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All right, you guys introducing my good friend, our good friend, the heroic Sheldon Richman.
Uh, he is the managing editor of the Libertarian Institute with me.
Uh, welcome back to the show.
How the hell are you?
I'm doing great, Scott.
Thanks for having me back.
Always glad to be with you.
Yeah, man.
It's been way too long since I had you on the show and I'm glad we have a chance to talk about what we're talking about too.
It's, uh, one of your comparative advantages here talking about trade and economics with us.
So, uh, President Trump has announced new tariffs, especially, I guess, just steel and aluminum to put America first and, um, build up America's economy.
And you say that that's foolish or worse.
Why is that?
Yeah, it's, yeah, it is worse than foolish.
Well, Trump, uh, this, uh, to give Trump credit for a moment and I'll put quotation marks around that word.
This is actually a position, uh, that, that he seems to have been steadfast about for, I don't know, 20 years or more.
I mean, we usually think that, uh, Trump really has no ideas, no, no commitments.
He just says whatever is going to advance him.
He's a demagogue, but if you go back over his career, he seems to be pretty consistent, uh, against, uh, freedom to trade.
Uh, you know, we call it free trade, which is okay as a shorthand, but you know, it's not trade that's free.
It's people, people trade.
So the, he's been against freedom to trade, uh, for a very long time.
Let me get the credit to him out of the way for being at least consistent, but he's consistently bad, not consistently good.
Um, well, you know, the case against, uh, trade restrictions, restrictions on people's, uh, trading activities, whether or not there are national boundaries involved goes back, uh, well, way before Adam Smith, maybe we find this in other people, but Smith formalized it.
And then in America, we have great works by Henry George and William Graham Sumner in the 19th century.
And then the 20th century, you know, with, uh, Oh, Friedman and Mises and, you know, various schools who believe, uh, generally believe in the free market have been staunch free traders.
And I've pointed out like over and over and over again, I mean, so many times why free trade is good, why leaving people free to trade is good and why restrictionism, you know, and I don't like to call it protectionism that, that seems to give it too much credit restrictions, uh, make us poor.
They may in the short run reward some cronies, some special interests like Trump's policies, uh, this time, uh, do we'll do, uh, but they hurt everybody else.
And so the cronies are always a very tiny minority of the, uh, workforce and the firms and industries in a, in the country.
So while it helps a very select few, and I do mean tiny, tiny, tiny, especially in this age of, uh, robotics where, uh, heavy plants have very few people in them because automation and the computers and robots do the work.
Uh, it may help a tiny group of people, but it hurts every, all other companies that use those materials, steel and aluminum in this case as inputs for their products.
And a lot of those are exporters.
So now they're now at a disadvantage and it harms consumers.
So you put all those people who are hurt together, get that number and put it up against the number of people who will be benefited in the short run.
Let's say there's no contest.
You're clearly sacrificing almost everybody to these few well-connected people, people, workers or firms or business owners and managers.
Uh, it's a joke.
It's a joke this time they've invoked the national security, but that has been done many times.
Uh, the, even the numbers don't hold it up.
There's just no national security argument for this, but conservatives unfortunately seem to be falling for this.
Uh, Fox news and, uh, our old friend, Dan McCarthy, who's great on so many things, uh, think this is a good idea and it's just, there's just no case for it.
Period.
All right.
So first of all, on the national security thing, I want to, you brought that up just to dismiss it.
And I just want to chime in real quick.
I read a great piece by Steven Chapman at the Chicago Tribune where he linked, I believe, uh, even linked to the statistics where he said, when it comes to aluminum and steel, I don't remember exactly, but it was, I think less than 5% in both cases, uh, come from China.
And, and I think especially on steel, he said, America imports steel from like 10 different nations.
And of course, if there was a war with China and America needed steel for its tank divisions or whatever it was, uh, obviously all of our European allies and our Canadian allies and so forth, uh, would ramp up production to help us.
You know, as you said, the numbers, they just don't bear out, even if hypothetically you took on the crisis.
I can elaborate on that.
Uh, the, I think it's an article in the, at the Mercatus Institute, uh, today or yesterday, which, uh, has some also also has numbers, uh, national defense and homeland security together, uh, used only about 3% of total steel shipments.
That doesn't mean imports.
That means all steel, uh, in the U S in 2015, 3%.
