Distribution is an issue

Free market capitalists might not like it, but the distribution of wealth is a legitimate societal problem and it is only going to get worse:

The rising cash holdings of U.S. corporations is increasingly in the hands of a few U.S. companies, with just five tech firms having grabbed a third of it. And nearly three-quarters of cash held by non-financial U.S. companies is stashed overseas outside the long arm of Uncle Sam.

Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco System (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service.  That's even more cash concentration in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors.

Corporate America's rising pile of cash is becoming increasingly important to investors as profit growth and the stock market stalls. The amount of cash held by U.S. companies rose 1.8% in 2015. Unfortunately for U.S. investors, 72% of total cash held by all non-financial U.S. companies is stockpiled outside the U.S., up from 64% in 2014 and 58% in 2013 as companies try to avoid paying U.S. tax rates.

Remember, corporatism is not capitalism. And free trade doesn't benefit a country if the money collected for its exports never enter it.

Brainstorm: Murphy vs Day

I'm pleased to announce that on Friday, June 17th at 7 PM Eastern, Brainstorm and the Tom Woods Show will be co-hosting an all-Austrian free trade debate between the well-known Austrian School economist Robert Murphy and Austrian School heretic Vox Day. The debate will be moderated by the noted Austrian School economist Thomas Woods.

It's too soon to open registrations, but as always, Brainstorm members will have first crack at seats to the event. A transcript will be made available to Brainstorm members and the audio will be available via the Tom Woods Show.

Another strike against free trade

You may note that among my four points against free trade, I note that free trade is incompatible with democracy and national sovereignty. One argument I failed to note in this regard is the way in which free trade permits extortion by holding the national economy hostage:

Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

The Obama administration has lobbied Congress to block the bill’s passage, according to administration officials and congressional aides from both parties, and the Saudi threats have been the subject of intense discussions in recent weeks between lawmakers and officials from the State Department and the Pentagon. The officials have warned senators of diplomatic and economic fallout from the legislation.

Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

Dr. Miller mentioned that he couldn't think of any way that foreigners buying up American assets could be a bad thing. But, once more, we have an object lesson in letting reason be silent when experience gainsays its conclusions. Free trade not only imperils democracy, but also endangers the rule of law.

Notice again that free trade theory fails due to the limited imaginations of its advocates and their inability to even conceive of potential problems that are actually occurring in the real world.

But speaking of Dr. Miller, I emailed him to broach the possibility of a second debate addressing a topic that more than a few readers observed we failed to discuss, namely, whether free trade necessarily requires the free movement of people or not. He agreed at once, although we both need to do a bit of research before we're prepared to debate it. When we're ready, I'll let you know and we'll hold another open Brainstorm event.

Mailvox: "one of the most substantive debates I've heard"

MC rather enjoyed the free trade debate:

This was fantastic.  Clearly one of the most substantive debates I've heard.  Both of you made your points well and it really gave the audience the ability to truly focus on the subject matter and the pertinent points of each argument.  I was impressed with Dr. Miller as he did not seem like your typical Academic, but really a guy that is interested in honest discussion (although naive).  Would love to hear more of these.

I am of the opinion that Free trade works well in theory, in a perfect world with honest players, but such a world does not exist this side of heaven.  I believe due to the fallen nature of man, protecting the nation-state is much more important than the benefits of open free trade, because of the eventual destruction of the culture and national identity.  I think the founders understood this much better than us, which is why they advocated tariffs and an American First mindset.

Great debate, I was very impressed, this is really good stuff.  More Please!

I'm glad everyone enjoyed it so much. I intend to keep doing this sort of thing and more at Brainstorm, and the more people that support Brainstorm by joining or simply showing up for the free events, the more high-quality guests like Dr. Miller and Dr. Hallpike will be interested in participating.

Speaking of the debate, some of you will recall that I felt the purely logical aspect of my critique of free trade could be improved and further refined. In that regard, a syllogism occurred to me that I believe  succeeds in succinctly and conclusively refuting Dr. Miller's corruption argument for free trade.

1. Dr. Mill argues that free trade is beneficial because it reduces corruption by removing power from the hands of elected politicians and transferring it to the board members and executives of multinational corporations, who are presumed to be less corruptible than politicians by virtue of being answerable to the Invisible Hand of the free market.
2. But it is the board members and executives of multinational corporations who are the primary actors responsible for corrupting the politicians.
3. And the causal factor of the process of corruption is, obviously, more intrinsically corrupt than the various parties being corrupted by it.
4. Therefore, Dr. Miller is incorrect, the hypothetical ability of the Invisible Hand to rein in the corruption of the corporate interests is insufficient, and free trade will tend to increase corruption by transferring power from state politicians to multinational corporate interests.
5. Therefore, free trade is not beneficial.

Notes on the free trade debate

First, Dr. Miller has graciously provided the audio of our debate at Future Strategist, which, among other things, once more demonstrates the astuteness of my decision to avoid pursuing a career in radio or anything that involves speaking in public. It's as if the more clearly I am able to think through these complicated issues, the harder I find verbally articulating the path through them. At this point, I have to expect that if I ever come to correctly grok the fullness of all the myriad pros and cons of free trade, my verbal explanations will be reduced to seemingly nonsensical word bursts.

move... you know... war... people... um, mask of credit!

