Politics

A Second Trump Presidency Promise No Improvements on Trade

by Trenton Hale | Mar 6, 2023 | Economics, Featured Articles, Politics

Over the past few weeks, former President Donald Trump has been releasing some of his proposals if he were to return to the White House in 2024. While many of his positions pose great danger to personal liberty, such as his plan to “end crime and keep Americans safe,” his proposals on tariffs are near the top in terms of ignorance.

In a video posted on February 27, Donald Trump released his plan to “end our reliance on China.” In the short video, Trump claims that his plan would increase American jobs by the millions and remove our dependence on China. The Trump War Room Twitter account proclaimed he would “revive Mercantilism for the 21st Century.”

Trump’s promoting of tariffs would be disastrous for the economy. The increase in the costs of production manipulates competition as it leads to people spending more money on a product than they otherwise would have. People would be better off buying products in their self-interest at the cheapest cost.

Let us say America were to propose a tariff on a sweater company from Britain to incentivize American made sweaters. Since the tariff can be altered so high that it forces Americans to buy domestically, the prices of the American sweaters would be expensive since the demand for American-made sweaters would skyrocket. The extra money a consumer lost due to the tariff could have gone somewhere else in the economy.

If the tariff were to be exponentially higher and the hypothetical industry were to be started, it would need workers. If this new company needed 30,000 workers, it would need to come out of another sector of the economy. Therefore, no net gain is achieved.

Sadly, Trump did not understand this economic concept when he came into office in 2017 and he still does not. Trump wasted no time before to increase tariffs to boost domestic growth, but failed to accompish his goal.

In a report conducted economist Erica York of the Tax Foundation, the Trump tariffs imposed nearly $80 billion worth of new taxes on Americans, equivalent to one of the largest increases in decades. They also reported that his tariffs reduced long-rung GDP growth by 22 percent, wages by 14 percent, and full-time equivalent jobs by 173,000.

The tariffs implemented in 2018 and 2019 have led to direct burden and deadweight loss, according to numerous economists. In fact, the amount of burden costed was roughly $800 per household.

Industries also took big hits as well. Aaron Flaaen and Justin Pierce found that the tariffs were associated with “relative increases in producer prices via raising input costs.” Between February 2018 through January 2020, the tariffs were estimated to cost American companies $46 billion, and exports of goods hit have fallen sharply.

The claim that Trump would bring mercantilism to the twenty-first century clearly shows the former president’s ignorance of economic history. Mercantilism, as defined by economist Murray N. Rothbard, is “a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state.”

Thanks to this policy, monopolies such as the East India Company and the French East India Company were formed. Countries such as Great Britain adopted these policies, and it cost them economic growth and freedom of colonial business.

Further consequences were seen in the tax revenue used to build the power of the English government, along with the” multiplying of the royal bureaucracy needed to administer and enforce the regulations and tax decreed,” according to economist Thomas J. DiLorenzo. The consumers lost out on the government restrictions on production on top of hampering the division of labor imposed by the bureaucrats.

It was only after Britain extended the trading market that economic growth could be achieved. According to Professor Robert Allen, the expansion of international trade led to Britain’s “high wage, cheap energy economy, and it was the springboard for the Industrial Revolution.”

Eventually, free trade began to flourish as countries saw high economic growth and reductions in poverty. Countries such China embraced free trade after decades of failed communism, including with America. Both sides benefited from free trade, benefits that gives Americans an extra $260 of extra spending a year, according to economists Xavier Jaravel and Erick Sager.

America has seen great benefits from free trade over the last several decades. According to a report published by the Peterson Institute for International Economics, the payoff for American trade between 1950 and 2016 was at $2.1 trillion. This increased the GDP per capita by around $7,000 and GDP per household to $18,000.

Companies also see great benefits as well. Almost 11 million jobs are depended upon the export of American goods and services, as well as foreign direct investments.

Despite all the great benefits from free trade, people like Donald Trump continue to ignore basic economics and instead implement disastrous economic plans.

