Quotulatiousness

June 17, 2018

Conrad Black – Trump’s not bluffing

Filed under: Business, Cancon, Economics, Government, Politics, USA — Tags: , , , , , , — Nicholas @ 03:00

In the National Post (but linked from his personal website), Conrad Black warns of the danger of assuming that Trump is just blustering on his trade threats:

Justin Trudeau struck just the right Canadian note of our gentle nature but refusal “to be pushed around,” and he predictably will reap the short-term reward for standing up for the country opposite the ideal American bogeyman, the blustering billionaire president who has been a Garry Trudeau caricature of the Ugly American for 25 years. (It is a very incomplete picture, like most caricatures, but it works for Trump and he often cultivates it.) The boycotts of American goods and holidays will be a bonus to Canada economically and the anti-Trump American media will be along within two weeks to lionize doughty Canada like “Gallant little Belgium” in 1914 and “Plucky Israel” in 1947, and it will strengthen Canada’s always fragile self-regard opposite the United States.

On the other hand, Trump isn’t just a blowhard; all his career he has known how to go for the jugular and his reference to 270-per-cent Canadian tariffs on butter is a valid complaint that threatens to tear the scab off this egregious payoff to the comparatively small number of Quebec dairy farmers who mainly profit from it. The same issue was hammered hard by Martha Hall Findlay when she ran for the federal Liberal leadership in 2013 and by Maxime Bernier when he ran narrowly behind Andrew Scheer for the Conservative federal leadership last year. The issue died down after their unsuccessful campaigns, but if Donald Trump is incited to hammer that theme, he will roil the domestic Canadian political waters and English-French relations in the country generally.

Presumably our trade negotiators will not become so intoxicated by the prime minister’s peppy talk and spontaneous popular boycotts of the U.S. that they forget the correlation of forces. An aroused American administration could do serious damage to Canada’s standard of living, and it could be a tempting tactic to expedite more important negotiations with Mexico and the principal Asian and European powers. The United States is now enjoying three times as great a rate of economic growth as Canada (4.8 to 1.5 per cent), has lower tax rates, 11 times as great an economy, and more unfilled jobs than unemployed people.

Behind the peeling façades of Norman Rockwell and Walt Disney, the United States is a monster, and not always an amiable monster. If Canadians are blinded by their visceral dislike of Donald Trump, as the antithesis of Canadian criteria for likeable public figures, they will be exposed to the ruthless pursuit of the national interest that in his own career propelled him from technical insolvency to immense wealth and celebrity and then, against all odds, to control of a great political party and to the headship of the most powerful country in the world. If these talks blow up, the U.S. doesn’t have to settle for WTO rules; it can impose outright protectionist measures. Justin Trudeau has been agile, and the country has responded admirably. But Canadian policy-makers must understand that they are playing for almost mortal stakes with potentially dangerous protagonists who have no sense of fair play and no interest in what Canada thinks of them.

June 14, 2018

The economic idiocy of Canada’s supply management system

Filed under: Cancon, Economics, Politics — Tags: , , , , — Nicholas @ 10:03

Andrew Coyne, who finally seems to have weaned himself off the PR voting jag, explains the Canadian government’s idiotic yet deeply entrenched supply management bureaucracy:

How did supply management, of all things, come to be at the centre of everything?

The policy, under which farmers in a number of sectors — milk, cheese, eggs, poultry — are organized into government-approved price-fixing rings, enforced by a complex system of quotas and protected by prohibitive tariffs on imports of the same goods, has been in place since the early 1970s. It affects fewer than 15,000 farmers nationwide, who between them account for less than one per cent of Canada’s GDP.

Yet it has somehow become the central issue not only of our domestic politics, but of international trade talks. It was the pretext for Donald Trump’s decision to impose tariffs on imports of aluminum and steel, and is his most-cited grievance with Canadian trade policy. As such, it has become the rallying cry of preening political patriots, each of the parties seeking to outdo the others in defence of a policy whose avowed purpose, let us remember, is to make basic food items more expensive for Canadians.

It has also become a source of deep division within the Conservative Party. It was already, of course, thanks to last year’s leadership race, in which Maxime Bernier made its elimination the central plank in his campaign, as Andrew Scheer made its retention the key to his. Indeed, Scheer’s narrow victory was directly attributable to the votes of thousands of Quebec dairy farmers, who took out party memberships for the sole purpose of ensuring Bernier’s defeat. It is even possible the Scheer campaign encouraged them in this endeavour.