Second, since I didn't have any reason to fully cite a few of the more interesting quotes I'd found, (for, as Spacebunny observes, a very particular definition of interesting) I thought some of you might find reading them to be illuminating. Since Dr. Miller didn't put much effort into distinguishing between free trade in goods and free trade in labor, there wasn't any point in doing more than mentioning these statements in passing. But many free traders do attempt to make the distinction, which is why I believe they are worth noting.

Milton Friedman, "What is America" lecture at Stanford:

There is no doubt that free and open immigration is the right policy in a libertarian state, but in a welfare state it is a different story: the supply of immigrants will become infinite. Your proposal that someone only be able to come for employment is a good one but it would not solve the problem completely. The real hitch is in denying social benefits to the immigrants who are here. Look, for example, at the obvious, immediate, practical example of illegal Mexican immigration. Now, that Mexican immigration, over the border, is a good thing. It’s a good thing for the illegal immigrants. It’s a good thing for the United States. It’s a good thing for the citizens of the country. But, it’s only good so long as it’s illegal.

Ludwig von Mises, Liberalism, Chapter 8. Freedom of Movement

The natural conditions of production and, concomitantly, the productivity of labor are more favorable, and, as a consequence, wage rates are higher, in the United States than in vast areas of Europe. In the absence of immigration barriers, European workers would emigrate to the United States in great numbers to look for jobs. The American immigration laws make this exceptionally difficult. Thus, the wages of labor in the United States are kept above the height that they would reach if there were full freedom of migration, whereas in Europe they are depressed below this height. On the one hand, the American worker gains; on the other hand, the European worker loses.

However, it would be a mistake to consider the consequences of immigration barriers exclusively from the point of view of their immediate effect on wages. They go further. As a result of the relative oversupply of labor in areas with comparatively unfavorable conditions of production, and the relative shortage of labor in areas in which the conditions of production are comparatively favorable, production is further expanded in the former and more restricted in the latter than would be the case if there were full freedom of migration. Thus, the effects of restricting this freedom are just the same as those of a protective tariff. In one part of the world comparatively favorable opportunities for production are not utilized, while in another part of the world less favorable opportunities for production are being exploited. Looked at from the standpoint of humanity, the result is a lowering of the productivity of human labor, a reduction in the supply of goods at the disposal of mankind. Attempts to justify on economic grounds the policy of restricting immigration are therefore doomed from the outset. There cannot be the slightest doubt that migration barriers diminish the productivity of human labor. 

Gary North, "Tariffs as Welfare-State Economics", Mises Institute

The ethics and economics of restricted trade surely apply to the person who wants to trade on the other side of the invisible line known as a national border. If the arguments for restricted trade apply to the American economy, then surely they apply to the other nation's economy. Logic and ethics do not change just because we cross an invisible judicial line.... Any time a government sends out a man with a badge and a gun to restrict trade, this is an act of war. Nobody should favor a restriction on other people's trade unless the results of that trade are comparable to the results of trade during wartime.

What I find interesting about these defenders of the free movement of people, or if you prefer, free trade in labor and services, is that although the greatest among them, Ludwig von Mises, clearly recognized the potential flaw in his pro-free trade position, he not only uncharacteristically chose to wave it away, but to the extent he considered it at all, he reached what is now obviously a completely wrong conclusion.

This issue is of the most momentous significance for the future of the world. Indeed, the fate of civilization depends on its satisfactory resolution. It is clear that no solution of the problem of immigration is possible if one adheres to the ideal of the interventionist state, which meddles in every field of human activity, or to that of the socialist state. Only the adoption of the liberal program could make the problem of immigration, which today seems insoluble, completely disappear. In an Australia governed according to liberal principles, what difficulties could arise from the fact that in some parts of the continent Japanese and in other parts Englishmen were in the majority?

To continue from my observation in last night's debate, this is a 20th century defense of an 18th century argument that sounds utterly insane in the face of 21st century realities. Consider the application of this argument to current events:

In a Sweden governed according to liberal principles, what difficulties could arise from the fact that in some parts of the country Syrians and in other parts Swedes were in the majority?

What difficulties indeed?  Anyhow, it has become increasingly apparent to me that the lack of concern about national sovereignty shown by free traders is akin to that demonstrated by libertarians, and reflects a fundamental conflation of the concept of "the nation" with the concept of "the state". They simply don't understand that their positions are logically self-refuting in addition to being empirically false.

UPDATE: The paper I mentioned, Trade Wars, Trade Negotiations and Applied Game Theory, by Glenn W. Harrison and E. E. Rutström, can be found here. 

Thus proving the Alt-Right right

Actual headline and subtitle at the increasingly mistitled Reason:

The Alt-Right Is Wrong: Trump Is an Enemy of Western Civilization, Not Its Champion

If your candidate opposes free trade and free speech, he's not a defender of classical liberalism.

