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Wednesday, December 25, 2019

Nationalist economics

I was asked to address the intersection of nationalism and economics two years ago, for an anthology that was never published, at least, not to the best of my knowledge. But the conclusions I reached, though not what one could really call timeless, are still definitely relevant as 2019 comes to a close. Consider it a Christmas present of sorts to the old school readers who enjoyed my focus on economics in the past.


NATIONALIST ECONOMICS AND THE NEW RIGHT
by Vox Day

It is one of the great ironies of modern politics that free trade and economic globalism have somehow become identified as not only right-wing policies, but right-wing dogma. This was not historically true, though, as from the very start, free trade has generally been a hallmark of the LEFT side of the political spectrum. If you recall, the infamous mercantilists attacked so furiously by Adam Smith in The Wealth of Nations were, almost to a man, royalists, not revolutionaries, while the great prophet of the Left, Karl Marx, openly advocated free trade on the grounds that it would help bring about world socialist revolution and the emancipation of the proletariat.

In the 240 years since Adam Smith triumphed over the mercantilists, the question of free trade has generally revolved around whether it is good for the nation concerned. However, this is not actually the right question to ask, as the more fundamental one is whether free trade and nations are even compatible. And, as it turns out, the answer is no.
But let us not get ahead of ourselves and instead begin at the historical beginning. It is vital to first understand that the intellectual foundation for free trade is considerably shakier than most conservatives realize, particularly those conservatives who believe that David Ricardo settled the matter once and for all with his articulation of the Theory of Comparative Advantage.

The Failure of the Free Trade Champions
David Ricardo was not an economist in the modern professional sense. He was a stockbroker, a successful con artist who put Michael Milken and Bernie Madoff to shame, a politician who purchased his seat in the House of Lords with his ill-gotten gains, and a pamphleteer. His works were not written with an aim of better understanding the matter addressed, but were primarily written as extended opinion editorials meant to advocate specific political policies. Moreover, his arguments were so heavily biased toward his preconceived conclusions that Joseph Schumpeter was moved to describe the custom of economists creating hopelessly impractical theories on the basis of heavily biased simplifications as "the Ricardian Vice".
Besides the Theory of Comparative Advantage, which Ricardo cribbed without attribution from “An Essay on the External Corn Trade”, a work that was published two years earlier by Robert Torrens, Ricardo's two other theories of historical note are the labor theory of value, which you may recall is the logical foundation of Marxist economics, and a highly peculiar theory of wages and profit that concludes the rate of profit ultimately rests upon the price of corn.
Seriously. I’m not kidding.
In fact, despite its massive influence on economists, politicians and trade policy for the last two centuries, the Theory of Comparative Advantage was never mathematically modeled or put to a serious theoretical test for 134 years. And although it was initially claimed that a comparison of textile and automobile production in the U.S.A. versus the United Kingdom broadly confirmed the Ricardian Model, more stringent tests soon demonstrated that neither the model nor the theory on which it was based had much application to the real world.
In his landmark book, Free Trade Doesn't Work, Ian Fletcher identified seven specific flaws in Ricardo's version of comparative advantage, which consist of assumptions that do not necessarily hold in any given trade environment, and in many cases, do not apply at all. These seven dubious assumptions are:
  • Trade is intrinsically sustainable.
  • There are no external costs.
  • Production factors move easily between industries.
  • Trade does not increase income inequality.
  • Capital is not internationally mobile.
  • Short-term efficiency causes long-term growth.
  • Trade does not inhibit foreign productivity.
Of course David Ricardo is not the only economist cited by defenders of free trade. Another common right-wing reference is Henry Hazlitt, the Austrian economist whose Economics In One Lesson, published in 1946, is popular among homeschoolers for its clarity and brevity. Chapter 11 of that work, which is devoted to making the case for free trade, is easily the weakest chapter in the book, as it contains no less than 23 specific errors. Since this article is merely a contribution to an anthology and not a book in its own right, I shall restrict myself to pointing out seven of them.
Error #1: Hazlitt assumes that manufacturers are the primary beneficiaries of barriers to trade and therefore the leading advocates of them. This may have once been true, but it is clearly no longer the case. Economics in One Lesson was published in 1946, when the U.S. balance of trade ran a 35 percent surplus and trade amounted to 6.8 percent of GDP. Free trade was operating to the benefit of most American manufacturers and workers alike; since the industrial infrastructures of Europe and Asia were in ruins, few American sectors were at a competitive disadvantage. Like Ricardo, Hazlitt clearly never imagined a scenario when jobs would not be lost to foreign manufacturing competitors, but to the new foreign factories established by the former domestic manufacturers. The additional profit provided by a $5 tariff is now of less interest to the domestic manufacturer than the opportunity to set up a factory in Bangladesh, make the sweater at a lower cost, then import it and sell it for $25. If we leave out the distribution channel, which is the same for both foreign and domestic manufacturers, and assume a profit margin of 50 percent, we can compare the profit margins of the various alternatives.
At the 50 percent profit margin, we know that the manufacturer's domestic costs were $15 and his profit was $15 with the protection of the $5 tariff. But Bangladesh has a wage rate that is one-thirtieth that of the USA, so if labor is one-third the cost of production and international shipping is 10 percent of the manufacturing cost, his new production and delivery cost will be $11.17. This reduction of $3.83 in costs means the offshored manufacturer can now afford to sell the imported sweater for 22.34 and still make the same 50 percent profit margin he did before; without tariffs he can compete on price with the $25 English sweaters and actually increase his profit margin by nearly six percent. At the old $30 price, his profit margin has risen to 63 percent, thereby creating a serious incentive to move production to Bangladesh even in the absence of any price pressure from the English sweater makers. Either way, the consumers benefit, the manufacturer benefits, and only the thousands of workers, who lost their $5/sweater jobs, suffer.
So, the $5 tariff not only protects the domestic manufacturer from the English competitor, but more importantly, protects the worker from the domestic manufacturer as the tariff would reduce the domestic manufacturer's profit margin from 63 percent to 46 percent. With the tariff in place, the domestic manufacturer has no reason to go to all the trouble and expense to relocate his factory to Bangladesh simply to lose four percent from his profit margin. Hazlitt's error here is the result of the failure of the theory of comparative advantage to account for the international mobility of capital.
Error #2: Hazlitt asserts that the $5 left over from the reduced import price of the sweater will go to help employment in any number of other industries in the United States. It may. Alternatively, it may not. Also, it should be kept in mind that Hazlitt was writing when imports accounted for a trivial 2.9 percent of GDP. They now account for 16.3 percent, so that $5 is nearly six times more likely to go towards increasing employment in industries outside the United States than it was in 1946. Therefore, what was theoretically supposed to be $5 of the tariff going towards U.S. employment must be reduced to $4.19 on average.
Error #3: Hazlitt erroneously assumes that the British will buy more from U.S. manufacturers because their possession of U.S. dollars will force them to buy more American goods. This is untrue, however, because the dollar is the world's reserve currency and is frequently utilized for trade between foreign countries; the British are no more forced to buy American goods due to their possession of dollars than the Thebans were forced to buy Athenian goods due to their possession of silver Athenian talents.
Error #4: Hazlitt assumes that foreign dollar balances cannot remain perpetually unspent in the United States. But there are presently an estimated 1.25 billion in Eurodollars being held in foreign banks that will never come back to the United States, as they are presently used as the basis for 90 percent of all international loans. Furthermore, the United State has been running a continuous and growing balance of trade deficit in goods since 1976. The $9 billion that went overseas that year has not only not returned to be spent here, but has since increased to $750 billion. 41 years and counting is a long time to wait for this supposedly inevitable return, and moreover, is very unlikely to provide any comfort to the worker who lost his job as a result more than four decades ago.
Error #5: Hazlitt assumes that an American worker who loses his job in one sector will automatically find it in another sector. This repeats Ricardo's mistake and is the sixth false assumption identified by Fletcher. There is no reason to assume that the loss of a job in one sector will create any additional demand in another sector, indeed, to the extent there is worker mobility between industries, all the loss of a job in one sector will do is create downward pressure on wages in the other sectors. There is a hidden and implicit appeal to James Mill here, (or alternatively, to Keynes's critical formulation of Say's Law), in the idea that supply somehow magically creates demand. While this can be true in a technological sense, as there was no demand for CD players prior to their invention, it is most certainly not a reliable economic law, as the excess supply of U.S. housing or the dead inventory stock of any business will suffice to demonstrate.
Error #6: Hazlitt assumes that American employment on net balance will not go down, and that American and British production on net balance will go up. This is not necessarily true, being an erroneous conclusion based on the previous error. The American worker may well remain unemployed on a permanent basis, as have one-quarter of the formerly-employed male workers since 1948.
Error #7: Hazlitt assumes that consumers in both countries are better off because they are able to buy what they want where they can get it cheapest. But this is a false assumption because most consumers are also workers, or are dependent upon workers. The consumer who is employed can better afford the $30 domestic sweater than the unemployed consumer can afford the $25 import. Free trade does work to the advantage of a small number of Americans in the financial sector as well as to its foreign beneficiaries, but at an inordinately heavy short-term cost to around 25 percent of Americans as well as a severe long-term cost to the entire American economy.
The many flaws of Hazlitt's case notwithstanding, it should be noted that none of the traditional critiques of free trade even begins to address the most fundamental problem with the policy, which is the significant modern increase in the mobility of labor, a factor that has never been properly accounted for by economists or policymakers in the 200 years since David Ricardo published The Principles of Political Economy.

