testament to Man’s fallen state that rebuilding these structures without government involvement is impossible, but I have hope. It doesn’t mean that I don’t make compromises from time to time, whether in the ballot box or with my wallet, but I do my best to support local businesses, local institutions, and so forth, and, when possible, to vote in ways conducive to what I want.
I’m all for friendly terms. As I noted a while ago, I suspect that most of our heated debates would be better over pints. Besides, if my undergrad years taught me nothing else about social interactions, it’s the liberals who have a propensity for letting academic/political/intellectual conversations get in the way of friendship. I can’t guarantee an apology to Mr. Levin, though. We’ll see.
I wonder if, at the core, on many (though certainly not all) issues, we’re probably more in agreement than our conversations would reveal. I’m just more inclined toward one end of the conservative spectrum than you, and am more of an agrarian idealist. Doubtless, my being a country boy from a town of about 2,000 and your coming from where you do (It’s public enough information, but I’ll leave it unmentioned here for your privacy) probably have a fair amount of influence
P.s.: Same here.
Cheers.
Good Morning William. In the dim recesses of my mind your argument concerning the comparative advantage of the Chinese toy planes reminded me of reading that argument by Milton Friedman many years ago. I decided to look it up. In 1980 Milton and Rose Friedman’s book “Free to Choose.” was published and your argument is to be found in the chapter entitled “The Tyranny of Controls.” albeit that the country he chooses as an example is Japan. I decided to re-read it. On page 43 after making more or less the same argument you have made they say:-
“The price of the dollar in terms of yen would fall until, on the average, the dollar value of goods that the Japanese buy from the United States roughly equaled the dollar value of goods that the United States buys from Japan. At that price everybody who wanted to buy yen for dollars would find somebody who was willing to sell him yen for dollars.”
I admit this extract reads a lot out of context but the point I’m trying to make is that even these great Libertarians and believers in the idea that the market can do no wrong anticipated a theoretical world of freely floating exchange rates. The reality though has been that all the Asian economies have attempted to artificially manipulate their exchange rates to drive export led growth. It’s almost as though they had all been reading the writings of the 19th century German economist, Friedrich List, who had witnessed the amazing growth rates of the protectionist countries Britain and the United States and reasoned protectionism was a good idea for emerging economies. Of course, the Japanese and Chinese Communist political establishment did read his writings and decided that was sauce for the goose was sauce for the gander. The 1997 flight of foreign capital from Asian countries was yet a further reinforcement of this reasoning.
It was I believe David Ricardo the British economist who popularized the idea of comparative advantage at a time when there was little recognition that international financial and technological mobility and improved transportation and communications would tend to render the geographical location for manufacture and services provision immaterial. However, Ricardo also believed that wages should be left to free competition so, for example, in his time restricting agricultural imports from other countries was not good sense, hence his support of repeal of the Corn Laws in Britain. However, this belief of Ricardo’s has never been firmly coupled with his comparative advantage theory in common parlance. I think if I ask you what is the value in dollars of China’s comparative advantage products outside of wage/materials rate advantages and Chinese food you would be hard pressed to come up with any great value.
I think the dangers of currency interventionism are best illustrated in the following article by Thomas Palley:-
http://www.levy.org/pubs/ppb_85.pdf
In this article written in 2006 he predicts this current economic recession as a consequence of currency interventionism although I doubt he could have quite foreseen its amplification by the greed, stupidity and fraud surrounding sub-prime mortgages and their dice-and-slice spin-off financial investments. Within this article you will find what for me is a key statement concerning the madness of current global trade arrangements under the mantra of “the market is always right”. Palley states:-
“In particular, the system promotes global deflation by emphasizing exports excessively; this focus
hollows out the income and aggregate demand–generation process in the United States via de-industrialization and outsourcing.”