TGIF: Which Way — Capitalism, Socialism, or Something Else?

by Sheldon Richman | Mar 3, 2023 | Economics, Featured Articles, Justice, Libertarianism, Politics, Sheldon Richman, TGIF

Big questions are being thrashed out these days. One of the biggest is this: do we want capitalism or socialism? Unfortunately, the online discussions I’ve witnessed have been, to put it as politely as I can, terrible. (For an example, see this one between Reason senior editor Robby Soave and political commentator Briahna Joy Gray, cohosts of The Hill‘s online show “Rising.”)

Let’s start with the words themselves. We’re in a linguistic mess. It’s only a slight exaggeration to say that nearly everyone has his own definition of capitalism and socialism. So when people get together to hash things out, they ought to begin by saying what they — the discussants, not the words — mean. That doesn’t seem to be an unreasonable demand.

It’s pointless to debate what words “really mean.” There are no platonic definitions. Language is usage, which is what dictionaries have traditionally reported on. and word usage changes. So we should dispense with that conversation or else time will be wasted.

As I say, we’re in a linguistic mess. Bernie Sanders is the country’s best-known “democratic socialist.” Asked during one of his campaigns what democratic socialism is, Sanders said something like, “It’s an economy that works for everyone.” Real informative, Bern. Thank you very much.

The fact is that most younger Americans today seem to think that socialism is just a bigger welfare state. For example, they would probably say socialism would include Medicare for all, a program in which the government would pay everyone’s medical bills through taxation. But that’s not what socialist ideologues have traditionally had in mind. For Marx and his socialist predecessors, socialism meant the abolition of private property, money, and hence the market: the state would own the factories, hospitals, and other means of production. I don’t think most people who call themselves socialists today favor that.

How about capitalism? As I wrote some years ago, as the word is used, capitalism

designates a system in which the means of production are de jure privately owned. Left open is the question of government intervention. Thus the phrases “free-market capitalism” and “laissez-faire capitalism” are typically not seen as redundant and the phrases “state capitalism” or “crony capitalism” are not seen as contradictions. If without controversy “capitalism” can take the qualifiers “free-market” and “state,” that tells us something. [I discuss the many problems with the word capitalism here.]

It tells us that the word itself is a muddle. The word capitalism has been called an “anti-concept,” a term I associate with Ayn Rand, who wrote:

An anti-concept is an unnecessary and rationally unusable term designed to replace and obliterate some legitimate concept. The use of anti-concepts gives the listeners a sense of approximate understanding. But in the realm of cognition, nothing is as bad as the approximate….

But the word capitalism is worse than an anti-concept because it’s not merely approximate; it contains contradictory elements. As philosopher Roderick Long writes:

Now I think the word “capitalism,” if used with the meaning most people give it, is a package-deal term. By “capitalism” most people mean neither the free market simpliciter nor the prevailing neomercantilist system simpliciter. Rather, what most people mean by “capitalism” is this free-market system that currently prevails in the western world. In short, the term “capitalism” as generally used conceals an assumption that the prevailing system is a free market. And since the prevailing system is in fact one of government favoritism toward business, the ordinary use of the term carries with it the assumption that the free market is government favoritism toward business.

And similar considerations apply to the term “socialism.”…

Ironically Rand, like Ludwig von Mises but unlike F. A. Hayek, favored the name capitalism for her “unknown ideal.” But Rand, again like Mises, left no doubt about what she meant. The other day I caught a YouTube short of Rand talking about capitalism in which she said she meant “real, free, uncontrolled, unregulated, laissez-faire capitalism, not the mongrel mixed economy we have today.” (I prefer self-controlling and self-regulating to uncontrolled and unregulated, but let that go. See my “Regulation Red Herring.”)

If people define their terms before plunging into the debate, the time will likely be more fruitfully spent. If I were in such a discussion, I would insist that the issue is not whether we really have capitalism, but whether we, individually, are fully free, politically and legally, to produce, consume, invest, and exchange in unmolested self-regulating markets.

And I would ask the self-described socialist if he favors the abolition of property, money, and markets. If he says no but favors Medicare for all, housing subsidies, and regulatory agencies, I would say he sounds like an advocate of a mixed economy in which markets exist but are routinely manipulated by state personnel aiming to effect outcomes they believe that voluntary exchange will not achieve.