This is almost astonishingly ignorant. It amazes me to have to point out that classical liberalism is not Western Civilization, which predates classical liberalism by literal centuries.

Moreover, it is free trade that poses a deadly danger to Western Civilization, as the combination of cheap travel and communications technology, relaxed border controls, and the free movement of people that is necessary for the operation of free trade are putting Western Civilization in the greatest peril it has known since the Turks were knocking at the gates of Vienna.

It's not just a stupid headline writer either, as Robby Soave doubles down in the body of the article itself:

No presidential candidate who fails to grasp why unrestricted trade across national borders is the hallmark of a civilized society is fit to lead one, and no leader who seeks the power to shut down newspapers who criticize him can be trusted to defend classical liberalism from its enemies.

Apparently Robby is not only ignorant of European history, but of American history as well; no American president has ever favored unrestricted trade across national borders, not even Bill Clinton or George Bush.

And, again, classical liberalism is not Western Civilization. The temporal and conceptual subset should never be confused with the set.

Free trade's fundamental flaw

It is little wonder that utopians of various flavors, from Communist to libertarian, are enamored of free trade. Because it now requires a utopian-level credulity to believe that free trade is a viable option in a fallen world.

When I was growing up we were taught in sixth grade that Democrats wanted “tariff for revenue only;” Republicans wanted protective tariff to keep manufacturing – and jobs – at home. Abraham Lincoln said of tariff, if he buys a shirt from England, he gets the shirt but the money leaves the country and pays wages to Englishmen; if he buys it from a US manufacturer, he has the shirt, and the money stays in America, paying American workers. This is, according to Ricardo, far too simple an analysis; but it appeals to reason. American goods may cost more without overseas competition, but the money and jobs stay/ cheaper goods are not always appealing to those who have no jobs to give then wages, and must rely in government to pay them for not working; and a sizeable number of “workers” resent being on the unemployment role and getting welfare aid.

The US establishment went to war in 1940, and suddenly produced tanks, rifles, airplanes, trucks, bandages, ammunition, cargo ships and battleships; when the American people rose up they drowned Germany and Japan in war materiel. The German war machine used animal drawn transport to supply much of the Wehrmacht; The United States turned the last cavalry regiments into mechanized units and the Red Ball Express that supplied Patton. I used mules to plow cotton fields during World War II; but our soldiers did not depend on mules for ammunition. If all our plants had been in Frankfurt instead of Detroit, the outcome might have been different.

It's not as if China is the enemy of the West or manufactures anything  militarily important, right?

Already at trade war

Cuckservatives, and economically maleducated conservatives, don't realize that the fact one is not fighting a war does not mean one is not already engaged in one:

In retort to Trump pointing out a necessary shift in trade position (a shift to put American interests first – a shift to stop the dependency on cheap import goods – a shift to use China’s dependency on access to our market to OUR advantage) Jeb Bush came back with an example of Boeing manufacturing.

Donald Trump, responding to Jeb’s Boeing example, pointed out China is forcing Boeing to open a manufacturing plant in China.  As typical from a candidate who is unfamiliar and unbriefed on the issue Jeb looked back incredulously and said:

    “C’mon man”…

There you have it.  There’s the disconnect.  Almost everyone missed it.  There, in that exact moment, is the spotlight upon all that is wrong with a professional political class; globalists dependent on Wall Street for their talking points.

Trump was 100% correct.

But the issue is bigger.

Not only is China demanding Boeing open a plant in China, the intent of such a plant provides an opportunity to explain why Trump is vitally important – and time is wasting.

China is refusing to trade with Boeing if the company does not move.  Why? It’s not about putting Chinese people to work, it’s about China importing their research and development, Boeing’s production secrets, into their country so they can learn, steal and begin to manufacture their own airliners.

This is just how China works.  In time, Comac, a state-owned, Shanghai-based aerospace company will then use the production secrets they have stolen, produce their own airliners, kick out Boeing, undercut the market, and sell cheaper manufactured airplanes to the global economy.

Boeing, the great American company that Jeb Bush thinks they are, becomes yet another notch on the Asian market belt.

All of those Boeing workers, those high-wage industrial skill jobs that support the American middle class, yeah – those jobs lost.   And the cycle continues.

Theory, logic, and fifty years of free trade experience all demonstrate the same thing: free trade impoverishes a wealthy nation and lowers its per capita wages toward the global average. And those are just the negative economic consequences. No amount of magical thinking and repeated chants of "ricardosmith ricardosmith" are going to change that.

If you want to go into more detail on the subject, read the relevant chapter of Cuckservative: How "Conservatives" Betrayed America.

Open borders theory failed

Considering how badly mainstream economics has failed with even a partial implementation of the free movement of people, imagine how bad it would be if the globalists ever got their way and established a borderless world:

• Immigrants make up 13 percent of the US population and 17 percent of the workforce. 
• The number of Americans not in the labor force last month totaled 94,103,000.