[…]

There is no serious case for supply management — a policy that is is as unjust, inasmuch as it imposes the heaviest burden on the poorest families, as it is inefficient; that locks out new farmers and deters existing farmers from seeking new markets; and that makes us look utter hypocrites in free-trade talks, not only with the U.S., but the rest of the world — and no serious person whose livelihood does not depend upon it would make it.

And yet every member of every party is obliged to swear a public oath of undying fealty to it. That all do, but for one, is a sign of the institutional rot in our politics. For they do so not in spite of its awfulness but because of it — because the willingness to say two plus two equals five has become the ultimate test of loyalty.

On other issues, that might be because of genuine agreement. But a willingness to sign onto a truly hideous policy like supply management — that’s certain proof an MP is a “team player.”

June 13, 2018

Imagine … a tariff-free world

Filed under: Economics, Government, Politics, USA — Tags: , , , — Nicholas @ 04:00

Danny Chabino on what he calls “Trump’s G7 Surprise”:

In what I consider a brilliant move on the part of Trump and his team, instead of initially discussing what tariffs he would increase if x,y and z didn’t happen or if whichever nation wouldn’t reduce tariffs on whatever industry, he simply raised the simple question of why don’t we just not have tariffs at all? It’s brilliant in the sense that it not only shut down all the anticipated arguments, but also placed the world’s leaders in a position of having to awkwardly defend the very idea of tariffs (and subsidies), and they knew they couldn’t really do that. It highlighted the true intentions of the world’s leaders as representatives of the authoritarian nature of almost every existing government in the world today.

Now, please don’t misunderstand this article as me beaming with a Trump glow. In fact, Trump knew full well no one would take him up on such an offer. I do believe if they had he would have followed through, but his next moves will be ones that I believe are the wrong ones. He will seek to raise tariffs, which has always done more harm to the nation raising the tariffs than it has done good that nation. Trump will do just as he has threatened and hurt his own country;’s economy with new tariffs.

What I do enjoy, though, is that all of the world’s major leaders had to essentially admit that they don’t want their people and their economies to be better off. At least not on their own. They want their people and economies to be dependent upon their leadership and their governments. While everyone at the summit knew that the greatest of outcomes would be for all the world’s most powerful nations to exercise free trade, and that this would benefit the entire world in great proportions, that really wasn’t their aim. Their aim was to gain greater power. What an incredible admission!

When given a golden opportunity to end tariffs and increase freedom and prosperity for most citizens of the world, the world’s leaders instead chose to cling hard to their own designs. The world’s leaders know full well that tariffs hurt their own citizens, but they don’t care. Tariffs have never served the function of creating market efficiency, and they have never helped protect a nation’s economy. Instead, they have always been a means for governments to exercise control over huge parts of their own economies, and where there is control, there is power. Politicians and world leaders seek power. It’s like their drug of choice, and they can never get enough of it.

June 12, 2018

G7 minus one

Filed under: Economics, Europe, Germany, Russia, USA — Tags: , , , , , , — Nicholas @ 05:00

Justin Raimondo on the well-shared image of Angela Merkel and her associates apparently trying to browbeat Donald Trump at the G-7 meeting (this version from Raimondo’s article):

All the Very Serious People are tweeting and retweeting this “iconic” photo of Trump surrounded by the Euro-weenies, with Angela Merkel seeming to lecture the President while the rest of our faithless “allies” look on. It’s “America Alone” – the visual representation of the internationalist worldview: Trump’s policy of “America First” is “isolating” us, and, according to clueless leftists like Michael Moore, Merkel is now the “leader” of the “free world.”

This last is good news indeed, for if Merkel is the new leader of the “free world” then the stationing of 35,000 US troops in Germany – at a cost of billions annually – is no longer required and we can bring them home. This also means Germany, rather than the US, will be sending troops all over the world to fight “terrorism” – a move that is sure to cause consternation in certain regions with a history of German intervention, but hey, somebody has to do it!