Five Arguments Against Free Trade
Nor is the inability to account for the technology-enhanced mobility of labor the only failure in the free trade model. There are actually five separate and specific arguments against free trade, each of which alone suffices to prove that free trade has had a negative effect on wealthy Western nations. Even more, they show that the freer the trade has been, the worse the effects. In order of their appearance, these five arguments are the empirical, mathematical, nationalist, practical, and logical arguments. And each of these five arguments represents a very serious and substantial challenge to the claim that free trade makes a nation wealthier or better off in the long term.
The empirical case against free trade addresses the conventional argument for it. This childishly simple pro-free trade argument has changed very little over the centuries, and was repeated last year in a major essay by Francis Fukuyama in Foreign Affairs. The conventional argument for free trade is a post hoc ergo propter hoc construction which states:
  1. International trade has become increasingly free over time.
  2. Wealth has increased during the same period.
  3. Therefore, free trade produces wealth.
But this is absolutely not true. We have considerable evidence that freer global trade does not necessarily make an individual country wealthier, and in many cases, actually makes it poorer. Although the free trade in goods has considerably increased over the last 50 years, average real wages are lower in the U.S.A. than they were 43 years ago. Still, even though wages are lower, could not the country still be wealthier? Proponents of free trade often cite growing GDP per capita as evidence of a country's wealth increasing, and it is true that since 1964, U.S. GDP per capita has risen from $3,500 to $54,600, a 15.6 times increase. Many interpret that rise in GDP per capita as proof that the U.S.A. is wealthier, but they are absolutely incorrect to do so because over that same 50-year period, total US debt per capita has risen more than twice as much, by a factor of 34.
If your income doubles, but your personal debt increases by more than twice that, are you genuinely wealthier? No, of course not! Your perceived increase in wealth is a mirage, and you are actually poorer than you were before. Freer trade has clearly not produced greater wealth for America or Americans, but has instead resulted in greater indebtedness. This is not to say free trade can never benefit a national economy, but we have clear empirical evidence that it has not in the case of the United States over the last five decades. Nor has it been of net benefit to any Western nation once debt is correctly accounted for. Therefore, the conventional pro-free trade argument is obviously and inarguably false on empirical grounds.
The mathematical case against free trade is an abstract one that is considerably beyond the ability of most individuals to calculate and confirm for themselves, but it nevertheless merits a brief mention. At its core, free trade theory relies upon the Law of Supply and Demand as articulated by Adam Smith. This well-known law dictates that as prices rise, demand will fall, given constant supply, thereby producing a downward-sloping demand curve. But in his revolutionary Debunking Economics, Australian economist Steve Keen cites the work of William Gorman, who in 1953 utilized mathematical logic to prove that the Law of Demand does not apply to a general market-wide demand curve, but only applies to individual demand curves. Moreover, it is not possible to derive a conventional downward-sloping market-wide demand curve by simply adding together the quantities demanded by all individuals at every possible price; the resulting curve that represents cumulative demand can actually be of almost any shape at all.
In other words, the combination of all rational consumer preferences results in an irrational market where lower prices may, or may not, increase demand at any given point of supply. This mathematical proof has many implications for economics that have not yet been properly explored by economists, but among the obvious casualties is the theory of comparative advantage. In summary, the math required for free trade to reliably operate in an economically beneficial manner according to the theory of comparative advantage literally does not add up.
The practical case against free trade turns the usual free trade attack on tariffs around on the attackers. It is extremely common for free trade advocates to point out that protective tariffs are taxes on domestic citizens, not on foreign producers, and this is true. However, it is false to conclude from this fact, as they do, that these taxes on domestic citizens make the country poorer by raising taxes, because this would only be true if the alternative to taxes in the form of tariffs was no taxes at all. That is obviously not the case, and it will never be the case in any country where the government is also funded by income, property, wealth, and value-added taxes.
It should be readily apparent that a nation possessing a government funded by tariffs will tend to be wealthier and more free than one with a government funded by income taxes and sales taxes, because tariffs are considerably less intrusive on the domestic citizenry, are considerably less expensive to administer, and are massively less economically disruptive than either personal or corporate income taxes. And tariffs are literally nothing more than a sales tax, albeit a very limited form of sales tax that only affects a small percentage of the goods that are available in the national economy.
In 2020, a complete reliance upon tariffs would mean that less than one-fifth of GDP would be subject to federal taxation instead of all of it being liable to multiple forms of taxation. Even from the conservative small government perspective, it should be entirely obvious that free trade cannot make a country any more wealthy if its import taxes are replaced with income and property taxes.
The logical case against free trade is straightforward, and yet is frequently dismissed due to a failure to understand it.
As Ludwig von Mises wrote in Liberalism, “production is more restricted where the conditions of production are comparatively favorable than would be the case if there were full freedom of migration. Thus, the effects of restricting the freedom of movement are just the same as those of a protective tariff.” This means there is no credible way to rationally argue in favor of the free trade in goods without also accepting that those very same arguments apply to the free trade in services too. There is no meaningful way to distinguish between the argument for the free movement of goods and capital, and the argument for the free movement of labor. From the logical perspective, they are one and the same argument.
Whether it is their intention to do so or not, those who argue for unrestricted free trade are also arguing for unrestricted immigration. It is not a coincidence that everywhere free trade policies have been adopted, the level of immigration has increased while the native employment rate has declined. While free trade advocates claim America is wealthier as a result of its freer trade and more liberal immigration policies, the fact that 104 million Americans are now either unemployed or out of the workforce, that they are collectively $73.4 trillion in debt, and that all the jobs created since the 2008 recession went to immigrants are an eloquent and conclusive rebuttal to their assertions. Freer trade with China alone costs the USA 185,000 jobs per year; the resultant increase in the unemployment rate obviously does not make Americans wealthier.
And last, but most certainly not least, is the nationalist case against free trade. It is very common to hear free trade advocates wonder why we don’t look at international trade the same way we look at domestic trade. As the Austrian economist Robert Murphy put it, “someone might worry about trade deficits with China—whereas not lose a moment’s sleep over interstate trade deficits within the borders of the United States.” But the benefits of domestic trade require people moving from Michigan and Massachusetts to take jobs in California, where they make the goods that are subsequently shipped to Florida, Texas, and other states within U.S. borders. That movement that is required to efficiently provide workers with available jobs in locations that require them to change their residence is called labor mobility, and in the United States, the rate of labor mobility is 3.2 percent per year.
If we extend that rate of labor mobility to the world, which is absolutely necessary if the United States is to receive the the same benefits of international free trade that it presently obtains from domestic free trade, that rate of labor mobility mathematically dictates that nearly half of all Americans would have to emigrate to find jobs in other countries before the age of 35. The benefits of free trade depend upon the most efficient matching of labor with capital, which is why Americans with a talent for robotics would have to travel to where the robotics industry is operating at maximum cost-efficiency, which would presumably be Japan or South Korea, while talented young filmmakers everywhere from Albania to Vietnam would be moving en masse to Hollywood, or Vancouver, or wherever movies were being made most efficiently.
Is the United States genuinely better off if half its children have to leave the country and find jobs elsewhere in the world? Is any nation better off? No, obviously not. Free trade advocates cannot reasonably claim that the national economy will be materially better off if the nation ceases to exist.

