Tom Mullen: Economics Was Invented to Refute Trump’s Tariff Arguments

When Adam Smith wrote Wealth of Nations, it wasn’t to refute the “godless socialists” 21st-century Republican voters believe are taking over the world. It was to refute the kinds of protectionist ideas championed by conservatives like Edmund Burke and Alexander Hamilton in Smith’s day, Abraham Lincoln eighty years later, and Trump today.

Bastiat remade Smith’s case in 1848. Henry Hazlitt did so again in 1946. Still, these economic fallacies persist because they offer the victims of other bad economic policies villains they can blame for largely self-inflicted wounds.

The Broken Window Fallacy

Every time a Trump supporter sees “Made in China” on a pair of sneakers, he throws up his hands and says, “Do you see that? They’re stealing our manufacturing jobs.” He then repeats a version of Bastiat’s broken window fallacy. It goes something like this:

China puts tariffs on our products so our exports can’t compete in its markets. But we don’t put tariffs on China’s exports, making their sneakers cheaper than we can make them here. American sneaker manufacturing jobs go to China, but no Chinese manufacturing jobs come to the United States.

What is unseen is the money American consumers no longer have when the tariffs are put in place.

Not only do millions of Americans lose their jobs, say the protectionists, but all of the money they would have spent domestically is instead spent in China. This causes other American businesses to fail, cut production, or not expand as much as they otherwise would. The unemployed American factory worker doesn’t eat out at the local restaurant. The restaurant needs fewer wait staff and cooks, who in turn don’t have money to spend on new clothing, etc.

As Bastiat would say, this is “what is seen.” But their argument ignores what is unseen.

What is unseen is the money American consumers no longer have when the tariffs are put in place. For example, the tariff may result in them paying $200 for the same pair of sneakers they previously paid $100 for. That means they no longer have $100 they previously had after buying the sneakers, which they could spend on other products. Whatever jobs they were supporting with that $100 are now lost.

The Jobs

To this, the protectionist might say, “But the $100 savings on a pair of sneakers doesn’t replace the entire $50,000-per-year sneaker manufacturing job that has been lost.” This is just more of the same fallacy.

First, the entire $50,000 is not lost. All other things being equal, the unemployed sneaker factory employee goes to another job. The job may pay less, but that is only because the higher salary earned making sneakers when the tariff was in place was not the true market price for that job. It was artificially inflated by government intervention.

When the ledger is balanced, Americans, in general, are far better off without the tariff.

Regardless, what is lost is only the difference between the employee’s previous salary and his new one.

Second, one must compare the number of sneaker manufacturing jobs lost to the number of consumers of sneakers. While all of apparel manufacturing never employed more than about a million people in the U.S., sneaker consumers alone number in the tens or hundreds of millions.

When the ledger is balanced, Americans, in general, are far better off without the tariff on sneakers. They now have $100 for every pair consumed to improve their own quality of life and to create millions of jobs which wouldn’t exist if they didn’t have that extra $100 to spend.

The same goes for all manufacturing jobs “lost” to China and other countries. The lower prices Americans pay for automobiles, clothing, Apple iPhones, and Bobcats allow them to patronize those American industries which operate more efficiently than their overseas competitors. That’s called “comparative advantage,” something else free market advocates since Adam Smith have been educating people about.

Tariffs Are Just Taxes

The principle applies equally to production as to consumption. The steel and aluminum tariffs proposed this week purport to create jobs in the domestic steel and aluminum industries. But what about the domestic manufacturers who currently buy steel and aluminum from less-expensive foreign exporters? They now must raise their prices to cover their increased costs, making them less competitive in foreign markets and their consumers poorer by the amount of the price increases of their products after the tariff is levied.

Conservatives like to point out that American taxpayers “don’t owe other people houses.” I completely agree, but that sword cuts both ways. Neither do American taxpayers owe manufacturing workers a higher-paying job. And in the end, that’s all tariffs do: make American taxpayers subsidize artificially higher wages.

No matter what spurious arguments special interests make in favor of tariffs, they are, at the end of the day, just another tax.

President Trump says he is only levying the tariffs because other governments don’t treat American exporters fairly. “But those other countries aren’t lowering their tariffs! We need ‘fair trade!’” Virtually every mercantilist who ever lived made the same excuse, and it doesn’t make any more sense than any of the others. Even if another country continues to levy tariffs on its imports, Americans are still better off paying $100 for a given pair of sneakers than paying $200 for them, for all the same reasons.

But what if the other country enters a “free trade deal,” then subsidizes its manufacturers to give them an unfair advantage over our own? Bastiat eviscerated this fallacy 170 years ago with his “Petition of the Candlemakers.” Unless you’re in favor of a tariff on sunlight to protect manufacturers of LED light bulbs, you can’t be in favor of responding to subsidization of manufacturers in other countries with tariffs on imports entering your own.

No matter what spurious arguments special interests make in favor of tariffs, they are, at the end of the day, just another tax. No matter what foreign governments may be doing to “protect” manufacturers in their own countries, it never helps to respond by placing more taxes on ourselves.

