For all my adult life I’ve seen the arguments against any sort of Protectionism – and since the rise of Donald Trump, just more so. I understand fully the argument – the free flow of goods, capital and people tends to work to the benefit of those nations which allow such free flow. This is pretty obvious – the more we allow people the freedom to move about and do as they wish, the better, overall, things are. No one will ever be able to construct a rational argument in favor of just locking everyone out (and everyone in). But this does not mean that there is no argument to be made for Protectionism.
In 2015, the United States produced 79 million tons of steel – not a shabby number. But that number was 35 million tons less than in 1967 and wasn’t quite 10% of China’s 2015 production. The fact that China is producing north of 800 million tons of steel does indicate there is a large market for steel. In fact, the United States just in November of 2016 (ie, last month) imported a bit more than 2.2 million tons of steel. You can rely on it, that come war-time (real war – World War type of war) we’re going to need more than the 79 million tons of steel that we currently produce…and while I haven’t been able to find a break down of just where that 2.2 million tons in November came from, how much you want to bet that a very large portion of it came from China? You know – the nation we’d most likely find ourselves opposed to in a major war. I’m sure there’s some slack in our steel mills; I’m sure, that is, that we can ramp up production. But, how much? How fast? Of what types? How fast, to get down to nitty-gritty, can we increase production of ship and tank armor? A big war means we’d need a lot of tanks and ships. Could we build them?
I bring this up because, first off, steel isn’t something that most people think about – but the world produced nearly 1.6 billion tons of the stuff in 2015. It is a gigantic part of the global economy. And steel is the finished product. You’ve also got to add in all the coal and iron mining and a host of other feeder industries which are in existence just to get you that new car…or that new tank, depending on your need. Our elite leaders like to think in terms of the hot, new technological application – they don’t even think about things like how much steel we have, or how much we might need in an emergency. I also doubt they think of things like corn production, copper mining, finished lumber products…the things which are actually necessary for a functioning economy. A cool new ap to tell you how to get to the grocery store is fine, but it isn’t a necessity. When push comes to shove, you’d better have lumber, and corn, and steel.
I’d like to point out that for all the horror stories of how the Smoot-Hawley Tariff destroyed the global economy in the 1930’s, there still is the fact that the United States rose to economic dominance in the world while we lived in a Protectionist regime. We didn’t become a Free Trade citadel until after World War Two. I also note, with great care, that it was after World War Two that our domestic industry got smacked by global competition. There was some good in that – let’s face it that American cars were becoming pretty lousy until foreign competition forced domestic auto makers to improve. On the other hand, domestic autos were improving massively from the early part of the 20th century until the 60’s. Perhaps the fact that we wound up with the Big Three automakers had something to do with our hidebound auto manufacturing in the 1970’s? If lack of international competition is bad, then lack of domestic competition isn’t all that great, either.
But I also have never fully bought the notion that tariffs caused or prolonged the Depression. Just as I never bought the Progressive idea that rampant Capitalist greed brought on the Depression. I’ve figured for ages that everyone looking at the Depression was ignoring the elephant in the room: World War One and the Spanish Flu epidemic. Ten years before the Depression hit the United States, the world had just finished up slaughtering 10 million fit, young men in war. Add to that the 10 to 20 million fit, young men and women who were laid low by the Spanish Flu in the immediate aftermath of World War One. Add in things like the massive market for manufactured goods in Russia was gone (blasted away by war, civil war and Stalin’s determination to industrialize Russia via slave labor rather than foreign investment); the fact that there was a massive over-capacity in manufacturing (a lot of hot-house manufacturing capacity was built during the war), the fact that rather than building armies and navies the world was rapidly shrinking them and you get a situation where there was bound to be an economic contraction. Just in terms of the fact that upwards of 30 million young people weren’t placing demands on the global economy – weren’t having children, etc – because they were dead and you just know that there had to be a readjustment of the global economy. A readjustment which was bound to be painful – and which wouldn’t be ended until global population was substantially higher than prior to World War One.
The main thing here is to not look for a main thing – it was a host of factors, almost all of which were entirely out of control by anyone, which caused the Depression. Tariffs didn’t kill the economy and free trade wouldn’t have restored it. The economy, as a thing, is that which provides for the needs of the people…and if you suddenly lose 30 million of your most productive (and highest demand) people, you’re going to have a problem. Period. And that brings me to my point: a dogmatic assertion that Free Trade is always best is as asinine as a dogmatic assertion that Protection is always what is needed.
What is needed is a bit of thought – and thought coupled with an understanding that there are no neat and tidy economic prescriptions which will cover all eventualities. In general, Free Trade is good. But in the specific, we need a very large capacity to produce goods here at home – both for our own long-term economic well-being, but also in case of emergency when our trading partners are either at war with us, or simply not able to send us the necessary goods because of the stresses of war.
The most important thing, for me, in looking at the economy is to look to the needs of our people both in war and peace. What do we need to have? Do we have it? If we don’t have it, how do we get it? There are lots of things which will go into answering those questions – perhaps we just need to adjust our tax rates? Reform our regulations? Work out better trade deals with our trading partners? But, also, just perhaps – maybe we need to throw up a few tariffs in some crucial areas to make certain that we have the capacity to look after ourselves at need? As a Catholic, I’m big on Dogmas – you can check out the Catechism of the Catholic Church if you want to start running through them. But all that has, ultimately, to do with the one, immutable thing in the universe: God. Outside of God, everything is a bit fungible, to one degree or another. A low tax, low regulation, Free Trade economy is generally the thing you’re searching for…but it won’t do us the least bit of good to have low tax rates and no ability to feed our people by our own efforts in a crisis.
Don’t get hung up on hard-and-fast rules. Seek for what is best. Be willing to experiment. If one thing doesn’t work, try another. If we try to make dogmas out of transitory economic events, we’re just going to get burned. Remember, once upon a time it was said “what is good for GM is good for America”. Not quite like that any longer – in fact, an argument can be made (and has been made) that if GM had gone defunct in 2009, we might be better off. I think we would have been – because it’s not like no one would pick up the slack on auto manufacturing if GM went belly up. Someone was going to take over the famed names owned by GM and make new cars…and perhaps better cars for a lower price. Holding on to things like corporations just because they’ve been around for a while is silly – but just as silly as holding on to a notion about Free Trade which isn’t really supported by the facts of history…nor by the needs of our nation.