A Closer Look at Comparative Advantage
Unit Labor Costs
Britain: 100 cloth, 110 wine
Portugal: 90 cloth 80 wine
A comparison of the unit labor cloths shows that in the absence of transportation costs, it is more efficient for Britain to produce cloth, and Portugal to produce wine. This is because if we assume that the two goods trade at an equal price of 1 unit of cloth for 1 unit of wine, Britain can obtain wine at a cost of 100 labor units by producing cloth and trading, instead of at the cost of 110 units by producing the wine itself, and Portugal can obtain cloth at a cost of 80 units through trade rather than 90 through domestic production.
So far, so good for the Ricardian model. But now let us introduce the free movement of labor into the equation. In this scenario, both wine and cloth workers will move to Britain, since by doing so 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, so that Britain's labor costs are now actually half that of Portugal.
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 has only happened because wages have fallen by 50 percent; other consequences include how all of the newly unemployed British workers go on the dole or turn to crime to making a living, how the new British voters are inordinately inclined to vote for the Labour Party, thereby imbalancing the British political system, and, over time, how many British women begin bearing half-Portuguese children and thereby reduce the average IQ of the next generation from 100 to 97.5. Fortunately for economists, these are all non-economic factors and therefore can be safely ignored in concluding that free trade and the free movement of labor are beneficial to Britain.
That sounds suspiciously familiar, though, doesn't it?
In conclusion, the addition of the free movement of labor to the Ricardian model mathematically proves that free trade combined with unrestricted immigration is not only economically beneficial, but is mathematically preferable to comparative advantage by a factor of 1.9, and to pure protectionism by a factor of 2. Quod erat demonstrandum.
What else can we conclude from this unseemly exercise of the Ricardian Vice?
  • Ricardo implicitly postulated the immobility of labor.
  • The mobility of labor not only fails to disprove comparative advantage, but actually strengthens the case for even freer trade so long as one only considers the case from the perspective of manufacturers in the country with higher labor costs, and the only factors considered are the labor costs and the manufacturer's profits.
  • The mobility of labor will eliminate international trade since everyone will be living in Britain.
  • The mobility of labor operates to the detriment of labor.
  • David Ricardo and his fellow free traders are dishonest charlatans.
That being said, the strongest case against free trade does not rest on David Ricardo's intellectual corpse. It is not even, strictly speaking, entirely economic in nature.