As for the actual socialist, I’d start by saying what H. L. Mencken said:

The chief difference between free capitalism and State socialism seems to be this: that under the former a man pursues his own advantage openly, frankly and honestly, whereas under the latter he does so hypocritically and under false pretenses.

People with an overwrought sense of romance love the phrase, which Marx did not originate, “From each according to his ability, to each according to his need.” But how does that not describe a nightmare world? Under socialism, would each individual freely decide what he thinks his abilities and needs are? (What is a need?) If so, central planning is out of the question. So some presumptuous person or bureaucracy with dictatorial powers would make those decisions. Oh happy days! The promised withering away of the state is about as likely as an honest politician.

I can’t see that socialism has anything at all to be said in its favor. Even Benjamin Tucker, the prominent American free-market anarchist, who was seduced by the valueless labor theory of value, said, “[State] Capitalism is at least tolerable, which cannot be said of Socialism or Communism.”

What the free-market advocate must not do is let his interlocutor get away with claiming that “our capitalist system” is the free market. When, for example, Briahna Joy Gray says, as she did in the discussion I linked to above, that homelessness or (undefined) inequality is capitalism, she must be called to account with a question: “But are people free in the market?” Considering how thoroughly government bureaucracies at every level encumber necessarily win-win voluntary exchange, it can’t be the free-market order that’s causing homelessness. Coercive corporate power, which Gray and her ilk see as the prime culprit in so many ills, derives from coercive political power and cannot exist without it — thus, it’s what I call the most dangerous derivative.

Influencing the language is like herding cats. Nevertheless, I’d love to come up with a single word ending in ism for what free-market champions favor. We could simply say, “the free market,” “laissez-faire capitalism,” or Adam Smith’s marvelous term “the system of natural liberty,” but they seem clunky in some sentences. “Individualism” has its virtues, but it’s not quite on point in this context because markets are founded on social cooperation and the division of labor. “Enterpriseism” is contrived, although it makes the point. I’ll keep working on it.

For Further Study

Sheldon Richman, “Capitalism versus the Free Market” (video), Future of Freedom Foundation, 2010.

Sheldon Richman, “Capitalism and the Free Market, Part 1 and Part 2, Future of Freedom Foundation, 2010.

Sheldon Richman, “Is Capitalism Something Good?” Foundation for Economic Education, 2010.

Sheldon Richman, “Wall Street Couldn’t Have Done It Alone,” Counterpunch, 2011.

Roderick T. Long, “Corporations Versus the Free Market, Or Whip Conflation Now,” Cato Institute.

Roderick T. Long, “Rothbard’s ‘Left and Right’: Forty Years Later,” 2006.

Don’t Be Silent

by Sheldon Richman | Feb 28, 2023 | Blog, Politics

We should reject the fashionable idea that one should never write or post anything that possibly could be used by bad people for bad purposes. That admonition brings two things to mind.

First, it fails its own test. If good people avoid a topic because even constructive analysis might be put to bad use, the very avoidance will likely fuel conspiracy theories about how this or that interest group controls the public debate. Thus the fashionable idea is self-subverting — much as the precautionary principle is.

Second, it reminds me of what Ludwig Wittgenstein, in a very different context, wrote in concluding his Tractatus Logico-Philosophicus: “Whereof one cannot speak, thereof one must be silent.” There are no chilling implications in Wittgenstein’s maxim because he literally meant can not, as opposed to may not. The same can’t be said for the fashionable maxim.

Can There Be Only One Race?

by Sheldon Richman | Feb 27, 2023 | Blog, Politics

I’m old enough to remember this 1960s Lay’s Potato Chips commercial. (Hell, I’m almost old enough to remember when plays were in black and white!) In the commercial a man (Bert Lahr, the cowardly lion in The Wizard of Oz) faces a challenge from the devil, who has a bag of Lay’s: “Bet you can’t eat one.” “That’s absolutely absurd,” Lahr says; of course he can eat one. After enjoying the chip he says, “I’ll have another,” to which the devil says, “Oh no. I said just one. Ha-ha-ha-ha-ha….”