His article is concerned to offer solutions to mercantilism masking as free trade including managed exchange rates and the imposition of taxation on US bonds and other financial instruments bought by foreign governments and private investors. This is not dissimilar to the ideas of the American Richman family in their book “Trading Away Our Future.” Here is their website which further explains their thinking :-
http://tradeandtaxes.blogspot.com/2009/01/balanced-trade-will-create-jobs-raymond.html
In addition it is of interest to explore the ideas of Dennis Murphy who argues that countries with fairly high population densities need to focus on exports because there is not the space for people to consume a large volume of goods produced for the home market. Japan I guess would be a good example where homes are small and space for storing second and third cars, power boats and recreational vehicles, jacuzzis, for example, is at a premium. His web site provides some interesting statistics to support his argument:-
http://petemurphy.wordpress.com/the-case-for-tariffs/
Interestingly, though it is not with China that the United States incurs the largest trade deficit value. Eire (Southern Ireland) has a higher one despite its population density being relatively low and this illustrates another aspect of mercantilism. Eire’s corporate tax rate is half that of the United States and many American pharmaceutical companies manufacture there to get this saving and avoid having to pay the very high sales tax, or value added tax, that the European Union market imposes on foreign imports. So clearly a belief that free trade is played freely, or fairly, is naïve.
This brings me to my last two points. How can a country like the United States which for so many years believed it was important to be anti-communist, lost so many lives fighting communists in Asia, and spent a fortune in an arms race to defeat communist governments with programs like Star Wars suddenly decide that communist run countries were OK and worth investing in? Could it be that once government declared there was no longer a significant military threat, greedy elites realized there were vast fortunes to be made? Here is Jack Welch, the former CEO of General Electric, giving the game away in a 1998 interview with Lou Dobbs.:-
http://message.snopes.com/showthread.php?t=44956
Welch’s view has given birth to the concept of Barge Economics whereby the most important thing now for a capitalist manufacturer, or services provider, is to get the lowest possible costs irrespective of the ethics, morality or plain human decency involved. The old adage still stands; buy low, sell high. The argument is that business is like the replication of genes; it is the survival of the most adaptive. The implication of this is that increasingly it does not make sense to manufacture anything, or provide an increasing number of services, from the United States anymore until the Chinese Communist Party or some Fascist regime takes over the country and imposes their draconian system of wage controls, pollution control avoidance and currency rigging systems and subsidies. Over the years I’ve read a lot about the way Communist and Fascist systems operate. They are abominable. Erik Beinhocker in the book I’m currently reading “The Origin of Wealth.” calls them “Big Man” systems. He says to be politically correct it should really be “Big Person” but I think the former title is right, you are statistically more likely to find sociopaths amongst men than women for obvious reasons. Communism and Fascism’s weakness for me as political systems is that it allows sociopaths to gain positions of power because its supporters do not understand that liberty requires control. Liberty requires that we impose tolerable limits upon our actions through government and its power to pass laws. We have to do this because human beings are Conditional Co-operators. We are a mixture of selfishness and altruism. I think in the United States there are many individuals who confuse the idea of liberty with the notion that the market is always right. We have the Sub-prime Disaster to illustrate that this idea is wrong. This disaster was the outcome of allowing too many zero-sum games to be played and Barge Economics and global trade manipulation tricks are further indications of this essentially selfish, or sociopathic, mentality. Our task in this country is to re-learn the true meaning and mechanisms of liberty and rebuild trust amongst ourselves by figuring out the best non-zero-sum games we should be playing.
Hey there Bruce, that is a lot to get through. And being that it’s Friday and I have real work to do, I don’t think I can.
Suffice to say that regardless of what you or I think about market economics, they are founded upon universally true laws, irrespective of time and place. Supply and demand can never be repealed. Marginal utility can never be reversed. The law of unintended consequences will always hold true for government intervention (the ultimate in “externality” creation). Market laws are amoral; they are discovered through logical deduction. Man must be moral, not the system he lives in.
My goal here is not to preach the Gospel of the market, but to inform the students of political history and political practice that certain things are unalterable and must be taken into account when deciding policy. Only a fool of a mechanical engineer would try to improve a car’s safety by first arguing away inertia. Yet our government, despite centuries of tutorial by economists, spits in the face of irrefutable fact, ignores the warnings, and promises an undeliverable utopia. This isn’t so surprising – we are, after all, dealing with politicians. It is more surprising that gullible citizens continually believe the demagogues, although given the complexity of the arguments and paucity of instruction in public schools, hardly so.