The 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 materialize only when 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. Due to these differences, free trade will have varying effects on a nation’s wealth, and it can reduce, as well as raise, a nation’s standard of living.
  4. Regardless, 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.
  5. Therefore, free trade must be opposed by every sovereign, democratic, or self-determined people who wish to preserve themselves as a free and distinct nation possessed of its own culture, traditions, and laws.

Toward a Nationalist Trade Policy
To determine an optimal trade policy for anation, it is first necessary to decide what the objectives of that trade policy will be. Furthermore, due to the number of rival interests involved, it is also necessary to order those objectives in terms of their priority.
  1. Maintain the population demographics of the nation.
  2. Increase per capita wealth without increasing per capita debt.
  3. Improve the state of the physical capital and infrastructure.
  4. Increase per capita income.
  5. Modify the amount of inequalities of wealth and income.
Before any trade policy can be adopted, the probable consequences for the nation and the economy must be understood and accepted by the people as well as the politicians and corporate leaders. To do otherwise is to risk imbalanced costs and benefits, political upheaval, societal instability, and long-term economic contraction.

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80 Comments:

Blogger stevo December 25, 2019 9:33 AM  

Oh boy. A wall of text for Christmas! Cheers everyone!

Blogger Kraemer December 25, 2019 9:50 AM  

This could well be the least gamma wall of text ever published on Blogger

Blogger David Ray Milton December 25, 2019 9:57 AM  

Fletcher’s book is great. Thanks Vox.

Blogger Iceeater December 25, 2019 9:59 AM  

Guest worker permits for your job and not mine.
(Vietnam war protester started and were made by college students who became subject to the draft = it's your war too.

Since free trade in usa is financed by hidden debt - its benefits assume the debt will never be paid and interest will be zero.

America has inventoried people w pay to not work benefits. Prison, easy disability, under employment, easy obtained student debt.
Now the computer - mobile devises connected to AI will make the siblings of the friends of the elite a member of the inventory. Let wage suppression begin in high dollar service economy and the riots will begin.



Blogger Doktor Jeep December 25, 2019 10:04 AM  

We have had socialism.
We have had communism.
We have had National Socialism.
We have had capitalism
National Capitalism has never been tried.
I can boil it down to one thing really: You can have competition but usury is illegal.
To get rid of usury we'll have to get rid of dual citizenship.

Blogger CM December 25, 2019 10:07 AM  

Thank you! I made it to error 3. I've definitely seen this argument, but one of the things that jumped out at me, specifically with China, is that US dollars have been used to purchase real estate, defunct manufacturing, and natural resources by a foreign country.

Of course, the assumption is this is good. But it strikes me as selling our birth right.

Blogger rekrapt December 25, 2019 10:16 AM  

So many of my conservative friends act like the abolition of global free trade would be the death of capitalism. No clue for them how it turns us into cattle.

Blogger Alexamenos December 25, 2019 10:34 AM  

This needs to be required reading for every conservative / republican commenter on townhall, american thinker, etc..., even if all they take away from it is 'democrats are bad'.

Also, a very Merry Christmas to you and yours.

Blogger The Observer December 25, 2019 10:37 AM  

So many of my conservative friends act like the abolition of global free trade would be the death of capitalism. No clue for them how it turns us into cattle.

Your average conservative accepts all the underpinnings of leftist thought, just with unprincipled exceptions. Not surprising.

Blogger tuberman December 25, 2019 10:52 AM  

Excellent article. Well over 200 years of free trade flimflam

David Ricardo the con man, plus many other economists
The East India Tea Company extending empire aggressively
The Rothschilds scamming the Brit Currency in 1815
The Central Banks going World Wide including Fed in 1913.
Many etc's it goes on and on.

Bad for civilizations, and bad for all cultures, and leads to "war of everyone against everyone." Destroys everything good, so real Christianity is free trade target.

Blogger Sam December 25, 2019 11:05 AM  

@7
Tell them to think of it like setting up a factory in a town. If management is nearby, things tend to work (easy to see issues, care about image to the community). If management is distant, the feedback is weak and the incentive to invest in the community or care about side effects is non-existent.

Free trade is that amplified. Businesses do not work in a vacuum. Social bonds and spill over effects are important for them and if you cut those away you insure long term decay.