Economics Applies to Everyone

And don’t forget, all the unseen, negative consequences of tariffs apply equally to foreigners. If they are taxing imports on automobiles, their citizens have less money to spend on other products. Their businesses that use imported materials must raise their prices and become less competitive. Any advantage they appear to gain in one sector, they lose in another, with the same overall net loss as we experience. The ability of foreign governments to protect their industries has a natural limit.

We’ve seen this movie before. The original wasn’t very good, and remakes are usually worse.

Tariffs are never beneficial to the economy and least of all when an inflationary bubble is about to pop. During the 1920s, the Federal Reserve augmented a natural economic boom with an inflationary monetary policy, turning the boom into a bubble. When the Fed finally began to tighten, the market crashed, and a recession followed. Republican President Herbert Hoover responded by signing the Smoot-Hawley tariff, which made an already-bad situation worse. He then began a series of interventions that differed from FDR’s “New Deal” only in scale.

FDR saw Hoover’s interventions and raised them, resulting in an almost two-decades-long depression. Contrary to conventional wisdom, it did not end because of WWII. The depression only ended when WWII ended and taxes and government spending were cut dramatically.   

We’ve seen this movie before. The original wasn’t very good, and remakes are usually worse. Hopefully, Americans are finally getting wise. A FEE article on the Smoot-Hawley tariff is trending on Google. Let’s hope Bastiat and Hazlitt start trending next.

Tom Mullen


Tom Mullen

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? and A Return to Common  Sense: Reawakening Liberty in the Inhabitants of America. For more information and more of Tom’s writing, visit www.tommullen.net.

This article was originally published on FEE.org. Read the original article.

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94 Responses to Tom Mullen: Economics Was Invented to Refute Trump’s Tariff Arguments

  1. Ƶĩppʯ (ȊꞪꞨV)

    regurgitating dogma does not make it applicable in all cases.

  2. C.L.

    WWII led to the cutting of government taxes and spending, hey?
    LOL.

  3. Ƶĩppʯ (ȊꞪꞨV)

    who knew the steel industry was sacrificeable to chicoms.

    What does the dogma say about sacrificing strategic industries to communists?

    what else should we sacrifice? how about rare earth metals? should we let the chicoms take all that too?

    economists never say anything about the rampant theft of intellectual property by chicoms, why is that?

    please enough with the dogma.

  4. stackja

    Red China will win the trade war if allowed. DT wants a strong USA. A weak USA won’t help the world. Why doesn’t Red China cooperate on South China Sea? Same reason as trade, Xi wants domination. Why do some collaborate with Red China?

  5. max

    Ƶĩppʯ

    do you have better idea, point us to the book article or copy past like me to read some other ideas.

    otherwise you sound pathetic.
    Ƶĩppʯ & Trump vs Adam Smith, Henry Hazlitt, Frédéric Bastiat

    well guess who I am going to believe

  6. Confused Old Misfit

    We’ve seen this movie before. The original wasn’t very good, and remakes are usually worse.

    The problem the “experts don’t acknowledge is that a great number of us do not like the way the present movie is playing out. Maybe the original movie wasn’t very good. But you have to ask yourself: “Who was it not good for?”
    This new movie needs to have some scenes re-shot and others cut. Maybe we’d better have a quick look at the old to check that the plot line stays true.
    The plot being to produce policies that produce the greatest possible good for the greatest possible number. Or, if you prefer, policies which produce the greatest number of opportunities for the greatest number of individuals. Sometimes these objectives are better achieved by governments doing little or nothing rather than a lot. Sometimes some nudging must be done to push things along in the desired direction.
    Tariffs are taxes and taxes are a blunt instrument sometimes used to “nudge” behaviors. In the current climate they are likely being used to “nudge” the negotiating behavior of some of the US’s trading partners.

  7. C.L.

    As I’ve said before – and I’m amazed that intelligent people cannot see this – Trump is applying a shock and awe strategy in order to re-calibrate and correct trade arrangements and deals which for decades have been tilted in favour of America’s economic competitors. There was a geo-strategic purpose behind such largesse during the Cold War but it is now time for orthodox national interest – not tactical welfarism – to govern America’s trade arrangements. This is policy reform at a paradigm level; it will not lead to catastrophic trade wars. It will lead to a rationalisation of bilateral and bloc-on-bloc trade for the United States.

  8. Driftforge

    It’s worth looking at the conditions under which free trade is advantageous:

    – where capital is not tied up in equipment that cannot be repurposed
    – where skilled labour can be instantaneously be retrained
    – where free movement of labour from one nation to another is allowed
    – where there is minimal to no sovereign risk of free trade ceasing

    In a nutshell, free trade advocates assume that transition is not a bitch; that transition costs cannot be imposed by competing nations; that labour is fungible; that treating labour as fungible has no societal costs… it goes on.

    Exactly who is ignoring broken windows?

  9. I remember many years ago an Australian company owner trying to start manufacturing some product in the US saying, or words to the effect, ‘All you have to do is capture 1% of the US market and you have it made.’

    Isn’t the US big enough to be self-sustaining no matter what happens in the rest of the world? Is the US now putting tariffs on everything?