It's all there in Cuckservative, specifically, the chapter on economics and immigration. Free traders, you are wrong. There is no need to resort to quoting Smith, Ricardo, Hazlitt, or Mises. I know them better than you do.

The fact of the matter is that their theory was put to the test. And it failed. They are every bit as wrong in that particular regard as Marx and Keynes and Friedman were about the Labor Theory of Value, the General Theory, and monetary theory.

For decades, people opined about free trade and the free movement of peoples based solely on theory. Now, we have sufficient data to assess their predictions, and contrary to what many of us expected, (and I include myself in this regard), the free traders turned out to be completely wrong.

That doesn't mean that autarky is the correct answer or that there are not significant problems with government-limited trade, but free trade has not only impoverished the nation, the free movement of people element has already put a number of nations in risk of extinction.

The benefits of foreign labor are a lie

In Cuckservative, John Red Eagle and I conclusively demonstrated, using official government statistics, that immigrant labor is a net negative to Americans and American workers. Others who are looking into the subject are reliably finding that the importation of foreign labor is harmful:

Last year, thousands of American companies won permission to bring a total of more than 150,000 people into the country as legal guest workers for unskilled jobs, under a federal program that grants them temporary work permits known as H-2 visas. Officially, the guest workers were invited here to fill positions no Americans want: The program is not supposed to deprive any American of a job, and before a company wins approval for a single H-2 visa, it must attest that it has already made every effort to hire domestically. Many companies abide by the law and make good-faith efforts to employ Americans.

Yet a BuzzFeed News investigation, based on Labor Department records, court filings, more than 100 interviews, inspector general reports, and analyses of state and federal data, has found that many businesses go to extraordinary lengths to skirt the law, deliberately denying jobs to American workers so they can hire foreign workers on H-2 visas instead....

At the same time, companies across the country in a variety of industries have made it all but impossible for U.S. workers to learn about job openings that they are supposed to be given first crack at. When workers do find out, they are discouraged from applying. And if, against all odds, Americans actually get hired, they often are treated worse and paid less than foreign workers doing the same job, in order to drive the Americans to quit.

What’s more, companies often do this with the complicity of government officials, records show. State and federal authorities have allowed companies to violate the spirit — and often the letter — of the law with bogus recruitment efforts that are clearly designed to keep Americans off the payroll. And when regulators are alerted to potential problems, the response is often ineffectual.

I know it's painful for the devotees of free trade, who love nothing better than to compare 21st century analyses to 18th century dogma, to admit, but the increasingly undeniable empirical reality is that free trade, and the free movement of labor, are about as Marxist, globalist, socially destructive, and economically harmful as Communism.

I've read every single defense of free trade that I can find. None of them, not a single one of them, holds up. And as for those who babble childishly about a protectionist government picking winners, as if that suffices to make a rational case, what on Earth do they think is happening in the USA and in the EU now?

All that free trade accomplishes is that it allows governments to pick winners from around the world rather than from inside their own borders. And the winners are those who are willing to pay the most for the privilege, which is why the dominant figures in the U.S. media are a) an Australian and b) a Lebanese based in Mexico.

An invitation

A few folks have said that they felt the economic chapter was the weakest part of the book, which I find absolutely fascinating as I have yet to hear anyone even begin to present the first glimmerings of a case against the key concepts in it beyond the usual "free movement of labor is not free trade", which is observably false.

So, this is an invitation to anyone that wants to take me on; critique the chapter and I'll post it here and respond to it. Declare your intentions in the comments, and if several of you are interested, you can even join forces and work on it together.

Bring it on. As a former free trader, I would very much like to be proved wrong.

Counter-Currents interview

A transcript of my interview with Greg Johnson of Counter-Currents:

GJ: How would you describe your political philosophy and who are some of the intellectual influences on its formation?

VD: I would describe myself as a Christian Western Civilizationist. I’ve been a libertarian for a long time. I was briefly even a card-carrying libertarian. But I was always more of a small L libertarian rather than a capital L one. Mostly because there were certain amounts of libertarian dogma that didn’t quite work out in the real world. Then as time went on it became readily apparent to me as I traveled around the world, as I lived in different countries, as I learned different languages, it became apparent to me that the abstract ideals that we often tend to follow in America in particular are not really relevant to most of the world.

I was being interviewed by a reporter from Le Monde in Paris about two months ago and he had absolutely no idea how to even describe the concept of libertarian to his readers. That’s in France, which is at least Western civilization and so forth. Trying to have a conversation about that sort of concept in Japan or China is just totally meaningless. So, that’s when I really became more cognizant of the importance of the nationalist element.

I think that just as Stalin found it necessary to modify international socialism for the Russians and just as Mao found it necessary to modify international socialism for the Chinese, it’s necessary for every other ideology to also understand that there are nationalistic, tribalistic limits to the abstract application of those ideologies.

GJ: That’s interesting. I’m an ex-libertarian myself. I was not a card-carrying libertarian, but I subscribed to Reason magazine and read lots of Ayn Rand and Hayek and Mises mostly when I was an undergraduate. There were things that led me away from that.