Now many of the issues companies have are due to leftist looting and parasitism making it harder for them to compete and so encouraging jobs to move overseas (intentional since those are opponents of leftists). But even without that you wouldn't want free trade since countries can alter their market to get an advantage over others. There are causes this is economically rational- if minimum profitable firm size is large enough, getting the industry set up means other countries don't and you accrue the surplus.

Blogger P Glenrothes December 25, 2019 11:33 AM  

Step #1 - Decimate the globalists.

Blogger Ominous Cowherd December 25, 2019 11:59 AM  

Thank you, Vox.

Ricardo was obviously assuming that Britain and Portugal would never be at war with one another. He probably chose wool and wine as examples because neither were strategic goods, and wouldn't be likely to raise alarms in the reader's head the way production of cannons and gunpowder might. Replace cloth with cannons and wine with gunpowder, and consider whether a Portuguese reader might see the result very differently.

The one argument I didn't see you explicitly make is that free trade could selectively target strategically important industries, like agriculture and weapons manufacture. China, for example, might try to undercut and destroy USA industries like semiconductor chip production, if it thought it might someday go to war with the USA.

Blogger Ominous Cowherd December 25, 2019 12:03 PM  

The Observer wrote:Your average conservative accepts all the underpinnings of leftist thought, just with unprincipled exceptions.
I have started replying to the phrase
``I'm not a racist, but ...'' with
``That's how a conservative says `I'm just as liberal as you are, but ...'''

Too early yet to say whether it's making conservatives rethink their acceptance of the tenets of Leftism.

Blogger Beardy Bear December 25, 2019 12:11 PM  

Bravo.

Blogger furor kek tonicus ( no need to be racist, Ratchets can Karen better than anybody ) December 25, 2019 12:24 PM  

VD
Since this article is merely a contribution to an anthology and not a book in its own right, I shall restrict myself to pointing out seven of them.



will there be a book in its own right?

Blogger John December 25, 2019 12:40 PM  

Vox, thank you very much for posting this! Merry Christmas.

Blogger VD December 25, 2019 12:42 PM  

will there be a book in its own right?

I doubt it. I have other writing priorities.

Blogger VD December 25, 2019 12:44 PM  

The one argument I didn't see you explicitly make is that free trade could selectively target strategically important industries, like agriculture and weapons manufacture.

That would be a separate case, the military case against free trade. To which free traders will resort to the canard that countries that trade don't war, which is false, and the correct counterargument that most countries have not engaged, and will not engage, in war with any one specific nation.

Blogger Scuzzaman December 25, 2019 12:56 PM  

Of course, the assumption is this is good. But it strikes me as selling our birth right.

Exactly what it is. Exchanging a legacy of enduring and immense value for an immediate and fleeting gratification of appetite.

Blogger Scuzzaman December 25, 2019 1:01 PM  

Step #1 - Decimate the globalists.

An updated Emperor Qin?

“First, kill all the globo-homos!”

Blogger Unknownsailor December 25, 2019 1:08 PM  

VD wrote:The one argument I didn't see you explicitly make is that free trade could selectively target strategically important industries, like agriculture and weapons manufacture.

That would be a separate case, the military case against free trade. To which free traders will resort to the canard that countries that trade don't war, which is false, and the correct counterargument that most countries have not engaged, and will not engage, in war with any one specific nation.


I'm sure you remember the old tripe that two countries with McDonalds extant don't go to war as well.

Blogger Clint December 25, 2019 1:22 PM  

Vox: First, Merry Christmas!
Second, this is one of the best presents you have given us old readers in a long time. Much appreciated.

Blogger Vachilles December 25, 2019 1:32 PM  

Make Mercantilism Great Again

Blogger Brett baker December 25, 2019 2:06 PM  

Nowadays SDL, we don't go to war, we intervene to defend, uh, democracy.

Blogger Frankfurt Bear December 25, 2019 2:10 PM  

Thanks a lot for this excellent article!

It will be of great benefit for any future discussion i'll have with globalists.
Although it is hard to convince globalists, that their agenda isn't beneficial for their country, their nation and in the end for themselves, it is still possible.
I have been under the spell of the globalist agenda for many years but finally recognized that I have been wrong all that time.

Blogger stevo December 25, 2019 2:23 PM  

I have some rhetoric I think might be good. How about "Racism is a human right". Too much?

Blogger furor kek tonicus ( no need to be racist, Ratchets can Karen better than anybody ) December 25, 2019 2:40 PM  

18. VD December 25, 2019 12:42 PM
I doubt it. I have other writing priorities.


wink, wink, nudge, nudge, say no more.

Blogger scipioafricanus December 25, 2019 2:53 PM  

Merry Christmas and thanks for the post, Vox!

Blogger Ominous Cowherd December 25, 2019 2:57 PM  

stevo wrote:I have some rhetoric I think might be good. How about "Racism is a human right". Too much?
Not sure that's going to do much. Try it, see how the target reacts.

Blogger Akulkis December 25, 2019 3:28 PM  

"Oh boy. A wall of text for Christmas!"

Don't abuse the term.
A "Wall of text" is a when someone posts some huge run-on, throw-a-bowl-of-spaghetti-at-the-wall bundle of accusations, in an incoherent mess, and further tortures the reader by not even being courteous enough to create paragraph breaks.

Anything divided into a large number, of mostly short paragraphs is anything but a WALL of text.

It's rather rude to equate one with the other.

Blogger stevo December 25, 2019 3:36 PM  

Hoping for exploding heads

Blogger CM December 25, 2019 3:40 PM  

stevo wrote:I have some rhetoric I think might be good. How about "Racism is a human right". Too much?
Not sure that's going to do much. Try it, see how the target reacts.


Discrimination as a human right is not even recorganized anymore.

Blogger jkmack December 25, 2019 3:45 PM  

This was a lovely Christmas gift for me. Thank you Vox for posting this.

Blogger jkmack December 25, 2019 3:51 PM  

They already do this with rare earth minerals.