  10. Confused Old Misfit

    C.L.
    #2653502, posted on March 6, 2018 at 11:45 am
    Trump is applying a shock and awe strategy in order to re-calibrate and correct trade arrangements…

    CL gets it! 100%

  11. Anna

    Edmund Burke championed protectionism? Would anyone like to provide citations? Adam Smith named Burke as his foremost devotee.

  12. max

    Still, these economic fallacies persist because they offer the victims of other bad economic policies villains they can blame for largely self-inflicted wounds.

    yes, blame guys behind a tree.
    blame is on us –you,me.. –people who elect present and past politicians.

    we are greedy do not want to work for peanut,
    we want clean water and air, no pollution
    we want safety

    well You can’t have your cake and eat it (too).

    We have met the enemy and he is us. —- but people like you need some else to blame.

  13. Roger.

    The job may pay less, but that is only because the higher salary earned making sneakers when the tariff was in place was not the true market price for that job. It was artificially inflated by government intervention.

    The market price of just about everything at present is inflated by government intervention.

    We’re not living in an Economics text book and world leaders like Xi are not always rational actors.

    Trump is trying to equalise things. It’s a short term tactic not a long term strategy. Electorally, he has the opportunity to do this because enough of those Americans displaced from jobs paying a reasonable wage due to supposedly free trade agreements voted for him. In any trade regime there will be winners and losers, but the political reality is that if that regime doesn’t result in a rise in general prosperity and well being it will be questioned. That’s democracy. Or perhaps you’d call it populism?

  14. Confused Old Misfit

    Max:
    You are not the enemy.
    Treat yourself like someone who you are responsible for helping.
    Then you might feel better about the world.

  15. Driftforge

    world leaders like Xi are not always rational actors

    Especially when rational is defined as per an economics text.

  16. max

    Confused Old Misfit
    thanks ill pop some pills from matrix

  17. max

    jobs will come back if you :

    work cheaper and harder
    work with out safety regulations
    work without environmental regulations
    no free medicare
    no social security
    have lower company taxes

    you do not need phd to know this.

  18. Faye

    America’s trade deficits are supposed to go on indefinitely until America is no more? That’s the globalists’ plan anyway.
    President Trump is calling a halt – even up the so-called ‘free trade’ with American tariffs and see what happens. What happens is the countries that had it so good against America wake up. They can either put up their tariffs more and play tit-for-tat or agree to have no tariffs.

  19. Biota

    As I’ve said before – and I’m amazed that intelligent people cannot see this – Trump is applying a shock and awe strategy

    These days events occur in an instant in time without any context past present or future.

  20. max

    Faye say:
    America’s trade deficits

    last year I get bike from china $500.
    did I make trade deficit?
    is anything wrong with that trade?

    your economic ignorance is fantastic, Sir.

  21. MPH

    Say’s Law applies here too. Ignore the dollar price, because that consumer of sneakers is also a producer. Therefore if the US economy becomes more self reliant the tariff will net out in dollar terms because while people pay more for sneakers, they in turn will be paid more for what they produce. The money price will settle out to reflect the relative availability of goods and services.

    One of the things that always that I always liked about Austrian economics was its consistency, from micro to macro – in this case though I think an isolated micro case is being extrapolated too far to justify an ideological opposition to tariffs.

  22. Paridell

    It is fanciful to claim that the Depression continued until after World War II. It is fitting facts to ideology.

  23. Kneel

    As others have noted, Trump’s “tarriff” and “trade war” statements are merely the opening positions he has. He knows he will need to compromise. He also knows that the collective “Phew!” (both domestic and international) when he dials it back to what he really wants, will be enough to get what he really wants in place and leave the “other side” thinking they dodged a bullet. You’d think the “smart guys in the room” might have noticed that this is very similar to any number of Trump processes – NK nukes, Mexico wall, et al. Yet still the market has apoplexy when he makes such statements, even before negotiation starts. Presumably, they’ll notice eventually and avoid the pathetic over-reactions in future – or they would, if they weren’t all SJW, snowflake, leftie knob-ends.

  24. I wonder why they call it the dismal science?
    No economist believes there are bad state actors.
    No economist believes trade is has and can be used as a weapon.
    One faction never changes their opinion despite mounting evidence (see Paul Krugman)
    The other faction never produces real bodies, just abstract notions.
    Neither works in an industry that will be exported “for the greater good”.

    Nothing dismal for the crystal ball gazers. They should call it the Utopian Unicorn Science. Where entire economies are changed because of theories, but none ever…EVER are held responsible (see Paul Krugman).

  25. Sinclair Davidson

    I wonder why they call it the dismal science?

    Wonder no more.

  26. Tariffs are taxes and taxes are a blunt instrument sometimes used to “nudge” behaviors. In the current climate they are likely being used to “nudge” the negotiating behavior of some of the US’s trading partners.

    Never thought I would see nudge policies praised on the Cat. It’s a new world.

  27. Colin Suttie

    Yet again some of the self-appointed smart guys are blindsided by a negotiating tactic. Some of you should read “Win Bigly” by Scott Adams, it’s pretty much all explained / predicted in there.

