Now Reading
The Upside of Protectionism

The Upside of Protectionism

  • We constantly hear the mainstream bang in our heads the importance of trade, international trade in particular – bilateral agreements being seen as out of fashion. But we rarely hear the domestic market being brought up at all.

Authored by Serban V.C. Enache via Hereticus Economicus:

While everyone is bemoaning the US Administration raising tariffs on the ‘usual suspects’ and placing new tariffs on new players, like India, nobody’s talking about the situation’s upside or the upside’s potential to grow over time.

We constantly hear the mainstream bang in our heads the importance of trade, international trade in particular – bilateral agreements being seen as out of fashion. But we rarely hear the domestic market being brought up at all. Aren’t countries exposing themselves to numerous risks of varying degrees and different natures by allowing the unhindered flow of international capital to dictate their fate? Aren’t we, the people at grassroots, tired of politicians apologizing to trans-national companies about how they can’t give them sufficient tax breaks and other privileges in order to sway them to dismantle operations somewhere else and open them up here? Aren’t we tired with corporations outsourcing every little thing? Aren’t we tired of the narrow-minded focus on lowering costs while completely ignoring the necessity of giving people good jobs that pay big wages, from which workers can spend enough to secure better lives [without needing to use credit cards] while also allowing them to leave some money idle on their balance sheet for rainy days? [i.e. to postpone consumption into the future].

The home market is the most important of any nation, and for decades the prevailing orthodoxy is that capital knows best, that capital subservient to the Globalist outlook of world affairs. It’s dangerous to allow people to vote on their own fate. It’s dangerous to give people bargaining power, because then the State will surely become tyrannical as a result, will ‘oppress’ big capital, and that tariffs and Government industrial subsidies just end up raising prices, hurting the poor the most. I’m tired of this false empathy. The same analysts who are shedding [crocodile] tears for the poor and slamming tariffs are the same ones who, for decades, have relentlessly tried to conflate the stock-market with the real economy. Manufacturing jobs are vanishing? That’s great for the country, because the stock-market’s going up. Wages are stagnating, while big corporations have record profit? That’s great, because the stock-market’s going up and you can import very cheaply from China. Who decides international trade? Some democratic, accountable, and transparent forum? Of course not.

Richard Wolff, a Marxian economist, often tries to confuse the audience by conflating tariffs with economic warfare, citing WW1 and WW2 as the byproduct. It’s nothing short of sophistry. A tariff is slapped on foreign goods meant for the domestic market, with the aim to protect the market share of domestic firms and thus grow domestic industry, in both size and specializations [diversification]. It’s not the same as economic warfare. It’s not the same as stopping foreign economic agents and states from doing business [buying and selling] with third parties. It’s not the same as freezing or confiscating assets owned by foreign entities. It’s not the same as denying foreign shippers the right of passage or the right to dock, or seizing their cargo.

The argument about how much revenue tariffs can or can’t bring in is a red herring. The purpose of Government money taxation is threefold: a) to create permanent demand for Government currency, giving it thus extrinsic value, and allowing the Government to provision itself with labor and materials b) to drain income out of the economy, regulating thus the levels of Aggregate Demand and keeping prices in check c) to penalize and or incentivize various socio-economic activities and behaviors.

With the right type of taxation in place, economic agents pursue productive [wealth creative] activities, as opposed to unproductive ones [wealth extractive], and they are thus able to meet their tax obligations. The State’s goal should be wealth creation, full employment, and price stability. Real constraints for a sovereign state are: available land, available labor, available materials, and technology level. There will always be enough Government funds for this project or that program, so long as there’s political will for it.

Aren’t we tired of demand leakages at home, which make the country run far below maximum capacity? Aren’t we tired of exporting net aggregate demand, so that foreign actors can use those funds to bid up our asset prices? Aren’t we tired to compete against foreign enterprises who underpay and overwork their labor and rape the environment? Aren’t we tired of eroding national sovereignty by surrendering more and more of the country’s economy to trans-national, foreign interests? Let’s have businesses, large and small, invest in capital equipment and labor training, instead of expecting the State to do all the heavy lifting by itself, so that capital can get away with higher and higher markups while investing less and less. Let’s promote an economy in which land and labor are placed before finance – and in which finance serves public purpose, instead of subverting it.

