Tag: trade

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free trade & free markets national politics & policies responsibility too much government

Trump’s Biggest Secret?

golden crutches, farm subsidies, tariff, trade, free, Trump, EU

“This trade war is cutting the legs out from under farmers,” says Senator Ben Sasse (R‑Neb.), “and White House’s ‘plan’ is to spend $12 billion on gold crutches.”

Referring to Donald Trump’s tariff brinksmanship with China, Sasse is decrying Trump’s request to Congress for compensatory farm subsidies. Sasse insists that “America’s farmers don’t want to be paid to lose” — but regardless of what farmers want, we should want free trade.

Tariffs are taxes. Consumers ultimately pay for them all.

Trump’s requested “crutches” is just another example of a bad government program leading to another, “compensatory” bad government program.

Old story. Too familiar.

The senator is right to be alarmed by the Trump “administration’s tariffs and bailouts,” for the president is playing a most dangerous game. Trade wars are not mutually beneficial. Trade is.  

Of course, if the ultimate result is an end to all trade barriers — as Trump himself demanded regarding the EU — then … could it be worth it?

One thing’s for certain: the history of protectionist brinksmanship is not pretty. Sasse himself predicts that Trump’s tariff hikes “aren’t going to make America great again, they’re just going to make it 1929 again.”

Sasse is referring to the passing of the Smoot-​Hawley Tariff Act of 1929, which led not only to a spooked Wall Street, but to bank failures and retaliatory protectionism from other countries. 

And a worldwide depression. And world war.

But is Trump really a secret free trader,* using tariffs in a game of chicken with trading partners?

This just in, from The Guardian: “Trump and EU officials agree to work toward ‘zero tariff’ deal.”

Stay tuned.

This is Common Sense. I’m Paul Jacob.

 

* We could be forgiven for thinking him an old-​fashioned protectionist, considering his repeated insistence that “Tariffs are the greatest!” But with Trump, maybe we should never take him literally.

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Photo by Carlos Martinez

 

Categories
crime and punishment folly free trade & free markets general freedom nannyism national politics & policies responsibility too much government

Serving Consumers? Punish!

Amazon, monopoly, trusts, antitrust, trade, free trade, big business, economic myths

New media ballyhooer Douglas Rushkoff made waves this week. Citing an un-​named friend who went hysterical about Amazon​.com’s purchase of Whole Foods, he asserted that such “unease is widespread, and has raised new calls for breaking up Jeff Bezos’s impending monopoly by force.”*

The company has “surely,” he claimed, “reached too far.”

Apparently, serving customers exceptionally well is bad for business.

Yes, he almost totally ignored the pro-​consumer benefits of Amazon. Had to — his case makes no sense when you factor in us consumers. He focused, instead, on Amazon’s success in terms of its recent “online and offline retail sales growth” and its control of 40 percent of cloud storage and streaming services.

He went on to spin a bizarre fantasy about how disruptive bigness is in business. His economically illiterate farrago reminds me of the sad case made against pre-​antitrust Standard Oil, a company which, during the whole time of its growth prior to break-​up, kept on producing more fuel at ever-​decreasing prices.** Broken up because of … fears about how businesses change. And of bigness itself.

As long as consumers are being served, this reaction strikes me as paranoid. When businesses get big (and even near-​monopolistic) and then cease to serve customers, they fail. While serving customers, there is no call for fretting over businesses that move from one success to another  — which is what Rushkoff has the gall to worry about. 

The call for Amazon’s break-​up over-​sells government and necessarily under-​serves consumers.

This is Common Sense. I’m Paul Jacob.

 

* Rushkoff’s piece in Fast Company was the first I heard of such a “call.” Rushkoff is the coiner of the term “media virus” and a sort of populist pusher of market skepticism.

** For the bizarre story of the Standard Oil case, and how it made no economic sense whatsoever, see Dominick T. Armentano, Antitrust: The Case for Repeal (Ludwig von Mises Institute, 1999), p. 41 – 43, and Antitrust and Monopoly (Independent Institute, 1990), pp. 57 – 60.

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free trade & free markets national politics & policies responsibility too much government

The Skinny on Trumponomics

ecomomics, economist, tariff, trade, protectionism, Trump

President Donald Trump does not trust economists. So he is demoting the Council of Economic Advisors, booting out of the Cabinet the Council’s chairperson.

If this were only because economists as economists cannot do what he has been able to do — make a big success in business and trade — we could give him something like a pass.