Two books in particular. First, I read Thomas Sowell’s A Conflict of Visions and the other was Céline’s Journey to the End of the Night, which basically destroyed my liberal optimism about humanity.

What are some of the things that you think don’t work about libertarianism? You said that some of the abstract libertarian dogmas just don’t work, so specifically what are those?

VD: Well, the most important one, as we are now seeing, is the free movement of peoples. What really changed my thinking and it was a process, you know, it wasn’t an immediate thing, although it was a fairly quick process now that I think about it . . . I grew up on Milton Friedman. My father had me reading Free to Choose when I was fairly young, and so I was a big free trade dogmatist and around the time of NAFTA and all that sort of thing I could recognize some of the problems but I bought into the line that the problem is that it’s not real free trade. It’s a free trade agreement, but it’s not real free trade.

Then I read a really good book by Ian Fletcher, and he directly addressed the concept of Ricardo’s comparative advantage, and he really destroyed it. I think he had something like seven major problems with it, and that got me interested, so I started looking into it. I’m very fortunate in that I have a pretty active and intelligent blog readership and they really like to engage and they have absolutely no respect for me so they’re quite happy to argue with me.

Most of them were free-traders as well so we ended up having an on-going two or three week debate about free trade, and it got pretty detailed to the extent that I went through Henry Hazlitt’s entire chapter on free trade just to look at it critically rather than just reading through it and accepting it. Just looking at the arguments. I found that the free trade arguments were just full of holes. Not just Ricardo’s, but also Hazlitt’s. That’s what got me realizing that Ricardo’s argument was totally dependent on the idea that capital could move but labor couldn’t and so what that got me thinking about was the fact that a libertarian society – even if we could convince everyone in the United States that libertarianism was the correct way to approach things – would rapidly be eliminated by the free movement of peoples as people from non-libertarian societies, people from cultures where they have absolutely no ideals that are in common with the Founding Fathers or with libertarian ideals, would rapidly be able to come in and end that libertarian society in much the same way that the Californians have gone into Colorado and completely changed the political climate there.

So, Ian Fletcher’s book is what really triggered that whole shift in thought process. Now I look at the concept of the free movement of peoples, free trade, and those sorts of concepts with a considerable amount of skepticism. Of course, in Europe we’re seeing some of those problems related to the idea of the free movement of peoples just as you see it in the States with the Central Americans coming across the border.

Read the rest of it there. One factual update: the landmark Martin van Creveld essay mentioned will not be appearing in Riding the Red Horse Vol. 2 since I made the mistake of showing it to Jerry Pournelle, who promptly stole it for There Will Be War Vol. X.

The price of free trade

Remember when the idea was that offshoring all the manufacturing jobs would lead to better, higher-paying jobs in technology? Yeah, about that....

The IT workers at Cengage Learning in the company's Mason, Ohio offices learned of their fates game-show style. First, they were told to gather in a large conference room. There were vague remarks from an IT executive about a "transition." Slides were shown that listed employee names, directing them to one of three rooms where they would be told specifically what was happening to them. Some employees were cold with worry.

The biggest group, those getting pink slips, were told to remain in the large conference room. Workers directed to go through what we'll call Door No. 2, were offered employment with IT offshore outsourcing firm Cognizant. That was the smallest group. And those sent through Door No. 3 remained employed in Cengage's IT department. This happened in mid-October.

"I was so furious," said one of the IT workers over what happened. It seemed "surreal," said another. There was disbelief, but little surprise. Cengage, a major producer of educational content and services, had outsourced accounting services earlier in the year. The IT workers rightly believed they were next.

The employees were warned that speaking to the news media meant loss of severance. Despite their fears, they want their story told. They want people to know what's happening to IT jobs in the heartland. They don't want the offshoring of their livelihoods to pass in silence.

The Web-based workers that the Cengage employees are training to take over their jobs are believed to be in India. Cognizant applies for thousands of H-1B visas annually, and is one of the top three users of the visa, according to government data. Cengage employees reached for comment didn't know what visa, if any, the contract workers in their offices were using.

There are four things you need to keep in mind if you are an ardent free trader:

1. The arguments justifying free trade have always been entirely theoretical, not empirical. In this way, they are no different than the incorrect pre-scientific logical conclusions that were subsequently proven to be false by modern science. At the time they were formulated, inexpensive shipping, the free movement of capital, and the mass movement of labor were unknown.
2. The USA historically enjoyed its fastest periods of economic growth under protectionist, restricted-immigration periods.
3. The post-WWII growth was not the result of any trade or economic policies, but a positive application of Broken Window theory. Every other industrial nation had its industrial capacity smashed, so the US benefited from an intrinsic infrastructural advantage for around 25 years.
4. Free trade levels all prices throughout the market. That's why a cashier in Miami gets paid about the same amount as a cashier in Portland. Even if free trade increases the overall amount of global economic growth, in doing so, it necessarily reduces wages and standards of living in the wealthier nations to bring them more in line with the wages and standards of living in the poorest nations.