  28. Yes Kneel, I believe they call it the madman theory of international diplomacy, another Nixonian parallel in the Trump era. Nixon used it to try to end the Vietnam war. It was ineffective.

    The problem is that it’s all bluff, and if randos like us know all about it and are talking about it in comments on poliblogs, everyone knows it’s a bluff already so it won’t work.

  29. stevem

    Part of Trump’s logic is that certain industries cannot be allowed to wither and move elsewhere. Allowing China (or another power) to destroy industries critical to national security is suicide. Australian oil refineries are closing and we are now completely reliant on imported fuel to the extent that in case of war fuel stocks will run dry in just 19 days, rendering our armed forces immobile.
    Given the complexity of modern materiel, any war would be over before production of new planes and ships could ramp up and such self-sufficiency is moot. There are, nonetheless, goals that may be considered more important than economic rationalism.

  30. max

    Meet Flippy, the rbot hamburger flipper

    https://www.youtube.com/watch?time_continue=30&v=TW1mQtJaypU

    robots are stilling our job put tariffs on it
    ( sarcasm )

  31. struth

    Blah blah.

    This bullshit has been entirely rebuffed on another thread.
    The theories are all fine and dandy, but if you are not asking yourself why you can get cheaper from China, and if “why” doesn’t matter to you, you are what is technically called a dickhead.

    So typical of an academic mind to be focussed on one little part of a much bigger problem.

    You see it here again, quoting books and other academics, yet not listening to the reasons we have already given you as to why your argument is bullshit.

    To you, it doesn’t matter that you are buying a hot TV from a guy down the pub, because he is supplying it cheaper than the shops can, and your economic theory says …….that’s a free market.
    Well it isn’t.
    It is a corrupt market with terrible consequences for you in the long run if you keep buying from the corrupt supplier.

    There honestly should be a new term invented, ATV….Academic Tunnel Vision.

    Earth to you types, we get your argument, we see how the economics work.

    Now you try and answer this.

    Is buying the cheapest product fine even if it is cheap from corrupt suppliers who have successfully, through foul, not fair means, corruptly brought your ability to make it, (and to compete) to a halt?
    Please answer that question.

    Is this a free market?
    No rule of Law for some, only others?

    Seems to me like you see a free market as the mafia telling you to buy from their “suppliers” for what you know you could possibly get cheaper and better quality, but they won’t allow you to “purchase” it, because they killed the other suppliers and their families.

    Without acknowledging why the products are the cheapest available and if it is through corrupt means, it must be halted, you are encouraging further corruption and soon we’ll all be paying through the roof with money we don’t have.

    I really can’t believe the academic class expect to be taken seriously at all.

    ATV is a real problem.

    Typical A.T.V and insulated idiocy.

  32. struth

    jobs will come back if you :

    work cheaper and harder
    work with out safety regulations
    work without environmental regulations
    no free medicare
    no social security
    have lower company taxes

    you do not need phd to know this.

    And the UN is responsible for us not being able to get rid of this, and responsible for getting most of it put in place in the beginning.
    But not for China.
    Yet we are supposed to become buyers of Chinese goods, and never put a tariff up to combat this pure corruption rendering us unable to compete.

    I’ll try and make it as simple as I can for ATV sufferers.

    Get rid of the global socialist U.N. and other forms of Chinese corruption and we wouldn’t need Tariffs.
    But without acknowledging the entirety of the problem and only looking at the tariffs and nothing else, you are showing typical theorist ATV.

  33. Tel

    What is unseen is the money American consumers no longer have when the tariffs are put in place.

    As soon as government spends money, somewhere resources are reallocated to whatever the government wanted to spend the money on, and somewhere (possibly in future) tax must be paid (possibly with additional interest) to cover said expenditure. Tariffs neither make this greater nor smaller, they are merely one possible way to collect the money owing.

    Trump cut taxes already in one place, now he moves those taxes to another place. Unless spending is reduced this process is inevitable so don’t bother complaining. Stop with the magical thinking already.

    For example, the tariff may result in them paying $200 for the same pair of sneakers they previously paid $100 for.

    That’s just a silly example, firstly there’s not a whole lot of steel and aluminium in a sneaker, but anyway the economics is completely wrong. It costs about $10 to make a pair of sneakers, the rest goes to retail markup, advertising, sports promotions, etc. If you made the same sneakers in a Western country the cost might triple to $30 but this is unrelated to the retail price which is driven by what people are willing to pay.

    Stephon Marbury proved this when he started selling cheap Starbury sneakers, which aren’t quite as good as the sneakers that cost ten times the price, but they aren’t that bad either. Buyers judge the quality of the shoes based on price and they want an expensive pair of shoes to feel good about themselves. It’s a Veblen good.

    If you must use an example, at least use Peter Schiff’s example which is washing machines. For starters, there’s some steel in a washing machine.

  34. mh

    Does anyone really believe that Trump, a non-politician, could have successfully campaigned for the US Presidency using “The American dream is dead” theme if something hadn’t gone horribly fucking wrong?

    Fair dinkum, get your heads out of books – and out of your arses.