Blogger Brett baker December 25, 2019 3:55 PM  

I remember reading something from old school libertarian Albert Jay Nock: "Workers in protectionist Germany live as well as workers in free trade Great Britain. But that doesn't seem to go into considerations of trade policy." Iirc.

Blogger Beardy Bear December 25, 2019 3:58 PM  

@27 Good rhetoric because it makes a target act due to emotion, but that action is unlikely to be productive to your cause or safety.

Blogger Joel Raúl Villegas December 25, 2019 4:03 PM  

Thank you, I was searching for this.

Blogger tuberman December 25, 2019 4:44 PM  

Akulkis wrote:"Oh boy. A wall of text for Christmas!"

Don't abuse the term.

A "Wall of text" is a when someone posts some huge run-on, throw-a-bowl-of-spaghetti-at-the-wall bundle of accusations, in an incoherent mess, and further tortures the reader by not even being courteous enough to create paragraph breaks.

Anything divided into a large number, of mostly short paragraphs is anything but a WALL of text.

It's rather rude to equate one with the other.


^^^True^^^

Blogger brbrophy December 25, 2019 4:48 PM  

this was the most masculine take on economics I've ever seen

Blogger Shane Bradman December 25, 2019 5:01 PM  

Economics is not independent from real world factors, and so should not exclude these factors in any theory. If the validity of a theory rests upon the exclusion of real world factors, it is a bad theory and must be dismissed.
Thank you for the essay, a fun read.

Blogger Shane Bradman December 25, 2019 5:04 PM  

Economic policy can be used as warfare.

Blogger Bad Attitude December 25, 2019 5:53 PM  

Thank you Vox. Well worth the time to read. Merry Christmas.

Blogger VFM #7634 December 25, 2019 6:23 PM  

Had no idea Marx's labor theory of value came from Ricardo.

And it appears obvious that Ricardo wasn't discarded as a charlatan because certain corrupt vested interests saw potential for themselves in making sure his ideas were promoted and taken as dogma.

Blogger Arthur Isaac December 25, 2019 6:42 PM  

I would still like to see a fleshed out model for Distributism see in Hillair Belloc's "The Servile State". Specifically historical examples of this system providing a working example of a non-capitalist/socialist system.

Blogger furor kek tonicus ( no need to be racist, Ratchets can Karen better than anybody ) December 25, 2019 7:10 PM  

and, of course, we should not neglect the Constitutional angle here in the United States:

the Constitution funds the Federal government via Tariff and Excise taxes.

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; "

note that "duties", "imposts" and "excises" are all various terms for taxes on international trade.


and the non-war income tax was passed by free trade Democrats explicitly in order to reduce tariff rates:
https://infogalactic.com/info/Wilson%E2%80%93Gorman_Tariff_Act


https://infogalactic.com/info/Revenue_Act_of_1913


https://babel.hathitrust.org/cgi/pt?id=hvd.hnfbr7&view=1up&seq=9&size=150
"AN ACT to reduce tariff duties and provide revenue for the Government, and for other purposes."




The Socialist Labor Party advocated a graduated income tax in 1887.[7] The Populist Party "demand[ed] a graduated income tax" in its 1892 platform.[8] The Democratic Party, led by William Jennings Bryan, advocated the income tax law passed in 1894,[9] and proposed an income tax in its 1908 platform.


thus, the Income Tax has *always* been a scheme by Socialists, Communists and Democrats to tax American citizens for the benefit of foreign nationals.

ie - of itself, an act of Treason.

Blogger Ben Cohen December 25, 2019 7:15 PM  

Always enjoyed your old school economics post Vox.

It's interesting to see that Ian Fletcher posits that the core of the negatives of free trade come from the inability to balance the international exchange rates. Does anyone here think that there will be a new Bretton Woods in the 20's by God Emperor Trump?

Blogger mike December 25, 2019 7:19 PM  

Great writeup, would be nice to have a website debunking leftists ideas they come-up with daily. Of course not all of them just those that serve as the base half- truths

Blogger LR27 December 25, 2019 7:50 PM  

The most disappointing thing about this piece is that after reading the whole thing, it is much more argumentatively effective to say “Ricardo Retardo”

Blogger Ominous Cowherd December 25, 2019 8:11 PM  

CM wrote:Discrimination as a human right is not even recorganized anymore.
Time we reversed that.
Shane Bradman wrote:Economics is not independent from real world factors, and so should not exclude these factors in any theory.
Most economists ignore reality in favor of their models, because that is a profitable way to tell policy makers the pretty lies they need. The simple models could be useful if they weren't misused, but how's a grabbler going to grabble like that?
Arthur Isaac wrote:I would still like to see a fleshed out model for Distributism see in Hillair Belloc's "The Servile State". Specifically historical examples of this system providing a working example of a non-capitalist/socialist system.
Didn't Belloc say it was how things were done in the Middle Ages? That's probably the place to look first for examples, then.

Blogger Don December 25, 2019 8:20 PM  

Vox thank you! I loved the return of the Great Depression! Merry Christmas sir!

Blogger Rex Little December 25, 2019 8:31 PM  

Vox, do you have any specific ideas for an American trade policy which would best meet the objectives you outlined?

Blogger the other boomer December 25, 2019 9:35 PM  

Merry Christmas to all!
What an excellent essay, Vox.
My choice of a home school economics book is Hilaire Belloc's "Economics for Helen." His critique of free trade, best I can recall, is that if the local makers of x can find something else to do, such that they are better off making y at a little lower wage but consuming the cheaper imported x, then the trade is beneficial. If there isn't an alternative trade for the x makers, then the nation should not import x.

Arthur Isaac: the ante bellum US economy, when most people were yeoman farmers, would seem to be an example of distributism, and even after until industry became predominate. Most people owned their own family farm, and even people who were not farmers often owned the means to support their family, maybe a blacksmith shop or a store.