Look, I was an ardent theoretical free trader for decades. I know the pro-free trade arguments better than you do; my father gave me Free to Choose to read when I was ten years old. But the fact is, the theoretical arguments are incorrect; the conclusions their logic predicted have turned out to be observably wrong.

And perhaps you remember what I wrote about how half of all young Americans will have to leave the country in order to find work under a true global free trade regime?  The stage for that is already being set.

Offshore outsourcing is having "a fairly strong impact" on IT employment, said Janulaitis. Students coming out of college are facing trouble starting a career "and a lot of that is driven by jobs that are taken by non-U.S. nationals in our economy, and a lot of that is H-1B [visa holders]," he said.

The illusion of knowledge

Now, I like Clark of PopeHat, but a challenge is a challenge. And one of the lures I find most irresistible is the cocksure breeziness of the man who thinks he knows what I know perfectly well he does not know. The fact is that no one who thinks "David Riccardo" is a reasonable response to a comment about immigration knows anything about economics. Or, for that matter, free trade.

James Thompson @JamesPsychol
Immigrants only benefit locals if they are better than the local average in ability and character, & make greater contributions

ClarkHat ‏@ClarkHat
The jury finds you guilty of economic ignorance and sentences you to read David Riccardo. 

Casher O'Neill @CasherONeill
@ClarkHat Do not invoke the sacred writings of Ricardo, that will get @voxday on your @@@ if he notices. :D

ClarkHat ‏@ClarkHat
Vox can attack me on economics if he wants; I'll fight back.

First, however, I will correct Mr. Thompson and observe that immigrants in sufficient numbers present a significant problem if even they are "better than the local average in ability and character". Consider the British in India, for example. If immigrants are inferior, they drag the invaded nation down. If they are superior, they tend to set themselves up to rule over the natives in their own interest and at the natives' expense.

Second, David Ricardo IS economic ignorance. Ricardo believed in a) the cost-of-production theory of value, which is a precursor of Marx's Labor Theory of Value, b) the price-of-corn theory of profit, and c) the theory of comparative advantage, all of which are widely recognized by modern economists to be intrinsically false. His mode of argument was so hopelessly inept that Joseph Schumpeter even mocked it in his epic History of Economic Analysis.

His interest was in the clear-cut result of direct, practical significance. In order to get this he cut that general system to pieces, bundled up as large parts of it as possible, and put them in cold storage – so that as many things as possible should be frozen and 'given'. He then piled one simplifying assumption upon another until, having really settled everything by these assumptions, he was left with only a few aggregative variables between which, given these assumptions, he set up simple one-way relations so that, in the end, the desired results emerged almost as tautologies.... The habit of applying results of this character to the solution of practical problems we shall call the Ricardian Vice.

Third, David Ricardo did not take immigration into account when he copied the concept from Robert Torrens, who introduced the theory of comparative advantage in An Essay on the External Corn Trade. As Ambrose Evans-Pritcher noted:

Ricardo described a world where free trade in goods was opening up, but labour markets remained largely closed. This is no longer the case. Globalisation bids up the wages of high-skilled engineers or software analysts towards international levels wherever they live.

Since Ricardo never took immigration into account, we shall do so on his behalf. I direct your attention to his original postulates from On the Principles of Political Economy and Taxation.

Unit Labor Costs

Britain 100 cloth 110 wine
Portugal 90 cloth 80 wine

In the absence of transportation costs, it is efficient for Britain to produce cloth, and Portugal to produce wine, since, assuming that the two goods trade at an equal price (1 unit of cloth for 1 unit of wine) Britain can then obtain wine at a cost of 100 labor units by producing cloth and trading, rather than 110 units by producing the wine itself, and Portugal can obtain cloth at a cost of 80 units by trade rather than 90 by production.

Now we introduce immigration into the equation and the free movement of labor. Obviously both wine and cloth laborers will move to Britain, since they believe they will receive an 11 percent raise and a 38 percent raise respectively. However, once they get there, the doubling of the labor supply in Britain this immigration causes will quickly cause the price of labor to fall. It will fall considerably.

This is great for Britain! It can now produce the same amount of cloth as before for price of only 47.5 units of labor and the same amount of wine for 47.5 labor units as well, thereby obtaining an equal quantity of both wine and cloth for less than what it used to cost to produce the wine alone. This will vastly increase profits in the British cloth and wine industries, as well as creating a windfall for the financial industry investing those profits! Granted, this is because wages have fallen by 50 percent; other consequences include how the newly unemployed British workers go on the dole and turn to crime, the new Portuguese immigrants are heavily inclined to vote for the Labour Party thereby imbalancing the British political system, and British women begin bearing half-Portuguese children and lower the average IQ of the next generation from 100 to 97.5, but those are mostly non-economic factors and therefore don't count as far as economists are concerned.

They sound suspiciously familiar, though, don't they?

In conclusion, we can see that open immigration and the free movement of labor is not only economically desirable, but is vastly preferable to comparative advantage by a factor of 105/200 and to autarky by a factor of 105/210. QED. What else can we conclude from this exercise of the Ricardian Vice?