  35. struth

    Now, I’ve just gone and looked back at who Tom Mullins is.

    Never been outside a university since he became a student.

    God these people are full of themselves, left or right wing.

  36. It amazes me that people who accept that all mutually beneficial human interactions take place within accepted rules, norms and civil behaviour, yet they also believe that trade is always, but always beneficial no matter how much the rules are bent, perverted, arbitrarily changed and ignored.

    Is Japan bending the rules? No worries, keep playing, we can’t lose.
    Is Europe changing the rules on the run? No worries, keep playing, we can’t lose.
    Is China willfully breaking the rules, cheating, lying and stealing? No worries, keep playing, we can’t lose.

    Say what? Did China steal your intellectual property, drove you out of business and when you lodged a complaint they arrested some of your executives to intimidate you? No worries, join the line where there are hundreds of other WTO complaints. In about 5 years we’ll tell you there is nothing we can do about it. But you got cheap sneakers eh! mate. Good for us all.

    What’s that Mr Boeing? You put thousands of Americans on the unemployment scrap heap in Seattle, shifted your production to China, but now they say they won’t be buying any more of your 707s and 787s because they are producing their own? And the planes are carbon copies of your planes?
    Don’t worry, there are no losers in trade. You and your former American employees got cheap sneakers eh! mate. What’s a 707 or two compared to cheap sneakers. Good for us all.

  37. struth

    Could you get more of an insulated academic dribbling shit.

    Studied English and never really left school.
    These people are full of themselves, be they left or right wing.

  38. As I’ve said before – and I’m amazed that intelligent people cannot see this – Trump is applying a shock and awe strategy in order to re-calibrate and correct trade arrangements and deals which for decades have been tilted in favour of America’s economic competitors.

    Shock and awe did not work in Baghdad and it certainly won’t work in Shanghai. I’m not amazed that dumbarses like you are returning to Dubbya-era strategery failures. You have zero originality, so the fact that Dubbya was the worst President in US history with this specific strategy leading to a trillion-dollar disaster costing hundreds of thousands of lives does not matter to you. You’ve got no ideas other than schoolyard bully tactics.

  39. max

    mh
    “something hadn’t gone horribly fucking wrong?”

    Questions is what is wrong ?
    why western countries are going down in shit holes.
    what makes west successful before?

    honest money (gold,silver )
    small government less than 5% of GDP
    responsible individuals
    saving and family life ( no divorce )
    working hard.
    no excessive regulations

  40. C.L.

    Shock and awe did not work in Baghdad …

    Yes, Saddam Hussein is still in power. I forgot.
    This from Monty, who cheered the worst president in US history creating ISIS and sending crates of cash to Iran. As for the Iraq War, it was Democrat Party policy.

  41. mh

    I remember a popular economics Professor, Stephen Keen, who was teaching in Sydney pre and post the GFC. He was constantly in the Australian media from 2008 to 2009 spruiking the property collapse. He told viewers/listeners/readers that he had sold his Sydney apartment and was now renting because he knew the Sydney property collapse was imminent. While he was selling this message, the Reserve bank was reducing interest rates, in fact on one day in late 2008 the RBA dropped interest rates by FOUR percent. New PM Kevin Rudd had also decided to treble our immigration levels. We also had jittery cashed-up Chinese mainlanders wanting to protect their capital by investing overseas. Despite these dramatic changes, the Economics Professor didn’t change his message. Keen’s was so confident he was right because of one factor – the relationship between the average Australian wage and the level of borrowing required to get into the market.

  42. Keep on loving that Iraq War chicken, CL. Top strategery, that.

  43. Jack Lacton

    When the ledger is balanced, Americans, in general, are far better off without the tariff on sneakers. They now have $100 for every pair consumed to improve their own quality of life and to create millions of jobs which wouldn’t exist if they didn’t have that extra $100 to spend.

    I’m as free market as anyone going around but what’s actually happened is that jobs in lower economic zones have been shipped overseas while the price advantage has been picked up in medium to upper economic zones. When you have a mortgage and family in a rural location that is losing jobs, your labour is not fungible. You can’t sell your home, there are no jobs to upskill to, and you’re stuck. No wonder people are upset. Unsurprisingly, academics miss this point.

  44. mh

    In 2007, Tom (Mullen) released his first solo CD, A Glimpse of the Ether, containing 13 original compositions. Tom’s style has been described as “Powerpop with a hint of modern rock.”

  45. John Constantine

    India jumped the tariff on Australian chickpeas to sixty percent yesterday.

    Not being Trump, the media don’t care.

    Australia still imports as many Indian taxi drivers, 711 cashiers and door to door solar panel salesmen as we can fit in.

    Why not a tarrif based gender equity system on Indian migration?. Get to fifty percent Indian chicks by taxing all the Indian blokes?.

    They started the tariff war.

    Comrades.

  46. Dr Fred Lenin

    Governments must make every effort to maintain employment for the workers , and if this offends some ecommunists and libertarians who cares . The last thing governments want are large numbers of discontented unemployed ,this is especially true of China where the unelected dictatorship would be threatened if this were so . They can never get the workers to go back to being starving peasants again, those days are over .p

  47. Driftforge

    When you have a mortgage and family in a rural location that is losing jobs, your labour is not fungible. You can’t sell your home, there are no jobs to upskill to, and you’re stuck. No wonder people are upset. Unsurprisingly, academics miss this point.

