They are bad! Evil! No good! Or, so we’re told – they are at tax on consumers to benefit corporations! They stifle competition! They caused the Great Depression! Yadda, yadda, yadda. I used to believe all that. Seriously. Bought it hook, line and sinker. But over the past 10-15 years, my views have modified.
Britain was the first nation to really go for free trade. They enacted it in the mid-19th century in service to the Liberal view that the freer the market, the better for everyone. There is, of course, much to be said for this: certainly the “Corn Laws” which the British Liberals got rid of were a horrible anachronism which kept food prices for the poor high just to provide a higher profit for rich landowners. But the dogmatic idea that free trade is always good is, in my view, flawed. And I think the experience of Britain proves it.
Right about the time that Britain went for free trade, it was the economic powerhouse of the world. No one could compete with British manufacturing. If you wanted something, you pretty much had to buy it from Britain. In comparison, the manufacturing capacity of the United States and Germany at the time was negligible…while nations like Russia, Japan and France didn’t even really count in the global marketplace. The introduction of free trade did seem to work. Food prices dropped like a rock as cheap, American grain flooded into the British market and Britain’s economic dominance continued for some time. Until, that is, right around the mid-1870s. At that point, the Germans and especially we Americans started to rapidly overtake Britain economically. This shifting of economic dominance was temporarily obscured by the fact that Britain remained until after World War One the financial center of the world – with vast investments, especially, in the United States, Britain’s financial dominance continued unchecked…but in things like coal and steel production, Britain was rapidly feeling the pinch of growing American and German competition. And it was competition from German and American manufacturers who were still protected by tariffs.
The United States kept high import tariffs in place from the Civil War until after World War Two. There were fluctuations, but they were vastly higher than anything we impose today. In some periods of time, ten times higher than they are today. During the time of high tariffs, the United States went from an economic backwater to the economic master of the world. Trouble is, tariffs went into bad repute in the United States because a high tariff enacted at the start of the Great Depression was blamed for deepening and lengthening that economic blight. And, truth be told, it might not have been helpful to impose that tariff at that time. But, really, I don’t think the tariff made the Depression any worse. What I honestly think people miss when discussing the Great Depression is that a combination of war and disease had knocked out of the global economy about 20-30 million young people who would have been both highly productive and who would have also greatly increased demand…no just in themselves, but in the children they would have had. That sort of hole in the economy was going to cause a major problem eventually. In 1929 it did – but years before then, Britain was already mired in Depression and Germany was only kept afloat by loans from the United States (loans made possible by the massive amount sold by the US to the Europeans during World War One).
In the end, I think it is a mixed bag, as is usual in human affairs. Dogma is for theology and not much else…and Free Trade is a dogma who’s time has come and gone, in my view. In general, you do want a free flow of goods, ideas and people. The nations who trade the most tend to do the best because of the cross-fertilization of ideas and methods which results from that trade. What our Progressive friends call “cultural appropriation” is, in reality, how people develope and expand. The more streams of ideas which flow into your nation, the better off you’re likely to be in the long run. That said, there is also the other side of it: the absolute requirement that a nation, as far as possible, remain master of it’s own destiny. It is simply asinine to think that the United States is better off if a majority of, say, our steel making capacity is outside the United States. At the end of the day, we can’t rely on anyone but ourselves…and so we must have the capacity to take care of ourselves in an emergency. And that means we have to retain sufficient productive capacity to do so – and if that means we have to ensure that some level of American production remains via Protection, then that is what we must do.
You see, the economy is not just a number…it isn’t just how much money is flowing through the land. This is especially true now that we use fake money rather than gold and silver backed currency. The economy is what we do to make a living – what we eat, wear, drive, live in. We are 317 million people and in the final analysis we must retain the ability to survive without importing a single thing if necessary. It won’t do us any good to have a bank account fat with fake money if, when a war comes, we can’t produce enough steel to build the ships and tanks we’ll need to fight and win.
We have to strike a balance between the good of having trade and the good of having the ability to take care of ourselves. There is no “right” answer here. What works may change from time to time and we have to remain flexible. To just Protect a dying business is stupid…but to Free Trade ourselves to the point where our business is dying is equally stupid. I think we need to adjust how we measure our economy – throw out the GDP measure. Let’s measure what we make, mine and grow at home. That will tell us how we’re doing. If in Year X we’re producing 10 million tons of Good A, but we find that in Year Y it has declined to 5 million tons, we should look into why. Is it happening because we’re using less of it? Or is it because we’re now importing 5 million tons of it? And then we have to ask ourselves: in any emergency, how much of this stuff do we need to produce? On the flip side, if we find we’re producing 10 million tons but consuming 20 million, we should look into whether or not our tax and regulatory policies are harming our production or whether its a matter of we’re doing all we can and just can’t meet demand via domestic production. That sort of thing will tell us what needs Protection and what needs Free Trade.
The main thing is to not lock ourselves into a Dogmatic view of these things. We need to look at this in the largest sense of what is overall best for us – not for the world; not for the bankers and the mega-corporations…but what is best for us; the people who have to make a living off the economy.