As a brief aside, Milton Friedman, the founder of Monetarism, was hostile towards the gold standard. He thought a limited money supply limited prosperity, and also supported floating exchange rates. Under a global gold standard, there would not be floating exchange rates. There would only be currencies denominated in different weights of gold. (However, I do believe even Friedman came to abandon Monetarism, but don’t quote me on that.)
Wall St. and greed did not cause this depression, but likely only exacerbated it. It was our nation’s central bank, the Federal Reserve, that created this housing bubble. A sound money (eg gold) cannot be manipulated by paper contracts on such a grand scale. See Austrian Business Cycle Theory.
Lastly, if you wish to preserve Americas industrial manufacturing base, then a tariff on manufactured imports may serve your purpose. It will also, unfortunately, make everybody poorer.
William. Take your time to digest the stuff I’ve thrown at you. It is a lot but pertinent I think. I am though interested in what you have to say by way of response. Nathan too and anybody else who would like to contribute in positive fashion rather than a rant. I’ve long since discovered the importance of trying to keep my ego in check in order to learn new ideas from others.
Bruce, the state of our academic economics is in disarray. After it’s clear to me that the authors I’m reading lack fundamental pieces of economic understanding, I tend to stop reading. I sustained my limited attention span through the insufferable “Animal Spirits” by Akerlof and Shiller, and it was enough to convince me of how poor most academic economists basic reasoning skills are. (And while I am not a Friedman inspired monetarist, nor do I think you should be, I would recommend anything else he’s written.)
Understanding the market mechanism as an organic whole makes reading these things somewhat trivial. The notion that you can get rich and prosper by exporting more than you import is as ridiculous as it sounds. If you don’t believe me, try it in your personal life. As another experiment, allow me to make your choices for you for a week, and see how well it goes (as a bonus, I’ll even try to make “good” ones!). These are basic thought experiments that help illustrate why socialism and protectionism are bad in all cases, irrespective of what your global neighbor is doing.
I don’t have the time to pour through academic papers that repeat long discredited fallacies. If this sounds conceited, I apologize. It’s just frustrating to think that such purportedly intelligent people spend their days propagating insidious, pseudo-credulous myths that affect my very own life.
Nathan:
5. re: economic liberalism. Don’t you get it? I want to be one, in the sense of Röpke “liberal conservatism”. I do believe that free trade is the way to go, rather than protectionist measure, but, again, I still long, perhaps deludedly, for the cultural and social (rather than governmental/political) institutions and framework that Röpke praises. It may be an enduring testament to Man’s fallen state that rebuilding these structures without government involvement is impossible, but I have hope. It doesn’t mean that I don’t make compromises from time to time, whether in the ballot box or with my wallet, but I do my best to support local businesses, local institutions, and so forth, and, when possible, to vote in ways conducive to what I want.
I can’t reply to all of this in depth for a number of reasons, lack of scholarship and dislike of platitudes chiefly among them, but a few points.
A) If you want to be a classical liberal, you eventually will be one. Enough study and reflection will almost certainly lead you to the determination that the trade-offs make Liberalism the least bad option.
B) That man is imperfect (fallen from grace) is a given. (“Do not let THEM immanentize the ESCHATON!”) Face it: there will be no perfect society on earth. Everybody who has tried to induce perfection through government or quasi-government institutions ends up in a position similar to Plato dreaming up his ideal Republic. That is to say, they must endorse, if not enforce, an economically stagnant/static, non-progressive life for those who inevitably end up as their, not citizens, but subjects. And since extreme egoism tolerates no peers, concentration of power lands in the lap of one man, a tyrant. Socialism is a static economy, unable to adjust to the changing needs and preferences of the people.
I don’t have the time to say more than that at the moment, except that I am very boorish when drunk and this forum is nearly guaranteed to be more civil.