    And you vote Trump. And Trump reduces taxes, invokes tariffs, reduces payments to leftist causes – causing your job to return, your ideological enemies heads to explode, and their wallets (and political energy) to shrink.

    Not everything is about increasing the nominal total – thought that is apparently rising. Some things are about getting doing right by your base.

  48. Confused Old Misfit

    m0nty
    #2653551, posted on March 6, 2018 at 12:37 pm

    Never thought I would see nudge policies praised on the Cat. It’s a new world.

    Not praise, only the acknowledgement of reality.

  49. Confused Old Misfit

    m0nty
    #2653556, posted on March 6, 2018 at 12:45 pm
    … if randos like us know all about it and are talking about it in comments on poliblogs, everyone knows it’s a bluff already so it won’t work.

    You haven’t met the Canadian Government yet, have you!

  50. Cynic of Ayr

    Another perfect example of an “intellectual” (especially an “Economist”) yapping away with his head up his arse, gleeful in $100 sneakers for himself, and not giving a rat’s arse about the bloke next door who hasn’t got $100!
    Move to china, Mate. You’d be a hit there!

  51. And you vote Trump. And Trump reduces taxes, invokes tariffs, reduces payments to leftist causes – causing your job to return, your ideological enemies heads to explode, and their wallets (and political energy) to shrink.

    The jobs will not return due to tariffs. It’s all a con, Driftforge. There are so few jobs left in the relevant industries due to automation that the benefit would be negligible anyway.

  52. cynical1

    Dead end argument.

    Australian made sneakers would cost too much to buy as would computers, flat screens and iphones.

    Unemployed Australians can afford some Chinese made sneakers.

    There are no winners.

  53. Confused Old Misfit

    Chinese made sneakers would cost too much for Australians to buy if Chinese workers were paid as much as Australian workers that are in work.

    Unemployed Chinese can’t afford those sneakers whether they are made in China or Australia.

  54. tgs

    When do we have to start seeing results before these moronic “4D chess” arguments will stop being put forward for any and every stupid tweet, utterance or policy coming out of the White House?

  55. Tel

    Did China steal your intellectual property, drove you out of business and when you lodged a complaint they arrested some of your executives to intimidate you?

    You must be kidding me.

    Name a person who had their intellectual property stolen.

    Here’s a tip: the unionized US auto workers never owned the IP to begin with. The people who lost their jobs were never entitled to jobs under US law… but they were still pissed about getting booted. The people who outsourced factories understood perfectly well they were exchanging built-up knowledge for cheap labour, and these people came out well ahead, so have most of the shareholders (not GM shareholders, talk to Obama about that). China has been upfront about the knowledge transfer from the get go, they made it a stipulation of doing any business there.

  56. Tel
    #2653684, posted on March 6, 2018 at 3:16 pm

    Did China steal your intellectual property, drove you out of business and when you lodged a complaint they arrested some of your executives to intimidate you?

    You must be kidding me.

    Name a person who had their intellectual property stolen.

    At this link http://www.industryweek.com/intellectual-property/what-could-be-done-about-chinas-theft-intellectual-property
    Just one of thousands that appear with a quick internet search.

    In an FBI survey of 165 private companies, half of them said they were victims of economic espionage or theft of trade secrets — 95% of those cases involved individuals associated with the Chinese government.”
    ….In one case, the FBI says Chinese nationals were caught digging in corn fields in Iowa in search of seeds developed by a U.S. company to be pest and drought resistant. While the theft of corn seeds may appear innocuous, in reality the company that developed them spent tens of millions of dollars on research to perfect the technology.

    And a related link about the FBI survey… https://edition.cnn.com/2015/07/24/politics/fbi-economic-espionage/

    You know better than I Tel that a price of a good includes the research and development costs. In the early life of a product these can be the major contributors to cost.
    I’m not sure how you can claim China has been up front and honest. There are thousands of testimonials.

    Even in something like the very niche Vaping Industry, ompanies who have spent months upon months to develop and perfect a Vaping Mod, find that within 5 days of release, Chinese companies are selling knock offs at half the price.

    So no I’m not kidding you Tel.

  57. @Tel
    I posted this the other day on another thread. You may have seen it.
    Death By China.

    https://youtu.be/mMlmjXtnIXI

    It’s directed by Peter Navarro. Trumps Director of Trade and Industrial Policy, and the Director of the White House National Trade Council.

    There is NO credible claim that China is fully up front and honest in her trade dealings. Not at a national level, not at a corporate level.
    China uses trade for purposes other than trade.

  58. Ƶĩppʯ (ȊꞪꞨV)

    Name a person who had their intellectual property stolen.

    I personally know people who have. These are not big time players either, small businesses who shifted manufacturing to china because of costs. Copies immediately came back into the local market through the back door. When queried about it the usual chicom reply is oh my uncle/cousin/brother is doing it there is nothing I can do about it.