Comparative advantage is a state of affairs that works for the wealthy. So-called free trade has worked out great for those at the top, but not for those at the bottom. Mainstream media and mainstream think tanks portray less educated workers as stupid and dangerous [dangerous for the well-to-do woke], because they favor tariffs. They never mention the fact that this particular trade policy falsely touted as “free” has been used as a most proficient weapon against them in class warfare. Offshoring and outsourcing didn’t lower total production costs. More so, the national system of production was rendered more vulnerable and risky [in civilian and martial terms] when we take into account the loss of critical manufacturing facilities and know-how.

“Free” trade was quite good in transferring income from labor [direct human production factors] to the managerial classes. The lower working classes aren’t stupid or insane. They recognize the changes of the last two decades haven’t helped them and wish for a new deal. China’s admission to the WTO, in spite of it not meeting the criteria, was a big factor in the decline of manufacturing jobs.

Liberals and SJWs who insist the Trump phenomenon was caused by the racism of white, straight, men in the US are lying through their teeth. While much focus was put by Trump, Sanders, and others on NAFTA for its negative impact on US jobs, the major culprit was China. Many US factories that moved to Mexico did so in the logic of matching prices from China.

See Also

Professor Brad DeLong explained how the Ricardian [mythology] view is unrealistic and why it favors the rich.

“[…] comparative advantage is the ideology of a market system that works for the interest of the wealthy. For comparative advantage is the market economy on the international scale, and the market economy is […] a collective human device for satisfying the wants of the well off, and the well off are those who control the scarce resources that are useful for producing things for which the rich of the world have a serious jones [fixation].”

In the early ’90s, more and more manufacturing jobs in the United States went overseas. The trend amplified, as entry-level jobs in some white-collar professions like the law now share the same fate. In the realm of software, few positions are left in the US, which will be ceded to experts in India, because the ideological consensus holds that the training of a new generation of specialists at home is untenable. Meanwhile, countries like China, South Korea, and Japan – who practice protectionism – don’t have to worry about such issues. “Protectionism causes depression” is nothing short of fear-mongering. People at grassroots recognize this scam without being savvy in trade and econ theory. They vote on instinct and their instinct is correct.

Mainstream economics, the foundation of policy-making in most countries, isn’t grounded in scholarship. It’s propaganda, highly valued bs because its proponents put out fancy equations when challenged. There’s nothing wrong with their math, but everything’s wrong with their assumptions. See one stark example here.

Tariffs are one way to strive for economic and geopolitical independence, but they’re just an instrument. The larger scheme has to rest on investment, training, diversification, and development. A nation’s true wealth rests in the full and multifaceted development of its productive powers, not its current exchange values. A nation must never sacrifice the former for the latter, for the promise it will be assured an important and comfy role as a mere cog in the grand scheme of Globalization. Autarky or efforts toward autarky have been described by the mainstream and the wannabe anti-mainstream as the goal of racists, nazis or fascists, and misanthropes.

The hypocrisy is telling, no? It’s good for a household to be independent from the grid [from everyone else] in terms of electricity; but when countries attempt economic independence [through their State institutions and policies], it’s bad and dangerous – it’s a case of tyrannical Government, led by racist extremists. According to these enlightened Globalists [some of whom are capitalists, some socialists, and others, mixed – like DiEM25], a country, any country, should always be dependent on another’s labor, another’s equipment, another’s fuel, another’s know-how, another’s military. To try and minimize those relations of interdependence is a crime… a declaration of war against civilization itself. To these humanist jackals I say, don’t worry, you’ll all get comfy, prestigious jobs as controlled opposition in the next paradigm; so spare us the hyperbole, the doomsday scenarios, and your demonization of independent, national, political economies.

Liked it? Take a second to support The Duran on Patreon!

