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A Sane Theory of Economic Nationalism

 

I HIGHLY recommend Kristor’s most recent comments on trade policy, which offer a coherent, traditionalist approach to foreign competition. To call Kristor’s views “libertarian” is grossly inaccurate. He recognizes the integrity of the community and its duty to protect members from economic harm.

Since it is difficult to read his points in the current format, I have chosen a few excerpts to highlight here:

Freedom does not mean lack of constraint; it depends upon proper constraint of what would otherwise be mere chaos. Only in the context of such constraints can behaviour be orderly (or therefore either good or bad). Determining the nature and bound of proper constraint is the basic matter of political discourse. Mercantilists get the constraints wrong at one extreme; doctrinaire libertarians at the other. Mere liberty does not suffice to order a society, because it does not suffice to order a life. But central planning overdetermines on the basis of inherently insufficient data, and thus leads to grotesque errors of resource allocation…

 

… My revulsion at China’s One Child Policy disinclines me to buy goods made in China. It devalues them in my eyes, so that I perceive them as less of a bargain. My personal moral objection to China’s policies thus affects the market price in the U.S. of all Chinese goods. I have no problem with such constraints. Furthermore there are any number of ways that the state can and should regulate commerce, so as to make a market possible in the first place. I have no problem with tariffs as such, or with their domestic equivalent, sales taxes. These strike me as no more than fees due to the operator of a market for participation therein. But I think high tariffs erected to protect errant domestic firms from foreign competition is – usually – a bad idea. I would rather not be doctrinaire even about that, and would not strike so strident a note about it, if it were not for the fact that historically the knee-jerk reaction of the federal establishment to any problem whatsoever is to form a department, issue regulations, impose fees, and mess things up permanently that would on their own sooner or later have achieved a quiet, satisfactory resolution. Regulations are not necessarily vicious in and of themselves, but they do almost always create new economic niches for private actors, in which new sorts of moral hazard – i.e., opportunities to profit exorbitantly by gaming the rules, whether licitly or not – are introduced to the economy, creating new sorts of problems that call out in their turn for new rounds of corrective federal action….

 

… Are there real economic wholes of which we are each a part, intermediate in extent between ourselves and the whole of mankind? Yes, certainly. We may characterize them as communities of shared interests. As members of such communities, we are each interested in their justice and goodness – and the prosperity to which they give rise – because it will tend to promote the goodness, justice and prosperity of the smaller communities of interest with which we are more intimately related; the communities, that is to say, with which we share more interests. If my nation does well, my town is likelier to do well; likewise also my business, my family, and that immediately related community of interest: myself. And, the more interests we share with a community, the more intensely are we interested in its prosperity. So, while we are interested at least a little in the prosperity of the global economy – no man an island, none wholly free until all are free, in Christ there is no East or West, and so forth – we are naturally most interested in ourselves and our children. As a family may through the agency or direction of the paterfamilias execute its shared understanding of its best option, given its circumstances, so may larger communities of interest, such as nations, order their acts toward each other – domestic social policy – and toward other communities – foreign and trade policy. Nations, then, are through their deliberative and executive agencies economic actors, at least effectually; and if Aristotle is right that to act effectually is to have actual existence, then nations are somehow real beings. Perhaps it is not more difficult – or easy – to understand just how a nation might be a real being, with properties, a point of view, intentions, and so forth, than it is to understand how several trillion human cells can be such a being. Nations then can have interests of their own that, while derived somehow from the interests of their constituents, are not necessarily coterminous thereto. A nation may intend or want something that none of its members intend or want, and indeed may need or intend to do things that none of its members would prefer. To say then that a nation is just a set of individual people is, not wrong, but grievously inadequate. It is like saying that a man is just a set of quarks. It is more accurate to say that a nation is at least a socially ordered collection of people, as a man is at least a socially ordered collection of quarks.

Nations are real. So, they may really act in their own interests. From that capacity to act follows the duty to act; and from the duty to act follows the duty to act justly (for, from that duty, and from the logic of morality, we may infer what it is just for nations to do, whereas absent such a duty, to speak of justice of and among nations would be to employ an analytical term simply inapt to the subject). From that duty follows also the right to act. So upon the actuality of nations hangs their sovereignty, and their legitimate authority to operate upon each other (and upon their constituents). They may trade with each other, or war, as men may (and they may deprive their constituents of life and leisure when need be, at least for a time, as men do when they train or fast for combat, or for the sake of overall vigor). Thus I do not at all reject the notion that it is legitimate for a nation to have a trade policy, or even to make war by trade. Trade war is to trade as war is to diplomacy.