The political class is screaming bloody murder over Trump’s performance at the G-7 meeting in Canada, where he reportedly spent most of the time detailing how much the US was paying for the defense of our vaunted “allies,” not to mention the high tariffs imposed on American goods. He then proposed a “free trade zone” in which member countries would drop all tariffs, subsidies, and other barriers to trade: the “allies” didn’t like that much, either. Nor did the alleged advocates of free trade here in the US give him any credit for ostensibly coming around to their point of view. Which reminds me of something Murray Rothbard said about this issue: “If authentic free trade ever looms on the policy horizon, there’ll be one sure way to tell. The government/media/big-business complex will oppose it tooth and nail.”

Of course the Euro-weenies don’t want real free trade: after all, they practically invented protectionism. What they want is a free ride, at Uncle Sam’s expense, and the reason they hate Trump is because they know the freebies are over. However, what really got the Usual Suspects frothing at the mouth was Trump’s insistence that Russia be readmitted to the G-8:

    “I think it would be good for the world, I think it would be good for Russia, I think it would be good for the United States, I think it would be good for all of the countries in the G-7. I think having Russia back in would be a positive thing. We’re looking to have peace in the world. We’re not looking to play games.”

The “experts” went crazy when he said this: our “allies” are being insulted, they wailed, while our “enemies” are being “appeased.” It’s sedition! Russia! Russia! Russia!

Eric Boehm says that the White House’s justification for imposing tariffs on national security grounds may have been undermined through Trump’s tweets hitting back after what he clearly felt was Justin Trudeau’s hissy fit (although Trudeau didn’t exactly break new ground or say anything radically different in his comments):

The Trump administration has spent months trying to construct a rather flimsy argument that steel and aluminum imports from Canada and other close American allies constitute a national security threat. More than a handy way to drum up public support for trade barriers, the “national security” claim is a crucial bit of the legal rationale for letting the president impose tariffs on those goods without congressional approval.

Then, as he was departing this past weekend’s G7 summit, Trump took to Twitter to air some grievences with Canadian Prime Minister Justin Trudeau. In doing so, the president may have significantly kneecapped that legal argument.

The last sentence of Trump’s tweet is the one that really matters.

The White House slapped a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum by invoking Section 232 of the Trade Expansion Act of 1962, which gives the president legal authority to impose tariffs without congressional approval when it’s for the sake of national security. That line of argument, outlined by Commerce Secretary Wilbur Ross in a February report, says that America needs aluminum and steel to make weapons of war, and that protecting the domestic steel and aluminum industries is the only way to ensure the country will be able to defend itself if attacked.

That is pretty weak, as I (and others) have written before. But as long as Trump makes that claim — no matter how strained the logic might be — the law seems to be on his side. Invoke “national security” and the president can do what he wants with trade.

Except now Trump seems to have admitted that it’s not about national security at all. His tweet plainly states that “our Tariffs [sic] are in response to his of 270% on dairy!”

Chris Selley points out that up until this eruption, Canadian politicians were still carrying on as if nothing was really at stake (especially Conservative leader Andrew Scheer, who re-swore his allegiance to ultra-protectionist supply management at all costs, and damn actual free trade):

So utterly obsessed are Canadian politicians by the small differences between them that federal Conservative leader Andrew Scheer recently demanded Prime Minister Justin Trudeau explain what he meant when he suggested Canada might be “flexible” on the issue of supply management in the dairy industry, in the face of new demands from Washington. It’s preposterous: you can’t fit a processed cheese slice between the three major party’s total devotion to the dairy cartel.

Because, as we all know, what unites Canadians from coast-to-coast is our universally shared determination to pay significantly higher prices for dairy products, to ensure that Quebec farmers are not overly bothered by pesky competition from uppity foreigners who don’t even speak Joual…

June 5, 2018

QotD: Protectionism is a form of bullying

Filed under: Economics, Quotations — Tags: , , — Nicholas @ 01:00

Bullying and protectionism have a lot in common. They both use force (either directly or through the power of the law) to enrich someone else at your involuntary expense. If you’re forced to pay a $20-an-hour American for goods you could have bought from a $5-an-hour Mexican, you’re being extorted. When a free-trade agreement allows you to buy from the Mexican after all, rejoice in your liberation. To compensate your former exploiters is to succumb to Stockholm syndrome.

Steven Landsburg, The Big Questions, 2009.