11
Leave a Reply

avatar
8 Comment threads
3 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
11 Comment authors
TjoeHelen BM4A MMTArthurRetara Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
Joe
Guest
Joe

Bs!

Ellie Donald
Guest
Ellie Donald

The great empires of the world never become industrial powerhouses while on free trade. On the contrary, they used protectionism to grow their industries and educate their workforce – and then imposed free trade via gunboat diplomacy on foreign, less advanced nations, and bled them dry of resources and slave labor.

M4A MMT
Guest
M4A MMT
Jonathan Bethune
Guest
Jonathan Bethune

I’m still a little enamoured with the concept of ” gross domestic happiness ” I’ve experienced a bit of life and have had the great good fortune to be able to educate myself in various disciplines and thru it all there was ” me” just me. It was me making me laugh , making me sad, moving in and out of depressions and the intellectual rigors of learning something new. Wondering at it and the why of it all. It was always me failing and learning from the mistakes, succeeding in my own goals not those of others because it… Read more »

Thraxite
Guest
Thraxite

Aren’t we (the world) tired of the US dollar being the global reserve currency so that America never has to pay for anything, just print more worthless paper. Its’ not the US being ripped off, it is the world being ripped of by the US. Yet a yank can never be anything but the victim in their own minds. They are the problem, not the solution. Lets get rid of their fiat money and let the Americans implode quietly on their own. Poor virtuous America, the world has taken advantage of you… Pull your finger out, you no longer have… Read more »

Retara
Guest
Retara

The author is Romanian, not American.
Other countries, not just the USA, suffered and are suffering from deindustrialization and the race to the bottom.

M4A MMT
Guest
M4A MMT

Every country that runs fiscal deficits is basically “printing money” in the sense that they’re adding net financial assets to the nongovernment sector. Back in the day, printing money meant not issuing interest-bearing bonds to match the fiscal deficit funds spent. Today, most countries who run fiscal deficits, issue interest-bearing bonds to match those funds spent over and above their tax revenue. All government debt in the world = worldwide private sector savings. You want to dump the USD, fine, but don’t pretend the rest of the world doesn’t run on fiat and on bank money [private IOUs leveraged off… Read more »

Regula
Guest
Regula

This is a rather confused article. While it is obviously to any nation’s advantage to produce as many of its goods inside its own borders, and to produce a bit more than what it consumes so as to export some of its goods to other nations who for reasons of raw materials, lack of technology or equipment cannot produce all their goods, tariffs are appropriate only if they protect such inland production. Just about every country has such tariffs or even import limitations for such protectionist purposes and/ or subsidies on vulnerable production like farming. Autarky, or as close to… Read more »

Arthur
Guest
Arthur

You’re mistaken. Russia levied counter sanctions, it didn’t just subsidize its sectors.
The article makes a distinction between tariffs as a tool, part of a bigger, clear plan, and economic warfare. I’ve read previous articles from this author, in which he criticizes Trump’s policies, and points out that the US doesn’t need tariffs per se, in order to reindustrialize.

Helen B
Guest
Helen B

Tariffs protect home grown industries and agriculture and prevent dumping. Ours were removed in the 70s by an idiot PM who said that if our industries couldn’t compete they deserved to fail … a Labor PM … when any fool could have told you that no manufacturing business whose workers’ wages and conditions are protected by unions can compete against 3rd world wages and conditions. So our industries went to the Philippines, then to VietNam and Cambodia and China. We used to have full employment, and houses that cost the equivalent of 2 years’ basic wages. I doubt you could… Read more »

Tjoe
Guest
Tjoe

As an entrepreneur I find that the author is not far off base. I worked to make higher efficiency bandsaws for primary processing of hardwoods, which is the oldest manufacturing sector in the USA. My state went from 95% covered with virgin hardwood forests to under 15% om 1920 and today is around 20% forested. While industry was fueled by the hardwood timber resource, supply is definitely limited, but renewable. My saws operate at 2x the tension. You would think that functioning state of the art saws that increase thin lumber yields by 25% would be a viable new value… Read more »

Copyright DRN Media PLC 2019. RSS: http://theduran.com/feed

Scroll To Top