Blogger Sargent.matrim December 25, 2019 11:43 PM  

I love this.

Simply speaking, if the nation is just the extension of the family (and it is), then basing your nation's health on the singular factor of wealth and profits is ridiculous and inherently harmful. Just as ridiculous as a family being structured just to make money. This will, and has been observed to, destroy the family unit, and eventually harm the wealth making capabilities of the family, because a family has many other needs to help it function in a healthy way. Making money, just being one of those needs.

We are human beings, not economic beings. There is more to life than just the singular marker of the profit margin.

This is why conservatives are so dangerous to the nation, just as dangerous as the progressive really, just in a slower, but just as methodical way. Because they see human beings as economic, and interchangeable units.

Blogger Sensei December 25, 2019 11:44 PM  

It's a Christmas miracle!

Blogger Shimshon December 26, 2019 2:38 AM  

Vox, this is the summation of your rethinking centuries-held assumptions on economics I have been waiting for. I have many of your posts bookmarked that say all of the above, but nowhere have you put it all in one cogent article. Well said! Better and more readable than any book. Any intelligent person who reads this and is still a free trade or open borders supporter can be written off as too short for the ride, or too dogmatic to be able to change.

Blogger Jack Amok December 26, 2019 3:45 AM  

Free Trade is another linear thinking failure. Ricardo's analysis is severely lacking in second-order effects. Well, politicians and stock brokers are linear thinkers of the first water. "I can change X and everything else will remain exactly the same!"

Blogger CM December 26, 2019 5:19 AM  

I would still like to see a fleshed out model for Distributism see in Hillair Belloc's "The Servile State". Specifically historical examples of this system providing a working example of a non-capitalist/socialist system.

I would like to see that, too.

But I think it's mostly been moot in the existence of many small nations with mercantalist policies. In such places, capitalism is given proper constraints, and the money makers remain close to the communities they exist in. However, the financial resources of successful businesses are also naturally limited so huge projects like Notre Dame, space travel, etc, can't happen without some centralized resource pool.

Distributism becomes a bigger concern when an empire (a very large country) breaks down the natural national barriers (legally recognized in states), forcing free trade between no longer recognized states, leading to wealth being drained from some locations and concentrated in the hands of very few who are far removed from the communities they "serve".

I would say the free commerce clause of our constitution broke America.

Blogger map December 26, 2019 5:39 AM  

Ben Cohen wrote:It's interesting to see that Ian Fletcher posits that the core of the negatives of free trade come from the inability to balance the international exchange rates. Does anyone here think that there will be a new Bretton Woods in the 20's by God Emperor Trump?

The problem does not get solved by balancing exchange rates. Look at the comparative advantage model Vox described: England gives up making wine and makes cloth, which means all of its former winemakers become clothmakers, while Portugals cloth makers become winemakers. Even with no capital/labor mobility, English clothmaking and Portuguese winemaking are rapidly declining fields with rapidly declining wages. These areas of economic activity grow poorer because of the surplus labor.

Now, what happens when you can't convert British winemakers into clothmakers, or Portuguese clothmakers into winemakers? Well, then you have rapid unemployment. In either CA case, you have rapidly increasing poverty in both nations due to free trade. That is before capital and labor mobility is even considered.

In fact, David Ricardo was disproved when England abolished the Corn Laws. This destroyed English agriculture and pushed the peasantry into the London factories, whose rapidly declining wages and grinding poverty were well-described by Charles Dickens. This was the result even though the "imports" were facilitated by the East India Company and under the exchange-rates regime of the British Pound.

Blogger map December 26, 2019 5:47 AM  

There is basically no way around this:

1) CA with no capital/labor mobility: Poverty in the remaining domestic industries that have to absorb labor from the dying domestic industry undone by trade.

2) CA with labor mobility: Basically, Portugal moves to England and England becomes poorer because of rapidly declining wages.

3) CA with capital mobility: England becomes poorer because industry leaves for Portugal.

4) CA with capital/labor mobility: England grows poorer twice as fast.

Blogger Brett baker December 26, 2019 5:54 AM  

Bretton Woods wasn't quite as wonderful as some portray it.

Blogger Avalanche December 26, 2019 6:31 AM  

@50 "Most economists ignore reality in favor of their models, because that is a profitable way to tell policy makers the pretty lies they need. The simple models could be useful if they weren't misused, but how's a grabbler going to grabble like that?"

Ooooh, very climate-changey of you, too! Great description of the basis of that whole scam!

Blogger Akulkis December 26, 2019 7:24 AM  

@49
"The most disappointing thing about this piece is that after reading the whole thing, it is much more argumentatively effective to say “Ricardo Retardo”"

That's not a critique of the logic presented in piece. That's just a manifestation of the recognition on your part that MOST PEOPLE ARE IDIOTS.

Blogger The Cooler December 26, 2019 7:44 AM  

Outstanding, Vox.

Blogger RC December 26, 2019 8:09 AM  

This was an excellent Christmas present and very timely. In my circle is an exceptionally bright young man headed into the study of economics. I was working on a paper to inoculate him against the lies about to be foisted upon him, but this piece is well beyond what I was preparing and is a superb starting point. Thank you.

For the Ilk's amusement but probably not their surprise, I was in a conversation with a college econ prof who thought well of herself. I asked her what she thought of Steve Keen's book and, I kid you not, she responded with an attitude of superiority that she didn't read Stephen King.

Blogger tublecane December 26, 2019 8:53 AM  

The more one studies our intellectual history, the more you encounter "words, words, words," as William Shakesman put it. Free trade as defended by free traders isn't truly free, anymore than free speech is free.

The mercantilism against which they tilt is bad if it's this or that particular strain. Or if you're good at it. Ditto protectionism.

Nationalism couple mean different things, from "live and let die" within one's country to bind everyone together for the maximum utility of the interest of the entire nation, as determined by those in charge. Which is allegedly what fascists and Stalinists did. Mao did so, and burned tens of millions of cheap Chinamen to make China a world power. That's obviously bonkers.