June 4, 2018

The economic damage of tariffs

Filed under: Economics, History, Politics, USA — Tags: , , , , — Nicholas @ 05:00

Tim Worstall fisks a recent Pat Buchanan brain fart article on the glories of erecting tariff walls against foreign trade:

Pat Buchanan has been going on for decades about how wondrous tariffs are and if only they were brought back then things would be just peachy. Sadly, this all seems to be based on his not understanding trade, tariffs, nor apparently even history. That’s not a good set of recommendations for a policy about trade and tariffs, one that has been tried many a time in history.

Now, it is entirely true that if we returned to a more Hamiltonian policy era then we’d all be richer. But that wouldn’t be because we had tariffs which paid for government rather than an income or corporate tax. It’s because government would be confiscating a very much smaller portion of what we all produce to pay for itself. If the Feds took 3% of everything we do instead of the current 18% or so then sure, we’d all be richer. But that’s true however that tax is raised.

[…]

His argument is that, protected from foreign competition, American business was able to develop and grow into being world beaters. No, I don’t think this is true – I insist that behind tariff barriers companies stagnate. Indeed it’s standard economics that the medium to long term effects of trade are that the competition from foreigners is what makes the domestic companies stronger and more productive. But put that argument to one side. Assume that Buchanan is correct.

For his conclusion to be correct then it must have been true that the total costs of trade were rising in that time period. Total costs being tariffs plus transport. Only if the total costs were rising was protection rising. The tariffs are only part of the story. And as it happens total protection was falling over this time period. The falls in the costs of transport – for the US externally primarily the steam ship – were greater than the rises in the tariffs. Thus the US was becoming more open to trade at this time when industry was booming and growing to world class levels.

That’s not an argument in favour of trade protection now, is it?

    The U.S. relied on tariffs to convert from an agricultural economy in 1800 to the mightiest manufacturing power on earth by 1900.

Well, it’s also true that what the US was inside those tariff barriers was the largest free trade area in the world. I’m the guy insisting that free trade makes places grow, Pat the opposite. And the place with more free trade among more people than anywhere else grows fastest? That’s a point in my favour, no, not Pat’s? Remember, the US Constitution expressly forbids the individual states from having tariffs between them…..that regulation is left to the Feds who have never imposed them.

    How have EU nations run up endless trade surpluses with America? By imposing a value-added tax, or VAT, on imports from the U.S., while rebating the VAT on exports to the USA. Works just like a tariff.

No, a VAT does not work like a tariff. In no manner at all does it do so in fact. As every economist keeps trying to point out. Within the EU all goods and services, no matter where they’re made, pay the exact same rate of VAT. Well, OK, ladies unmentionables pay a lower rate than motor cars, that’s true, but all unmentionables pay the same rate, all cars. There is no difference made between domestic and foreign production. It’s entirely unlike a tariff therefore, the crucial component of which is that distinction made between home and foreign production.

Stuff made in the EU and sold in the US pays no VAT. Stuff made in the US and sold in the US pays no VAT. Again, we’ve no distinction by source or origin, this is entirely and completely unlike a tariff.

May 11, 2018

QotD: Protectionism is by nature, zero-sum

Filed under: Economics, Quotations — Tags: , — Nicholas @ 01:00

A Protectionist is Someone Who… is so hopelessly – indeed, comically – confused about trade that he assumes that Americans who support free trade do so only out of a willingness to sacrifice the welfare of fellow Americans in order to improve the welfare of people in poorer countries. The protectionist does not grasp the fact that voluntary trade occurs only when each party to each trade believes that he or she will be made better off by the trade. The protectionist, unable to escape from the antediluvian superstition that trade is a zero-sum exercise, self-righteously – if ridiculously – accuses free-traders in rich countries of discounting or disregarding the economic well-being of their fellow citizens. The protectionist is an intellectual prisoner of his silly presumption that if people in poor countries gain from freer trade, people in the rich countries must thereby lose.

In short, a protectionist is someone who denies the reality of gains from trade.

Don Boudreaux, “A Protectionist is Someone Who…”, Café Hayek, 2018-04-09.