From the actuality of nations it follows further that statistics describing the national economy describe real properties of a real actuality, so that there is really such a thing as the GDP, and a balance of trade – in just the same way that there is really a price, and a value, of IBM stock, or a weight of a man. And, just as IBM and men are real factors of the global market place, so are nations. As with men, the differences of perspective among nations are the motivation and reason for their trade. If we valued our products and possessions to exactly the same degree as our counterparties, we would not sell. So long then as communities of interest differ, there will be trade among them. There is no way to recuse a whole community from commerce altogether, and permanently.

If China intends dominion over us, we cannot simply overlook the fact – it would be a failure of duty for us to respond to an organized attack in a disordered fashion, or to refrain from response altogether. So there is a coordinating role that the federal apparatus should play in our trade with China. From this it does not, however, follow that mimicking the Chinese mercantilist tactic is the best way to deal with it, or to respond to their inimical long-term objectives. Rather than meeting them blow for blow in a trade war – like two untrained boxers flailing at each other – it might make more sense for us to employ something like aikido, whereby we would through our response subtly direct the impetus of the Chinese mercantilist attack so that their own momentum causes them to topple and fall. It may be that the best way to cut them down to size is to let them overextend themselves by their compounded diseconomies, and then implode…

 

… No; there are fundamental problems with opening a sick economy to competition from other sick economies that are not thus open. But there is no problem with opening a healthy economy to competition from sick economies, whether open or closed. That way lies supremacy. If we want to be rich and powerful, we must either be very virtuous, or very wicked. Like welfare, protective tariffs are a way of deferring our confrontation with this fact of our world, that cannot forever be avoided, and will certainly sooner or later collect its due. The wages of sin is death. Wouldn’t it be much nicer to be virtuous?…

 

….I am betting that if we rationalized our policies we’d thrash China no matter how little they paid their people. Think how it would be if all the incentives in our society were aligned so as to reward work and investment – i.e., so as not to penalize them, at all, or to subsidize sloth. Then, add what would happen if regulatory relief (and resultant tax relief) reduced the cost of all domestic labor by, say 30 percent, without reducing real disposable income. The explosion in growth and productivity would be staggering. And it’s productivity that is the statistic to watch when it comes to the competition between nations. The greater the productivity of labor, the wealthier the laborer, and the more powerful his nation…

 

…[T]here is no reason in the real world why pay scales in both countries could not equalize at a far higher level of disposable income than either country has ever enjoyed. Both nations could be far more prosperous than either of them ever has been. The logistical obstacles to a stably prosperous future for both China and the U.S. will take work and ingenuity to overcome, but they are not insuperable. It is not the concrete reality of things, but mistaken ideas that prevent that prosperity from happening. Errors of thinking wrongly limit our notions of what is reasonably possible, and carried into practice they misinform our decisions and misguide us, e.g., lots of Americans – unlike Jeff W. – are so ignorant of economics or the real world or both, that they think socialism is a great idea. The result is repeated failure to attain stable prosperity, and these repeated failures tend to reinforce the erroneous notions that created them…

 

… [W]e all play a regulatory role: we regulate ourselves. And, we must remember always that conflicts of values are inherent in every decision – that’s why one must make decisions in the first place; conflict between divergent opportunities is the raw material of choice. At every transaction, every participant in the market must decide whether to be honest and make good money over the long run, or dishonest and make better money right away. There’s no way to escape the requirement of this choice. It is ubiquitous in human affairs, because it is built into the basic structure of the universe, which is inherently moral (physics is a department of morality). We want to improve the ratio of honest to dishonest choices at the moment of decision. We can discourage dishonesty by regulating everyone, thus raising the cost of honesty (and lulling everyone into undue complacency about the integrity of their counterparties), or by terrific penalties for dishonesty, thus enormously increasing its cost. Note that both options are forms of state intervention in private affairs; in advocating the latter option, I am not advocating a libertarian recusal by the state…

 

…Maybe we should stop the American socialists next door grinding us down, before we get all heated up about the Chinese socialists on the far side of the planet grinding us down. Trade wars pose the danger of global depression, that would surely take us down along with everyone else. Freeing the American economy poses the danger of tremendous economic growth, and the final eclipse of socialism. That’s why most protectionists are socialists, and vice versa…

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