After all, successful entrepreneurs have a knack for guessing an unpredictable future. Economists, not so much. Why the difference? Maybe because entrepreneurs have “skin in the game.” Governments boards and bureaus — or endowed professorships — don’t risk anything like skin.

Besides, prediction is an art, not a science.

Could Trump be fooled by his knack for working with real risk?

But all this may be irrelevant.

Trump’s problem seems to be that he cannot find enough reputable economists to jump on board his protectionist bandwagon.

Trade barriers, high tariffs and punitive measures to control corporate behavior — among Trump’s most popular policies — aren’t big among economists.

According to Josh Zumbrun, writing in the Wall Street Journal, a “survey of every former living member of the CEA for both Republican and Democratic administrations found that not one member publicly supported Mr. Trump’s campaign.”

Economist Pierre Lemieux, writing in response to Zumbrun’s article, clarified Trump’s particular problem: economists “have methods and theories that prevent them from saying stupidities. They are difficult to turn into parrots. And they believe in the benefits of exchange.”

That latter notion, really basic, is what protectionists like Trump do not understand.

And the kind of predictions economists can successfully make run like this: “Well, that won’t work!”

It’s usually said about protectionism.

But whose skin is on the line now?

This is Common Sense. I’m Paul Jacob.

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Categories
folly free trade & free markets meme moral hazard national politics & policies

Trump’s Dangerous Idea

Donald Trump, trade, protectionism, Donald Trump, war, borders, Bastiat

A lot of people were impressed by the reasonableness of Donald Trump’s foreign policy speech yesterday … despite the usual hyperbolic promises of “best” and “great” and “beautifully.”

Its general tenor? Refreshing. Rejecting post-​Cold War foreign policy for a return to “national interest” and “America first”? Long overdue. Like Trump, I think we should eschew nation building.

But still there is that one big problem: Trump is a mercantilist. He believes in protectionism. He thinks that trade has to be “fair” in order to benefit both participants. He thinks NAFTA and similar trade agreements (which generally promoted trade while still reserving a lot of room for government futzing about) are what hurt American industry. Trump is always blaming the “bad deals” made with Mexico and China, rather than placing the blame where it squarely belongs, on

  • America’s world-​high corporate income tax, and
  • chaos of regulatory excess, and
  • impenetrable tax code.

But protectionism makes sense to a lot of people. They are incredulous when they hear the (well-​established) idea that free trade — even unilateral free trade — is a benefit to the people who live under it.

Surely, they snort, when you target aid or protection to some industries, you are doing good, right?

Wrong. Oh, yeah, of course protectionism protects the chosen few, the advantaged. That’s what it obviously does. But it doesn’t protect the general interest – consumers pay more and producers allocate resources to less valued uses.

You have to look beyond the obvious (“the seen”) to get the full picture (“the unseen”).

Trump’s at his most dangerous right here — forget his loose talk — by continuing to pretend that protectionism helps America.

We cannot afford another Smoot-​Hawley.

This is Common Sense. I’m Paul Jacob.

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Donald Trump, trade, protectionism, Donald Trump, war, borders, Bastiat

 

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initiative, referendum, and recall

Trading One Right for Another

Trades are not unheard of in politics, but somehow they rarely exhibit the up-​front honesty and clarity of the trades that make up the bulk of our economic life. When I go to the super-​market, or the record store, or Wal-​Mart, I pretty much know what I’m getting and what I’m giving up.

Not so clear, though, in politics.

Take Arizona’s “Hunting and Fishing Amendment,” Proposition 109 on this November’s ballot. Much has been made of the first element of the ballot’s title, establishing a “constitutional right” to hunt and fish. Outdoorsmen love it.

But a second element gives to the state legislature “Exclusive authority” to regulate hunting and fishing, which may grant regulatory power to various wildlife commissions.

It basically disallows Arizona’s citizens from future influence through the initiative and referendum. That’s what citizens trade away for the first part. Citizens get a “right” to hunt and fish “lawfully,” a right they already have, but give up their current rights to influence what that “lawfully” means, via the ballot.

Prop 109 also declares that hunting and fishing would be the preferred means of controlling wildlife, and it says that “no law shall be enacted” that “unreasonably restricts” hunting and fishing, etc. 

Of course, constitutions can say “no law” all they want. History shows legislatures don’t abide by that prohibition. Neither do courts.

Just read the First Amendment to the U.S. Constitution, and consider … and cringe.

This is Common Sense. I’m Paul Jacob.