April 22, 2018

The balance-of-trade hobbyhorse

Filed under: Economics, Government, Media — Tags: , , , , — Nicholas @ 03:00

Don Boudreaux doesn’t have much sympathy with people who agonize over or — worse — set their national economic policies based on the balance of trade:

No concept in economics is responsible for more confusion and policy mischief than is the so-called “balance of trade.” The many fallacious beliefs about a trade deficit include the notion that –

– aggregate demand drains from each economy that runs a trade (or current-account) deficit, thus causing overall employment to fall in each country that runs a trade deficit;

– the GDP of a country that runs a trade deficit is lowered by that trade deficit;

– the denizens of a country that runs a trade deficit spend too much on consumption and save too little;

– a trade deficit is evidence of poor policy in any country that runs such a deficit;

– a country’s trade deficit would be ‘cured’ if only the people of that country were to save more or to buy fewer imports;

– a trade deficit in the home economy is evidence of ‘unfair’ trade practices by that country’s trading partners;

– a trade deficit means that each country that runs one is “losing,” and that to “win” at trade means running a trade surplus (or, at least, to not run a trade deficit);

– a trade deficit run by the home economy means that that economy’s trading partners who have trade surpluses are being enriched at the expense of the people in the home economy;

– a trade deficit necessarily makes the citizens of any country that runs one more indebted to foreigners;

– a trade deficit involves a net transfer of capital or asset ownership from citizens of each country that runs a trade deficit to citizens of countries that run trade surpluses;

– each dollar (or each yen, or each euro, or each peso, or each pound, or each you-name-the-currency) of a country’s trade deficit today means that the people of that country must sacrifice that much consumption sometime in the future;

– bilateral trade deficits have economic meaning and relevance;

– a trade deficit is something that should be “fixed” – that is, reduced or eliminated – through government policy, including especially through trade restrictions.

None of the above-listed beliefs about trade deficits is supportable. None. Not one. Not in the least. Each and every one of these beliefs is easily refuted with either basic economics or, in many cases, with simply a clarification of the definitions of terms and concepts used in national-income accounting. And yet these – and no doubt other – false beliefs about trade deficits (and about the so-called “balance-of-payments” generally) are widespread and spill daily from the mouths and keyboards of politicians, pundits, professors, and propagandists.

The belief that trade deficits cause economic problems in countries that run them – and that trade deficits necessarily reflect poor policies or profligacy by the people of those countries – is the economic equivalent of, say, the belief that the world is ruled by sorcerers who ride fire-breathing dragons and who marry their daughters off to centaurs. Both sets of beliefs are pure madness, yet one of them serves as the basis for real-world policies.

April 21, 2018

QotD: “Pitiless” globalism

Filed under: Business, Economics, Politics, Quotations — Tags: , — Nicholas @ 01:00

Kathleen Parker rightly criticizes Republicans for becoming a party of angry, fear-lathered excluders (“The GOP is becoming the party of exclusion,” July 31). But when she laments “the pitiless evolutionary march of globalization” not only does she reveal her own misunderstanding of the economy, she gives aid and comfort both to GOP excluders and to Sandersnistas who suffer many of the same misunderstandings.

In what way is globalization “pitiless”? Is it because it creates an ever-growing abundance of new goods and services that consumers choose to buy? Is it in the fact that it lowers the prices of food, clothing, furniture, electronics, communications, and (for example, by expanding the sizes of pharmaceutical-companies’ markets) medicines?

Is globalization “pitiless” because it allows many desperately poor workers in the developing world to earn incomes that enable them and their families to live above subsistence? Or perhaps globalization is “pitiless” because it obliges entrepreneurs and workers in the developed world – nearly all of whom are multiple times richer (thanks to globalization!) than are the foreigners about whom they complain they must compete – to adjust their actions to the choices of the consumers whom they serve?

Globalization is no more or less pitiless than is economic competition generally and what Deirdre McCloskey calls “market-tested innovation” – the same competition and innovation that over the past few centuries crafted our current high standard of living. So unless Ms. Parker believes that it is gentle and just for rich first-world workers to prevent poor third-world workers from improving their lives – unless Ms. Parker thinks it humane for consumers to be forced to accept whatever products are offered, and at whatever prices are demanded, by existing producers rather than motivate producers to work hard and creatively to please consumers – she should not describe globalization as “pitiless.”

Donald J. Boudreaux, letter to the Washington Post, 2016-07-31.