Uh, as far as where we get foreign steel from, uh, first of all, the U S makes the bulk of the steel that, that, that we use in this country, like 80%, sorry, 80 million metric tons.
Uh, another 30 comes from imports, but the top seven providers are all close allies, Canada, the EU, Brazil, South Korea, Mexico, Turkey, and Japan, uh, together, according to Mercatus, they supplied four fifths of the steel imported in 2016 and they would be reliable partners.
And, uh, another economist, Scott Sumner pointed out that, uh, the next world war is, will be a nuclear war.
So we're not going to need steel and smaller wars are going to not affect these allies.
So even in the sort of worst case, there's not a national security.
Yeah.
Got to admit, it's pretty hard to imagine a real shooting war with China that didn't end up turning to H bombs, especially with the Americans.
Yeah.
And you know, look, and you can easily go use the reductio ad absurdum for this, because what, what can't be the, uh, a claim to be a matter of national security.
If you're going to, if you're, you're going to control steel and, uh, and, uh, aluminum and other, what about other metals?
What about other materials?
What about, um, ideas, uh, ideas and scientific, you know, scientific ideas and technological ideas you have to then oppose the free marketplace.
If you're in ideas, if you're concerned about national security, because who knows what ideas about weapons people will get just from scientific conferences.
So should we keep, make sure the scientists stay home, not let them go out of the country to engage?
I mean, you could stop giving them ideas, Sheldon Richman.
I'm telling you, well, they probably thought of it.
Uh, I know it sounds ridiculous.
And some will say, oh, that's ridiculous.
But once you open the gate to national security, every businessman can come to Washington hat in hand saying we're vital to national security.
You know, Khrushchev once made a joke that maybe the most vital, uh, good for national security is, uh, buttons because it helps hold the soldier's pants up.
Imagine how do you fight if you're trying to hold your pants up?
Cause you don't have a, you know, you don't have the buttons, right?
So, uh, you can take this, it becomes ridiculous fairly fast, but it's not because of our side.
It's because of their position is ridiculous and it's really sad to see.
Well, you know, it's an old story.
Conservatives, you put the word national security on order to defense or military and the conservatives, uh, you know, eat it up.
Yeah.
Uh, the great John T.
Flynn pointed this out back in the thirties in his great book, uh, as we go marching, he said, you know, conservatives don't like a big government or big government spending.
If it, if it seems to be social welfare, but just, just slap the word defense on it and they'll, they'll be right with you.
They'll go for any amount of spending.
If you call it military.
Same thing.
But so here's the thing then I, uh, happen to remember Ross Perot saying something to the effect of, listen, the reason that we have, um, you know, working classes in America who can afford to own their own homes and have a middle-class kind of standard of living, even, uh, when they're doing, you know, manual type jobs on assembly lines and this kind of thing is because of protectionism in the first place.
And that ultimately the world is a very poor place.
And if it's just a race to a, to the bottom, what you're going to hear is this giant sucking sound as all of America's good factory jobs go off to Mexico and go off to China.
And so maybe you're arguing that, well, putting up a bunch of protection and tariffs is not going to bring those jobs back.
Or you're saying that even if it does, it's not worth it for people paying higher prices and so forth.
But aren't they right that pulling the rug out from under all that previous protectionism has, you know, really helped to accelerate.
Um, you know, cause it's not just, it's sort of the free market, but it's almost like in, in Russia shock therapy, right?
Where there's no soft landing.
You take a bunch of factories that were protection into existence and towns up around them all across America.
And this is now what we call the rust belt where all these former factories, it used to be the steel belt.
Now it's the rust belt cause nothing's going on there anymore.
And isn't that because of free trade in a way?
Well, it's not because of free trade.
Uh, for one thing, what's what kills factory jobs is, uh, is not primarily trade, but, uh, technology.
And many economists have shown this to be the case.
Uh, you just need, uh, very few people in factories anymore because they're all highly computerized and roboticized.
So if you look at American industry output, is it an all time high in the United States?
And you can find the numbers.
Mark Perry has written about this at AEI a lot.
A lot of people pointed this out.
Don, look at Don Boudreaux's, uh, cafe Hayek can find the numbers, uh, manufacturing output and exports at an all time high.
Now industrial jobs have been falling since the seventies pre WTO pre NAFTA because of technology.
So blaming trade.
And when you blame trade, you're also going to be scapegoating other countries like China, uh, is, uh, is, is wrong.