Admittedly, this is a long and winding road to my point: there can’t be only one race. Most people believe that human beings come in different genetic models: black, white, Asian, and a couple more. (Of course one can believe this without hating anyone.) But biologists and geneticists know better. There are no significantly distinct genetic groups of human beings that correspond to skin tone, hair texture, or other such visible features. Individuals within one grouping of superficially similar persons can have more genetic variation among themselves than they do with individuals in other superficial groupings. (We all are of African ancestry, though for some it’s more recent than for others.) As Barbara and Karen Fields discuss in Racecraft: The Soul of Inequality in American Life, the idea of race grows out of the discriminatory practice of racism, not the other way around. In other words, the double standard people used in the treatment of others itself generated the justificatory concept of race. It’s like witchcraft.

Does it follow from this that, as humane people like to say, there’s only one race, the human race? I don’t think so. In this case 1 = 0. Leaving aside the biologists’ technical genetic concept of race (which has nothing to do with appearance), a concept of race would be useful only for making distinctions. But if there is only one race, then by definition, there are no distinctions to make. Therefore, one equals none.

We already have a perfectly good biological category for distinguishing human beings from other animals: species. So we have no need for the category of the human race. “Race” is worse than superfluous. It’s dangerously divisive.

TGIF: Immigration Foes, What’s the Beef?

by Sheldon Richman | Feb 24, 2023 | Economics, Featured Articles, Justice, Libertarianism, Politics, Sheldon Richman, TGIF

If people are going to hate on immigrants, they should at least get their stories straight. Do immigrants take our jobs or do they sponge off us through welfare? Today, let’s talk about jobs.

Recently I was listening to Spiked‘s Brendan O’Neill interview Batya Ugar-Sargon, the left/right-populist assistant editor at Newsweek, when I heard say: “The elites love low-wage slave labor imported by the cartels to work service industry jobs, that they would rather have cheap labor than have to pay more for it.”

This is nutty working-class populism in its most uninhibited form. Ungar-Sargon would have us believe that people who risk life and limb thinking they’re choosing to escape political-economic hellholes to achieve better lives for themselves and their families in America are just modern-day Kunta Kintes! They’re not people; they’re imports! That might come as news to them.

Ungar-Sargon is talking about both legal and so-called illegal immigrants. Interestingly, though, it seems to have escaped her notice that the only immigrants who could potentially be treated like slaves are those branded illegal by the U.S. government. They are vulnerable to abuse precisely because they have to keep themselves out of the clutches of Immigration and Customs Enforcement (ICE). Legal immigrants can call the cops. Being put on ice has a different meaning these days.

A bit later in the interview she said,

Black Americans have paid a huge price for our essentially open border for the last 40 years. Over and over businesses would much rather hire illegal immigrants than hire black Americans, and so they’ve literally paid for up to 40 to 50 percent of wages just sacrificed on the altar of progressive pieties about importing people from failed socialist states. They’re very angry at that.

That 40-to-50 percent claim astounded me because I’ve never heard anything like it before. Neither have the two experts I asked, guys who know the immigration-related statistics as well as anybody and better than most. In their view, Ungar-Sargon made it up. She did not tell O’Neill where she got the statistic, and — shamefully — he did not ask.

I wonder why Ungar-Sargon singled out black Americans. She claims to reject identity politics in favor of class politics. Is she pandering? Since biology provides no genetic basis for categorizing people by skin tone or other such features — since the human species does not consist of three to five genetically distinct groups called “races” — who does Ungar-Sargon or her anonymous source include in the category of “black Americans”? But I digress.

Ungar-Sargon sounds like Bernie Sanders, a strong contender for the least impressive person in American politics, who says he opposes open borders because “the Koch brothers” favor it. That may be a reason, but it’s not a good one. What else does he oppose because a rich person favors it? Brushing teeth after meals?

Ungar-Sargon, Sanders, and the others in this camp have their own version of the alt-right’s replacement theory, don’t they? The “cartels,” she tells us, want to bring “slave labor” to America to replace native workers simply to save money. They want the people’s (mis)representatives to stop this at all costs. But this is nonsense. Immigrants, especially ones without government papers, do jobs that Americans think are beneath them, particularly when the government supports them.