1. Ricardo implicitly postulated the immobility of labor.
2. The mobility of labor not only fails to disprove comparative advantage, but actually strengthens the case for even freer trade... at least if you're in the higher labor cost country and you only look at the labor costs.
3. The mobility of labor will eliminate international trade since everyone will be living in Britain.
4. The mobility of labor operates to the detriment of labor.
5. Ricardo's logic is remarkably stupid.

But my argument against free trade does not rest on David Ricardo's intellectual corpse. It is not even, strictly speaking, economic in nature. This is the four-step Vox Day Argument Against Free Trade.

1. Free trade, in its true, complete, and intellectually coherent form, is not limited to the free movement of goods, but includes the free movement of capital and labor as well. (The "invisible judicial line" doesn't magically become visible simply because human bodies are involved.) 
2. The difference between domestic economies and the global international economy is not trivial, but is substantive, material, and based on significant genetic, cultural, traditional, and legal differences between various self-identified peoples.
3. Free trade is totally incompatible with national sovereignty, democracy, and self-determination, as well as the existence of independent nation-states with the right and ability to set their own laws according to the preferences of their nationals.
4. Therefore, free trade must be opposed by every sovereign, democratic, or self-determined people, be they American, Chinese, German, or Zambian, who wish to preserve themselves as a free and distinct nation possessed of its own culture, traditions, and laws.

Rethinking their strategy

The CDC belatedly admits the obvious:

The Centers for Disease Control and Prevention (CDC) on Monday said it is starting to “rethink” its Ebola strategy after the first-ever US transmission of the virus put a "relatively large" number of healthcare workers at risk.

"We’re concerned, and unfortunately would not be surprised if we did see additional [Ebola] cases in healthcare workers who also provided care to the index patient," CDC Director Tom Frieden said.

A nurse at Texas Presbyterian Hospital in Dallas was diagnosed with Ebola over the weekend, raising questions about the procedures that were followed when treating Thomas Eric Duncan. The nurse’s infection “doesn’t change the fact that it's possible to take care of Ebola safely, but it does change, substantially, how we approach it,” Frieden said.

Notice that phrase: "it's possible to take care of Ebola safely". Possible. You are permitting Ebola victims to freely enter the USA because you MIGHT be able to safely take care of them?

They've already been wrong once. Who wants to bet his life that they've nailed it this time? They might have, but then again, perhaps not. What they need to rethink is preventing anyone who has been in Africa within the last two months from crossing any Western border.

See how useful borders can be, at least in theory, free traders?

Inequality and Piketty

Yesterday I was asked about Piketty's argument that free trade reduces income equality. This requires an answer on several levels.

First, income inequality matters. The Keynesians claim that it doesn't matter if Peter owes Paul or Paul owes Peter. This is observably false, just as it matters if there is a middle class that is economically active versus an economically dominant aristocracy that is primarily interested in conspicuous consumption. This isn't some sort of new Levellism, merely a logical observation of fact.

Second, this is a literally Marxist perspective. It may surprise some to know that free trade is a Marxist position. Look it up. Free trade is not anticommunist, it is one aspect of communism.

Third, like most Marxist principles, this is wrong. Opening up an economy to additional outside players, most of whom have proved to be the apex predators in their native economies, means that the average individual's income is going to go down because the outside player is not going to enter the market if it cannot extract sufficient resources to justify their capital expenses in penetrating it.

Now, I haven't read Piketty and I see no reason to do so in the future. This is because he is attempting to sell a concept that is neither new nor true.

The truth about free trade

Free trade advocates are very often dishonest and attempt to claim that while they support the free movement of capital and goods, they do not support the free movement of people. But this is nonsense, because the free movement of people is intrinsically necessary for free trade in both labor and services. Furthermore, observe that the European Union's "Four Freedoms" are explicit on this point:

One of the "Four Freedoms" of the Single Market is free movement of persons – along with free movement of capital, goods and services. Having a Single Market means having free movement of products (goods and services) and factors of production (capital and labour). Saying the UK wants to restrict free movement of persons but stay in the Single Market makes precisely as much/little sense (and for precisely the same reasons) as would saying "The UK wants to impose tariffs on imports from Germany and France but remain in the Single Market" or "The UK wants to impose capital controls on investment into Italy but remain in the Single Market". Restricting free movement would, in substance, be withdrawing from the Single Market and hence in substance withdrawing from the EU. The substantive question is unambiguous. The only thing left to consider is the semantic question – whether withdrawing from free movement would be called "withdrawing from the EU" or not. Since the EU is the zone of EU citizenship and EU citizenship means free movement, the answer must be "Yes – the UK would not be in the EU", though we might perhaps still be in some other form of "Europe".

The second reason it is not mere word games is that many schemes for "withdrawing from the European Union" involve continuing to participate in some other form of "Europe" – e.g. the "Norway option" of continuing to be in the European Economic Area. "Out" hasn't normally meant "no Europe", merely "exiting the European Union". But exiting the European Union is precisely what any form of restriction on the free movement of persons entails, by definition.