And it just sows, uh, resentment and hostility among countries.
If we're concerned about national security, let's not sow resentment and hostility against other countries.
Cause that's what leads to conflict and war.
Well, that's an important point, but what about, look, Mexicans just work cheaper than the, the amount of wages Americans would like to make.
And so therefore you may carry your air conditioners.
You're just not going to hire people from Michigan anymore.
That's not what the, you know, it's harmed the steel industry.
You, you started off talking about steel.
Okay, sure.
So let's keep it on steel.
All right.
Um, steel, there was a very good piece in Bloomberg yesterday, Googling it.
I'm sure we'll find it.
The steel industry has basically cut its own throat.
And here's why I look after world war two, the U S was the only industrial power left standing.
So in effect, steel got a massive subsidy.
Not only has it gotten a lot, has it gotten a lot of money and a trade protection over the years, but it had the benefit in world war two.
Of course it had all those government contracts in world war two and afterwards and before that, but it had an added benefit from the government.
The government destroyed its competitors, right?
Germany and Japan and Europe was left in a shambles.
So any other steel, uh, factories there were, were wrecked.
So the U S was the only industry standing.
And so that gave everybody the feeling that, Oh, America is a economically superior world or we're dominant.
And that's the way that's how God wants it.
And that's the way it's going to be.
Except the predictable thing happened without competition.
You, the U S steel industry went, got lazy.
They drifted, they coasted.
And they, when Germany, Germany and Japan came back and then other, other countries like South Korea came back, they adopted the newest technology that the American industry was very slow to adopt, uh, in the 1970s and eighties when U S steel and the other, and the others were either closing or whining to Washington, a smaller company called new core steel, which is known as a mini mill and feels like niche, niche, uh, demand for, for specialty steel was booming and opposed a to the, to, uh, from the government.
So this is bogus.
This is not the Mexicans.
This is not cheap, unskilled labor.
Steel is a high skilled area right now.
You got to know computers and programming and stuff like that.
The day of the old mill where, um, you know, thousands of people worked, uh, is ridiculous.
There's a mill, uh, around Pittsburgh.
Now I read about that, that, you know, once had a, I don't know, 1400 workers and, uh, you know, today has like 14 workers, but it's not because it's turning out less steel.
It's because we don't need people to do that anymore.
We need people to do other things.
And that's what trade does.
It's it guides people into, into different areas.
Well now, but so Mexico would have been a bad example on steel.
China's the example on steel that they use.
Right.
And then, but the same argument is that Chinese labor is cheaper.
They don't even need these expensive machines because Chinese laborers are a dime a dozen or something like that.
Compete worldwide with high tech steel firms.
The fact that they have, uh, you know, slews a slew of, uh, unskilled workers, that's, that's not how it works.
They're not going to make quality steel products like that.
And then we only import a very tiny percentage from, uh, uh, from, uh, China.
So it's got nothing to do with China.
This is typical Trump.
He likes to say China, you know, that's how he emphasizes it.
He's a, he's just a, uh, he, he, he tries to scare the American people with, you know, these bogeymen.
Maybe he believes it.
Maybe sincere that I don't know if that would be worse or I don't know if it will be worse that he actually believes it, or he's just a liar.
Uh, it's, but it's bogus.
We're not, when we're not threatened by unskilled Chinese workers.
I mean, that's just ridiculous or Mexican workers.
Yeah.
You know, it's funny.
I was listening to that circle jerk song, a brave new world where he's talking about life on a factory line.
And is this really what we're made for and all that?
And it was funny.
Because that song was recorded at the end of that era when, you know, having a, a middle class or, or, or working class sort of drone existence on an assembly line in America was becoming really a thing of a, of the past.
But so here's the problem though, right?
Is they'll teach you in college.
Well, you know, you've got structural unemployment and that is that, you know, as the economy changes, eh, some people are going to be out of work.
But so what that translates into in human terms is a bunch of people out of work and they don't know what to do.
And maybe they can't with the level of education that they have get a job that pays as well as they would have been getting paid if they could work on an assembly line, like back in the day.
So you're saying it's not really the Chinese, it's the robots.
But so I'm changing the subject then I guess people are feeling this economic anxiety, man, there, this is how Trump got elected.
Right.
It was people, it wasn't race.