    A better question would be who hasn’t had there IP ripped off. Even big a player like apple is about to get looted yet again by being forced to “partner” with a local to host its cloud as China has just passed a law requiring all chinese data to be hosted on chinese soil. And the only way to do it is to “share” IP with a local. WHy do you think google pulled out of china?

    If I was Trump I would send a bill for a couple of trillion dollars plus interest to china and start confiscating chinese owned bonds and properties.

  59. Mark A

    Problem with economic theory, as I see it, is, that it works a treat in the classroom or books, not so much in the real world.

    Same as communism, perfect in theory, lousy and brutal in real life.

  60. Same as communism, perfect in theory, lousy and brutal in real life.

    As some have pointed out, extant examples of Communism/Socialism (such as Venezuela) has worked. These are the outcomes when Communism/Socialism is done correctly.

    And while I’m at it, I’d like to ask what will the steel and aluminium tariffs actually do? Will there be a glut in the world and suddenly China and whoever else will have to sell at bargain basement prices?

  61. bollux

    “What is unseen is the money American consumers no longer have when the tariffs are put in place.” Extrapolate the argument and no Americans earn anything as they don’t work, so they can’t afford anything. All money has to be borrowed from the future. About where they are now. Australians are trying to emulate the same poverty stricken ideas. Anyone think America is wealthier than they were in the 50’s and 60″s?

  62. Iampeter

    This is a great post on the economic arguments against tariffs but the problem is that the issue isn’t really about economics, it’s about politics.
    Trying to persuade people who don’t have the same view of the role of the state as you to change their mind on economics is putting the cart before the horse and won’t work.
    You have to get politics right and only then will the economics of free markets make sense and sadly far too many posters here are big government leftists and so will not be convinced on the economics.

    As such you’re arguments around the basics of free trade that have been empirically proven over the centuries are just “dogma” and “textbook theories”.

  63. Chinese IP theft is real, no doubt, but tariffs are not the answer. As this post sets out, it only hurts consumers in the country applying the tariff. Those jobs are gone, never to return.

  64. C.L.

    There’s nothing funnier at Catallaxy than left-wing statist and Obama-Gillard zombie Monty pretending to be Milton Friedman.

  65. Mark A

    m0nty
    #2653759, posted on March 6, 2018 at 4:53 pm

    Chinese IP theft is real, no doubt, but tariffs are not the answer. As this post sets out, it only hurts consumers in the country applying the tariff. Those jobs are gone, never to return.

    So why did they remove the tariffs then? If this is the result.
    Looked like a good idea at the time? Or did economic theory suggest it?

  66. chrisl

    Re stealing intellectual property
    I know of an Australian bed manufacturer (yes there is one) who can’t put his new designs on his website because they will be knocked off and offered for sale at Harvey Norman at half his price.
    Economic theory is good in theory….

  67. So why did they remove the tariffs then? If this is the result.

    Tariffs had nothing to do with it. It’s a separate issue.

  68. the sting

    Reference .. The Modest Member of parliament ,Bert Kelly , who often wrote about tariffs and protection given to the Australian car industry , ”the cost of protection is ultimately borne by those who export ”, in his example it was the Australian farmers and Australian miners.

  69. candy

    This tariff business might be one of the big tests for Donald Trump. I think his MAGA campaign revolved around bringing industry back home, with decent paying jobs. Maybe he will do deals with other nations and in return decrease a tariff or not impose it, so that America regains a kind of power it once had?

  70. Iampeter

    robots are stilling our job put tariffs on it
    ( sarcasm )

    LOL made me think of this.

  71. Leo G

    I wonder why they call it the dismal science?

    That view of economics was a reflection on the “divine order” views of economists like Thomas Malthus that war, famine, pestilence and disease were positive checks on the negative consequences of population growth.
    Sinclair cites the view of David M. Levy who argued that “political economy was characterized as “dismal” because Carlyle, Ruskin, and Dickens were horrified at the idea that systems of slavery were being replaced by systems in which individuals were allowed to choose their own path in life”.
    Sydney Uni Trotskyist economist the late Peter Groenewegen (groan a vague ‘un) also prefered to attribute that view to pro-slavers.
    But it was abolitionist and free trade advocate David Ricardo who first portrayed that particular view of his friend Malthus’s theory in such a negative light.
    Levy links the dismal view about economics with the view of pro-slavers.
    A persuasive argument, but a logical fallacy.

  72. Arky

    When Adam Smith wrote Wealth of Nations, it wasn’t to refute the “godless socialists” 21st-century Republican voters believe are taking over the world. It was to refute the kinds of protectionist ideas championed by conservatives like Edmund Burke

    ..
    Got it.
    Socialists good, conservatives bad.
    At last! At least one fuckwit libertarian finally admits which side they are really on.
    (Hint: Monty is cheering them on)

  73. rickw

    Does anyone really believe that Trump, a non-politician, could have successfully campaigned for the US Presidency using “The American dream is dead” theme if something hadn’t gone horribly fucking wrong?

    And at the same time you have people writing books on “Crazy Rich Chinese”.