Past generations can be forgiven for not grasping that free trade meant the end of national sovereignty and the end of the very concept of "the nation". They did not understand how inexpensive and easy travel would eventually become. But now we know better. And this is the real reason that "nationalism" has been attacked as  an intrinsic and dangerous evil; it is the strong point around which resistance to the universal pillaging of the global elite's attempt to construct its vision of Eine Welt, Eine Art, Eine Ordnung.

Patient #2?

A possible case of Ebola in Washington DC:

A patient with Ebola-like symptoms is being treated at Howard University Hospital in Washington, D.C., a hospital spokesperson confirmed late Friday morning. The patient had traveled to Nigeria recently. That person has been admitted to the hospital in stable condition, and is being isolated. The medical team is working with the CDC and other authorities to monitor the patient's condition.

Shut down air travel from Africa. Now. It's a good thing this possible case is in DC, as perhaps the disease in the near vicinity will sufficiently alarm Congress to force ObolaObama to finally take action.

And if the CDC wants to avoid panicking the public, perhaps they should stop making statements that make them look like completely incompetent idiots.

Tom Frieden, director of the Centers for Disease Control and Prevention, on Friday said restricting travel between the U.S. and West Africa would likely “backfire” and put Americans more at risk of contracting Ebola.... “Even if we tried to close the border, it wouldn’t work,” the top health official added. “People have a right to return. People transiting through could come in. And it would backfire, because by isolating these countries, it’ll make it harder to help them, it will spread more there and we’d be more likely to be exposed here.”

That's complete horseshit. The moron may as well have painted a target in his back in the event Americans start dying from a disease that he could have, and should have, prevented from entering the country.

Competitive asset-stripping

Russia calls the globalist bluff:

Russian courts could get the green light to seize foreign assets on Russian territory under a draft law intended as a response to Western sanctions over the Ukraine crisis. The draft, which was submitted to parliament on Wednesday by a pro-Kremlin deputy, would also allow state compensation for an individual whose property is seized in foreign jurisdictions.

Italian authorities this week seized property worth about 30 million euros ($40 million) belonging to companies controlled by Arkady Rotenberg, an ally of President Vladimir Putin targeted by the U.S. and European Union sanctions.

The draft law, published on a parliamentary database, would allow for compensation for Russian citizens who suffer because of an "unlawful court act" in a foreign jurisdiction and clear the way to foreign state assets in Russia being seized, even if they are subject to international immunity.

Asset-stripping sanctions aren't going to be very effective if the Russians simply compensate those whose assets are stripped by taking them from Western companies with Russian assets. This could have some interesting knock-on effects in the NBA.

And isn't it remarkable how the sanctity of free trade is so readily disrupted when something is at stake besides the livelihoods and standards of living of the working and middle classes?

The end of comparative advantage

As I have repeatedly pointed out for several years, David Ricardo's Law of Comparative Advantage has been shown to be based upon false assumptions. Now the mainstream economists are beginning to recognize this:

David Ricardo's Theory of Comparative Advantage has broken down after 200 years, or so I learned at the Lindau forum of Nobel laureates in Bavaria.

The theory published in 1817 has been a guiding principle of free trade, taken as a given by every student of economics in the modern era. It has served us well, but just as Newton's theories ran into limits and were overtaken by Einstein's relativity, comparative advantage no longer explains the world.

Under Ricardo's model, inequality was supposed to narrow within countries as globalisation accelerated exponentially in the Nineties. Instead it is getting wider....

Ricardo described a world where free trade in goods was opening up, but labour markets remained largely closed. This is no longer the case. Globalisation bids up the wages of high-skilled engineers or software analysts towards international levels wherever they live.

The Nobel laureates at Lindau aren't willing to give up on globalization yet (although they should), but the cracks in the economic wall are showing as they express their fears that it is "going horribly wrong". But it's not going wrong. It's going the only way it could possibly have gone.

Free trade is incompatible with national sovereignty. International labor mobility is incompatible with the very existence of nations. And the heterogeneous populations are economically detrimental and a material barrier to the growth of capital and national wealth. I shall repeat my core argument against free trade, which I first articulated in 2012 following a quasi-debate with Gary North:

1. Free trade, in its true, complete, and intellectually coherent form, is not limited to the free movement of goods, but includes the free movement of capital and labor as well. (The "invisible judicial line" doesn't magically become visible when because human bodies are involved.)

2. The difference between domestic economies and the global international economy is not trivial, but is substantive, material, and based on significant genetic, cultural, traditional, and legal differences between various self-identified peoples.

3. Free trade is totally incompatible with national sovereignty, democracy, and self-determination, as well as the existence of independent nation-states with the right and ability to set their own laws according to the preferences of their residents.

4. Therefore, free trade must be opposed by every sovereign, democratic, or self-determined people, be they American, Chinese, German, or Zambian, who wish to preserve themselves as a free and distinct nation possessed of its own culture, traditions, and laws.