April 8, 2018

QotD: Just and unjust profits

Filed under: Business, Economics, Quotations — Tags: , , , — Nicholas @ 01:00

“Progressives’” hostility to free trade would be amusing were its consequences less baneful: deeply distrustful of the motives of business people, and convinced that profits are ethically suspect, Sandersnistas and many other “Progressives” are in the front lines of the troops who are intent on using trade restrictions to protect business people from competition and, thus, to enhance business people’s prospects of earning excess profits – profits that truly are ethically unjust because they are the fruits of the forced removal from consumers of choices on how they, consumers, may spend their own money. (Of course, the very same economically damaging and ethically unjust consequences spring from trade restrictions supported by Trumpkins and many other conservatives. The tales that each of these economically ignorant groups tell to each other to justify their mercantilist policies differ, but the policies and the harmful results are identical.)

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-07-30.

March 15, 2018

QotD: The self-harming reality of tariffs

Filed under: Business, Economics, Quotations, USA — Tags: , , , — Nicholas @ 01:00

Unintended harm to American companies is a recurring problem with tariffs, even those meant to protect American jobs from competition that our government deems unfair. After Bush imposed steel tariffs, steel-consuming industries pointed out that they employed far more Americans than the steel industry itself, and argued that the net effect of the policy on jobs was negative.

Anti-dumping laws, which put tariffs on foreign imports that are supposedly being sold at too low a price, usually target intermediate goods and therefore make the downstream American producers that use them less competitive. Daniel Ikenson, a trade-policy analyst at the Cato Institute, notes that the government, perversely, is forbidden by law from considering the impact of tariffs on these producers before levying the tariffs.

Then there’s the question of costs. Gary Hufbauer and Sean Lowry, a senior fellow and research associate, respectively, at the Peterson Institute for International Economics, calculated [PDF] that Obama’s tariffs on Chinese tires cost American consumers at least $900,000 for every job they saved for one year. That’s before taking account of job losses caused by lower spending by consumers on other products and by retaliatory Chinese tariffs. This very high cost per job, they point out, is consistent with research on other instances of trade protection.

In an interview, Hufbauer notes that our efforts to protect industries from competition have typically not resulted in their revival and impose extremely high costs for any jobs they save. He cites the textile and maritime industries, both of which have been protected for decades, as examples of these disappointing results.

Ramesh Ponnuru, “The High Cost of U.S. Protectionism”, Bloomberg View, 2016-07-01.

February 25, 2018

QotD: Trade deficits

Filed under: Economics, Quotations — Tags: , — Nicholas @ 01:00

No economic statistic is reported more dolefully these days than the country’s trade balance.

Ever on the alert for signs of impending economic disaster, the press routinely couples reports of record monthly trade deficits with warnings of experts and Government officials of the dangers of the deficit.

Just what is so dangerous about receiving more goods from foreigners than we give them back is never actually explained, but it is often suggested that that it causes a loss of American jobs.

News reports sometimes even provide estimates of the number of jobs lost owing to every billion dollar increase in the trade deficit. Heaven only knows how these estimates are made, but presumably they are based on the assumption that imports deprive Americans of jobs they could have had producing domestic substitutes for the imports.

It almost seems tedious to do so, but it apparently still needs to be pointed out that buying less from foreigners means that they will buy less from us for the simple reason that they will have fewer dollars with which to purchase our products.

Thus, even if reducing imports increases employment in industries that compete with imports, it must also reduce employment in export industries.

Moreover, the notion that the trade deficit destroys domestic jobs is contradicted by the tendency of the deficit to increase during economic expansions and to decrease during contractions.

The demand for imports rises with income, so imports normally tend to rise faster than exports when a country expands more rapidly than its trading partners. The trade deficit is a symptom or rising employment — not the cause of rising unemployment.

That balance-of-trade figures are misunderstood and misused is not surprising, since their function has never been to inform or to enlighten. Their real purpose is to provide spurious statistical and pseudo-scientific support to groups seeking protectionist legislation. These groups try to cloak their appeals to protection with an invocation of the general interest in a favorable balance of trade.

David Glasner, “What’s So Bad about the Trade Deficit?”, Uneasy Money, 2016-06-02 (originally published in the New York Times in 1984).

January 28, 2018

QotD: Protectionism

Filed under: Economics, Quotations — Tags: , , , — Nicholas @ 01:00

All protectionism is rooted in the mistaken presumption not only that existing, domestic producers have a moral right – enforceable by the state – to the patronage of domestic consumers, but also that no future domestic producers have such a right as against current domestic producers. This right, were it real, implies that consumers exist to please existing domestic producers; it implies that continued or expanded production of that which is currently produced domestically is the end, while consumption is only the means of encouraging such production.