The salient point for us at this point in history is deciding what's more important: abstractions like GDP or the very existence of the nation. The former choice being inhuman.

Which is something even libertarians understand. I recall a title from one of their catalogues being something like In Defense of the Realm: the Role of the Nation-state in Liberal Revolutions or whatever.

Blogger tublecane December 26, 2019 8:55 AM  

@49- I don't find that disappointing. It's funnny.

Leonardo DiCaprio probably still feels bad about kids in high school calling him Leonardo Retardo.

Blogger Ominous Cowherd December 26, 2019 10:28 AM  

RC wrote:... I was in a conversation with a college econ prof who thought well of herself.

Herself. I see the problem. I spent 5 years in grad school for econ. Wasn't impressed by the females, prof or student.

Blogger Dave December 26, 2019 11:10 AM  

Video interpretation of Vox's essay. It doesn't take long to see who represents Nationalist Economics; https://twitter.com/GregNorberg/status/1209957230495199232

Blogger preapprehension December 26, 2019 11:53 AM  

It should be readily apparent that a nation possessing a government funded by tariffs will tend to be wealthier and more free than one with a government funded by income taxes and sales taxes, because tariffs are considerably less intrusive on the domestic citizenry, are considerably less expensive to administer, and are massively less economically disruptive than either personal or corporate income taxes.

The "more free" angle really hit home to me recently when my parents were contacted by the government; they have a couple bee hives which the government became aware of that (satellite photos?) and wanted to check that my parents weren't selling honey and not paying taxes. This is the same government that can't seem to control the nation's borders.

If the government were deriving its revenue from borders its incentives would be more aligned with its citizens in protecting the borders. Since the government is deriving its revenue from taxing its citizens, the incentive is to harass the citizens and ignore the boarders.

Blogger Ominous Cowherd December 26, 2019 1:16 PM  

preapprehension wrote:Since the government is deriving its revenue from taxing its citizens, the incentive is to harass the citizens and ignore the boarders.
Boarders? or freeloaders? Legal or illegal, they're swarming over the borders.

Blogger Student in Blue December 26, 2019 1:18 PM  

Merry Christmas, and thank you for the read.

"There is a hidden and implicit appeal to James Mill here, (or alternatively, to Keynes's critical formulation of Say's Law), in the idea that supply somehow magically creates demand."

Also currently known as, "Immigrants create jobs".

Blogger thalios December 26, 2019 3:00 PM  

@VD - Thank you.

Blogger map December 26, 2019 7:20 PM  

The bottom line is that trade within a sovereign state is radically different from trade between sovereign states. The wrinkle is basically this: sovereign states do things for political reasons, not just economic ones. The economic considerations are never the only considerations.

Basically, you never know when the supposed benefits of free trade are not simply manipulated by a sovereign state. All of these outsourced companies, for example, do not seem to realize that their "costs" are determined completely by the sovereign state in which they operate. China decides what the cost of a factory will be, what the workers are paid, what the material inputs will run and what taxes, regulations, fees will be. No one is building a factory in China by simply taking bids from local contractors and recruiting on ZipRecruiter. Everything is done with the intimate connection of the State.

In a free trade system, a sovereign can choose to practice mercantilism, run industries at a loss, seek political control of another sovereign state, and the state on the receiving end would never be able to stop this so long as they abide by "free trade" rules.

Blogger tublecane December 27, 2019 2:40 AM  

@72- Creating jobs is a bit different than creating demand, though it's just another causal step. The idea behind immigrants creating jobs is based upon the idea that jobs are waiting to be done but current residents won do them because they're lazy bastards.

Say's law is something else, based upon the idea that producing something leads to demand because once something has been produced you've got something to exchange, burning a hole in your pocket.

Not to say you must make demands upon others just because you produced something. You could consume it yourself or just sit there with it because you collecting dust. But there's definitely some connection.

Unlike between immigrants and jobs, because they can (and do) turn to crime and welfare. Also, we're talking about immigrants "creating" jobs with lower wages. Which is word games. It's not a different job when it's a white dude doing it for $15 an hour compared to a brown doing it for $9 an hour.

Blogger Student in Blue December 27, 2019 10:10 AM  

@75. tublecane
Creating jobs is a bit different than creating demand, though it's just another causal step. The idea behind immigrants creating jobs is based upon the idea that jobs are waiting to be done but current residents won do them because they're lazy bastards.

The approach I was trying to take was more along the lines of:
'supply creates demand' relies on implicit assumption of things that were never proven, much like illegals creating jobs. Instead, it's just assumed to be common knowledge and gee everyone should know things like that, duh. And how convenient, we currently have people shoving in more supply (immigrants) and expecting demand (jobs) to just conveniently work out because that's how the magic works, right? Cargo cult thinking.

I just wasn't clear about it I guess, apologies.

Blogger stevo December 27, 2019 10:36 AM  

I assumed the joke was obvious. Never assume.

Blogger Lightning in My Hands December 27, 2019 12:30 PM  

Enjoyed the scathing critique nestled in the Closer Look.

Blogger Nathan Hornok December 27, 2019 1:04 PM  

In my college days, we read Upton Sinclair's "The Jungle" in my Labor of Economics class. Reading these arguments, specifically about labor mobility, I've realized for the first time that the main character's problems could be laid at the feet of immigration. Upton was trying to demonstrate the horrors of capitalism where the worker becomes an atomized cog in the factory machine. Upon closer examination, the suffering of the main character could more accurately be laid at the feet of immigration policy that allows a Lithuanian immigrant to travel to a foreign nation with plunging wages (due to the massive influx of workers) where he is cut off from the social institutions and traditions that would have kept him from alcoholism and self destruction in his native country.

Blogger Unknown December 28, 2019 3:12 AM  

The order you have "Toward a Nationalist Trade Policy" is key. I 100% support it.

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