Bruce, one last link, posted today, apropos to our discussion:
http://mises.org/story/3630
“Tariffs, and similar measures designed to strengthen the nation, “should not be considered as measures of production policy.” They aid some citizens at the expense of others; they do not help the economy as a whole.
‘One might differ as to the advisability of protecting the Prussian Junkers by a tariff on grain imports against the competition of the Canadian farmers who are producing on more fertile soil. But if we advocate a tariff to protect Prussian grain producers, we are not recommending a measure in favor of the production of the supply of grain, but a measure designed to assist the owners of German land at the expense of the German grain consumers. It will never be possible to base an economic system on such assistance privileges.’ (p. 20)
Mises here completely explodes the nationalist argument for protective tariffs. Since these measures do not benefit the totality of the nation, they cannot be unambiguously endorsed from a nationalist point of view. Commitment to free trade, then, need not rest on utopian commitment to internationalism, as some suppose. Given the goal of nationalism, protection does not follow.”
William. It sounds like we are never going to agree upon how “free” free trade actually is but I think it extremely useful to flip Mises’s argument over to see it from the viewpoint of a Chinese worker. How “free” is the Chinese worker to consume American made goods. Not much!
I was musing over the contents of this post and particularly my own last post and suddenly found myself laughing at the absurdity of how elites with capital justify making themselves loads of money from China on the pretense they are helping the Poor of America with low prices through global trade when in reality they are doing this by exploiting the Poor of China. You need to have read George Orwell’s “Animal Farm” I guess to truly appreciate the black humor of the situation.
I’m sure that should America go into permanent decline because of de-industrialization historians will see the turning point as being when the so called “Libertarians” belief that the market is always right prevailed over the Founding Fathers somewhat hazy notion that “Liberty” requires that we impose tolerable limits upon ourselves.
This is best exemplified by the fact that global terms of trade often turned out to be the most “illiberal” terms of trade but this was not judged important enough to stand in the way of a goodly profit and helping the poor!
Free trade implies that people in different countries can voluntarily construct business arrangements without government interference ni the form of tariffs, quotas, price controls, etc.
That Chinese worker is not compelled to work in factories. Like their European and American counterparts in the 19th century, they choose factory work over field work because it is more productive.
Economics is the study of trade-offs. I am for affording people the liberty of choosing to “trade up,” so to speak, while it seems to me that you would rather consign them subsist in a pre-industrial society. The “capital rich elite,” a phrase that is suspiciously resentful of success, broker deals that benefit the Chinese worker, the Chinese capitalist, and the American consumer. You can obstinately insist this is exploitation in spite of all the facts, or you can at least admit that there is nothing logically or morally inconsistent with my arguments, and honestly state you’re more interested in preserving American manufacturing centers at the cost of more expensive goods.
(Aside for a moment: the primary reason why America is losing its manufacturing base is because we’ve created a financial industry boom, employing millions upon millions in otherwise unnecessary market speculation and its dependent operational structure. When a nation’s best and brightest are not entering physics, engineering, medicine, etc, but programming market algorithms – algorithms destined for failure as we’ve clearly observed – little wonder that we export manufacturing needs. I would probably place the majority of blame for this on our illustrious central bank, the Federal Reserve.)
Liberty involves, first and foremost, self-restraint. There is nothing compassionate about a federal behemoth setting so-called standards for trade in purported name of decency and morality. If laws like this must be made, they should be made on the state and local levels. Besides, these laws have no place commercial affairs. For example, abolish the Federal minimum wage and watch unemployment drop, to start.
Mises’ argument is simply true. You cannot get out of the moral predicament of government afforded privilege. The protectionist state slowly resembles, more and more, the medieval guild system – the very system that the history of the English people speaks to deconstructing.
Finally, I am not a fan of the Red Chinese government. I would consider them a strategic threat that we must plan for. But in the interests of avoiding a military confrontation, I would suggest encouraging liberalization through free trade arrangements, and treaties that systematically deconstruct the commie government’s power hold.