Make no mistake about what this position says: natives have a superior, if not the only, claim to the opportunities available through voluntary exchange in America. “They take our jobs” is an assertion of a native-only property right in jobs that has no rational basis in morality or economics. It’s an ugly “blood and soil” sentiment, which does not suit a free society. Not only that, it cruelly relegates people born elsewhere to lives of misery, poverty, and oppression — needlessly so because immigration, like every consensual transaction, is win-win. So keeping immigrants out not only hurts them; it also hurts us! Immigrants not only consume; they also produce and even start businesses and hire people, natives included.

True, if an immigrant is hired in America, natives who hoped for that job will be disappointed. But that sort of “negative externality” is a feature of life, not of immigration. People lose jobs in the short run through innovations in technology and business organization, not to mention fickle consumers. Who would outlaw innovation or consumer freedom on that count? The fact is, as history demonstrates, people who are thus harmed will benefit after a brief adjustment to change — if the government keeps out of the way.

But let’s also understand what Ludwig von Mises meant when he wrote in Human Action, in the section he called “The Harmony of the ‘Rightly Understood’ Interests”: “The fact that my fellow man wants to acquire shoes as I do, does not make it harder for me to get shoes, but easier.” In other words, mass markets with their economies of scale and falling costs of production, provide everyone with an ever-greater abundance of affordable goods and services. It was, after all, the emergence of the market order that led to mass production for the first time in history.

What Mises was saying about consumption obviously applies to production too because it’s the flip side of the coin. Producers hire workers. The availability of a larger labor force furnishes entrepreneurs with opportunities for new and better enterprises that could not have existed with a smaller workforce. Products and services that were beyond reach yesterday are available today. In a society unencumbered by government intervention (unlike the one we have), the increasing demand for jobs more or less creates its own supply.

As for wages, let’s see what a bona fide expert says. George Mason University economics professor Bryan Caplan (with illustrations by Zach Weinersmith) addresses the matter in their graphic nonfiction work, Open Borders: The Science and Ethics of Immigration.” Opponents of free immigration should hold their tongues until they are prepared to answer Caplan’s multidimensional case.

As for wages, Caplan writes:

Even economists who emphasize the negative effects of immigration on native wages report small — and mixed — effects. [George] Borjas and [Lawrence] Katz … estimate that, in the long run, extra Mexican migration from 1980-2000 reduced U.S. native dropouts’ wages by a grand total of 4.8%, and college graduates’ wages by 0.5%. They also conclude, however, that Mexican immigration increased the wages of native high school graduates by 1.2% and those with some college by 0.7%.

And:

Immigration increased labor demand through two channels — one obvious, the other subtle. The obvious: More immigrants means more potential customers. The subtle: Since migration increases foreigners’ productivity [a very important point! –– SR], they have more resources to offer in the marketplace. As a rule, sellers profit from more and richer customers.

And:

How can native workers possibly profit when labor supply rises? Through specialization and trade. When the supply of low-skilled workers goes up, so does the demand for higher-skilled workers to manage them. When non-English-speaking immigrants increase the supply of cooks and dishwashers, this increases the demand for English-speaking waiters.

“But,” Caplan’s stick-figure interlocutor asks, “won’t all these low-skilled immigrants depress our country’s average standard of living?”

Caplan replies: “Almost certainly. But there’s no need to worry. Your fears rest on the dreaded … ARITHMETIC FALLACY!” He illustrates the fallacy by asking us to imagine that a group of little kids enters a room full of NBA players. The average height of the group will shrink, of course, but has anyone actually shrunk? Of course not.

“The lesson: When the makeup of the population is changing, averages are deeply misleading. The average can easily fall, even though everyone is better off!” Understanding basic statistics is necessary simply to protect yourself from number-wielding fraudsters.

So, Batya Ungar-Sargon, Bernie Sanders, Brendan O’Neill, et al., stop losing sleep over what will happen to native workers if we respect the universal natural right of everyone, regardless of birthplace, to seek a better life. Beyond the very short run, treedom benefits everyone. To appreciate this point, economist Caplan notes that if people worldwide were free to move to where they would be most productive, world output “could easily double.” He writes, “estimated gains range from 50 to 150% of gross world product.” In other words, “economically, open borders is like getting an extra … seventy-five Manhattans a year.”

Respecting everyone’s liberty doesn’t cost. It pays — big time!