    Despite all the theory, something has gone horribly wrong.

  74. Stimpson J. Cat

    I wonder why they call it the dismal science?

    Lack of Bowties and Mankinis.

  75. Nerblnob

    I agree broadly with Tom Mullen.
    But I can also see that a lot of Trump’s policies are negotiating positions.

    What do I know?
    I never studied economics, I don’t even have a degree.
    I’m just a driller since forty years ago, who has moved into the business side of things over the last twenty years, which is necessarily international due to the nature of the business.
    90% of what I know about economics is experience and observation, and 10% from reading this blog.

    What I see is that tariffs and subsidies distort the market – Australian car manufacturing being a classic, not to mention the very stupid continuing tariffs on foreign used cars – and also that the Chinese will steal your product design.

    Like a Russian said to me, you can let them do it and lose a shitload of money, or you can fight them with lawyers and lose a shitload more.

    They’re taught that IP and the patent system are just western plots.

    So maybe Trump carrying a big stick is what they need to be threatened with.

  76. Confused Old Misfit

    What I see is that tariffs and subsidies distort the market – Australian car manufacturing being a classic, not to mention the very stupid continuing tariffs on foreign used cars – and also that the Chinese will steal your product design.

    Very true. Subsides to commercial operations are used to buy votes. The front story is that they are “creating jobs”. They are “buying jobs” to buy votes and using the voters own money to bribe them.

  77. classical_hero

    Libertarianism works in theory. I prefer to live in the real world.

  78. Nerblnob

    That’s true of any theories.
    They’re just attempts to understand observed facts and tools for trying to predict the future.
    Theories generally stay true in hard sciences, but a lot shakier , near worthless at times, in “social sciences” .

  79. Paul

    Trumps been banging on about this for years:

  80. Paul

    Trumps been banging on about this for years:

    link:

  81. Boris

    America’s trade deficits are supposed to go on indefinitely until America is no more? T

    American deficits are caused by the fact they, Americans, love to spend more and save less than most other people on earth, especially Chinese and Japanese. Not by China’s trade practices.

    China’s trade practices cause more harm to Chinese people, especially long term. This is collectivist ideology that the US should not be copying.

  82. Boris

    Libertarianism works in theory. I prefer to live in the real world.

    anh policy is based on some theory. It is better if it is based on a sound theory than a flawed one.

  83. Boris

    Trump is applying a shock and awe strategy in order to re-calibrate and correct trade arrangements

    So he knows tariffs are bad for America but uses them to bluff?

    I think it is more likely he thinks this is popular with his base, and will win votes. Whether this is sound economics does not even cross his mind. As with everything else it is all for show. Populism in its most naked form.

  84. OneWorldGovernment

    Boris

    Would you kindly explain how your shit is dated March 7 when in fact it is March 6 at earliest.

    Fuck off.

  85. md

    And what does Adam Smith say about goods being dumped in foreign markets and one-party states pursuing a long-term strategy of predatory pricing to destroy competitors in foreign markets.
    It’s like all this drivel of open borders some Libertarians go on about. Open borders wouldn’t just mean free migration of people. It would mean one-party states would send people to other markets (and that’s what they are: markets) to exert political influence, if not take control altogether.
    Libertarians need to understand that not everything boils down to simple equations and theories. The ‘people factor’ needs to taken account of.

  86. johanna

    You don’t see a lot of libertarianism in poor countries. It’s an indulgence of the affluent.

  87. cynical1

    Chinese made sneakers would cost too much for Australians to buy if Chinese workers were paid as much as Australian workers that are in work.

    “IF” is a big word…

  88. If countries limit how much beef or wool we can export into their country, is that a tariff? Or is that just a free market in operation?

    Maybe if Trump said no tariffs, but you can only import so much stee/aluminiuml per year, everyone would be happy.

  89. jock

    Just a thought but i am of thevopinion that voters including trump voters tend to use occams razor in seeing what they want in trade policy. Nobody has teally argued the benefits of free trade. We all know there is really very little really free trade and the punters know this.

  90. struth

    Basically, the idiotic position these “free trade by one side, even if the cheaper product is cheaper through corruption” walking lobotomies hold, is that the world is a unicorn fart utopia of fair and free trade now, and Trump’s going to come in and stuff it all up.

    But they hold to a theory…………………………………………………….!

  91. Ubique

    Trump is applying a shock and awe strategy in order to re-calibrate and correct trade arrangements…

    Yep. Dead right, CL. President Trump is a master negotiator.
    You have to love the way President Trump sows confusion, panic and fear amongst America’s enemies, the Australian ranks of which include the whole membership of the ALP and the Greens; and at least two thirds of the Turnbull government.

  92. Barry 1963

    Funny how a Labor government dismantled protection here and a conservative government reintroduced protection in the US (and blew the budget)!

  93. Iampeter

    Funny how a Labor government dismantled protection here and a conservative government reintroduced protection in the US (and blew the budget)!

    In Australia, conservatives are also largely responsible for the environmentalist bureaucracy which they first started building all the way back in the 90’s and middle class welfare as we know it.

    It’s almost like conservatives aren’t really an alternative to the left…

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