Only the widespread, if unthinking, acceptance of this presumption gives credence to the demands of domestic producers that some “unfair” practice by a foreign rival or foreign government justifies the imposition by the home government of punitive taxes on domestic consumers who purchase imports. Only a widely shared, if seldom articulated, belief that current domestic producers have a right to some minimum portion of domestic-consumers’ incomes explains the nodding of the heads of many people of all political persuasions when they hear some politician or pundit or preacher demonize foreign producers for selling wares to domestic citizens.

Don Boudreaux, “Protectionism”, Cafe Hayek, 2016-05-27.

January 27, 2018

The difference between being “pro-free market” and “pro-business”

Filed under: Business, Government, Liberty — Tags: , , , , — Nicholas @ 05:00

It’s a distinction that really does make a difference, argues Jonah Goldberg:

One of the most difficult distinctions for people in general and politicians in particular to grasp is the difference between being pro-free market and pro-business.

There are many reasons for this confusion. For politicians, the key reason is that businesspeople are constituents and donors, while the free market is an abstraction. Also, because capitalists tend to lionize successful people, we assume they share our philosophical commitments. But it is a rare corporate titan who favors a free market if doing so is bad for his or her bottom line.

Adam Smith recognized this in his canonical 1776 work, The Wealth of Nations. “People of the same trade seldom meet together, even for merriment and diversion,” he wrote, without the conversation ending “in a conspiracy against the public, or in some contrivance to raise prices.”

This doesn’t mean that capitalists are evil; it means they’re human beings. Virtually every profession you can think of has a tendency to dig a moat around itself to protect its interests and defend against competition. A few years ago, the American Academy of Pediatrics came out against affordable health care for children. Retail chains like Walmart and CVS started opening in-store clinics to provide affordable basic health care like vaccinations. The pediatricians rightly saw this as a threat to their monopoly over kids’ medical care. Obviously, the pediatricians didn’t think they were villains; they simply found rationalizations for why everyone should keep paying them top dollar for stuff that could be done more cheaply.

Similarly, most teachers like kids, but that doesn’t stop teachers unions from doing everything they can to protect themselves from competition or accountability. Indeed, unions, by design, are conspiracies against the public to defend the wages and perks of their members. NIMBYism (Not in My Backyard) is another manifestation of this phenomenon.

[…]

Smith understood this too. After noting how people of the same trade conspire to raise prices, he added: “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”

What both Smith and the founders understood is that such conspiracies can only last with the help of government. As the economist Joseph Schumpeter argued, in a system of free competition, monopolies cannot long endure without government protection.

January 15, 2018

The postwar “international order”

Filed under: Britain, Economics, History, USA — Tags: , , , — Nicholas @ 03:00

Niall Ferguson on the notion of a post-1945 international liberal order:

The phrase international order reminds me of the phrase Western civilization. As Indian independence icon Mahatma Gandhi wittily replied when asked about Western civilization, “It would be a good idea.” The notion that international order exists or has ever existed seems highly questionable to me. The notion of a liberal international order is even more questionable because it is neither liberal, nor international, nor very orderly.

It is often claimed by political scientists that the liberal international order came into existence in 1945. The argument goes that American and British statesmen, having learned from the terrible mistakes of the 1930s and 1940s, decided to make the world anew by creating a series of remarkable international institutions: the United Nations, the International Monetary Fund and later the World Bank. According to this narrative, Donald Trump’s election as US president in 2016 was a wrecking ball directed at the liberal international order created by the generation of 1945.

Yet this is a fairy tale. For one thing, there was nothing very liberal about the economic order that was established in 1945. It was devised by people – notably John Maynard Keynes – who had repudiated classical liberal economics and believed that international trade should be limited and capital movements controlled.

It was also not a truly international order. After 1945, it very quickly became a bipolar order that divided the world. There was nothing international about the Cold War. It was a battle between two empires and two ideologies, and the rest of the world’s nations had to choose sides.

In short, the notion of a liberal international order, born in 1945, is a historical fantasy. The reality is that it was only in 1991 when the Soviet Union collapsed and the Cold War ended that it was possible to create a liberal international order. The era of truly free trade, truly free capital flows and large-scale migration across borders did not begin until the 1990s.

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