It was that people feel like the people, the, the centrist establishment consensus is not concerned with our wellbeing because look at us, we're screwed.
Well, look, but it, you know, it wasn't just one thing.
Yeah.
Economic anxiety in some places.
That was your margin right there, right?
Culture and other things.
Yeah.
But okay.
But that's the result of ignorance and the fact that the politicians have an interest in telling people that and sowing the seeds long before Trump of selling the seeds of anxiety.
Yeah.
That's how you get elected.
You say, look, elect me because look what these other politicians have been doing that created all these problems.
So there's that.
And look, the world is always uncertain.
This is not the result of government.
That itself is not the word of result of government policy.
It's just in the nature of things.
There is always change, changing consumer tastes, throws tons of people out of work every year.
So should we tell people they can't stop buying what they've been buying all along because that's not fair to the people who make those things?
Technology, as I already said, throws many more people out of work than trade does.
Should we, should we now control technological innovation?
Should we have bureaucrats and their economic experts controlling the flow of innovation so as not to be too disruptive?
Who has confidence they would know what the hell they're doing?
You know, there was a time when 80 percent or more of Americans worked on farms because the machinery and the and the new seeds and fertilizer and all that stuff required that much labor.
Should we have stopped that?
Yeah.
Those people lost jobs.
Lots of them found new jobs.
Now, I'm not saying there's not personal hardship.
But that's life.
Now, government can minimize the hardship by doing lots of things, sweeping away all the regulations that make it harder for people to get retrained and move into different areas, get rid of occupational licensing, get rid of land use controls that make it difficult for people to move from place to place to look for the best opportunities.
But to try to keep change from happening or to control change, to make it a manageable flow, do you realize the totalitarian state you'd need to have to try to accomplish that?
And of course, it wouldn't do any good anyway.
You just put a bunch of power mongers in charge of things.
And, you know, as Hayek puts it, points out in The Road to Serfdom, you know, the worst get all get on top in a case in a regime like that.
So, I mean, people need to think about what they're asking for.
They really want the state.
They want politicians to manage change in order to keep anybody from ever suffering any economic hardship.
It's ridiculous.
We need to teach people this is the problem.
People don't understand the economic way of thinking.
They don't realize that if you protect one group of workers, you hurt everybody else, including exporters.
When the exports fall, is Trump going to say, hey, that's because countries aren't lending in our goods?
Or is he going to say, well, I guess I made a mistake with my tariffs because American firms now have to pay more for inputs, which means their product on the export market is more expensive than their competitors who are able to buy the cheaper inputs because they don't have tariffs on their stuff.
You know, I read it was in that it was in that Steve Chapman piece in The Chicago Tribune where he quotes a European Union economic minister saying, well, that's all right.
We'll just have to put a bunch of tariffs on American motorcycles and this and that.
I forgot the other things he mentioned.
And he said, yes, this is completely stupid, but we can do stupid.
That was the quote.
Well, minister, we can play this trade war all the way into a black hole with you.
And he he's at least he kind of realizes it's stupid, but why is he doing it?
If you see as somebody just put it, it's been put this way a hundred times that I happen to see it this morning.
If you see somebody shoot himself in the foot, you don't say, OK, because you did that.
I'm going to shoot myself in the foot.
Right.
Just because another country is hurting its consumers and also some a lot of its domestic producers doesn't mean we should retaliate by hurting our consumers and our domestic producers.
The great Henry George said that it's at the top of my article today at the Libertarian Institute.
Protectionism teaches you that you should do to yourself in time of peace what the enemy tries to do in time of war.
Right.
When you're at war in the old days, they bombed your ports or blockaded your ports so goods couldn't get in.
In time of peace, we blockade our own ports so that goods can't come in.
This is insanity.
Right.
All right now.
So.
All right.
So talk about trade deficits.
You say trade deficits are bad.
This is one that, you know, I love Pat Buchanan.
He's such a great antiwar guy and he's such a nice guy.
I can't help it, even though he's such a right winger.
And when it comes to trade deficits, he just says, man, oh, man, was it a bad deal for America to open up trade relations with China this way?
Most favored nation trading status.
And look at our terrible trade deficits.
So what's the problem or what isn't?
Look, Pat, I like Pat.
I know Pat personally.
I haven't seen him for a while because I don't live in the D.C. area anymore.
But a very nice guy has always been very nice to me.
And he's good on a lot of stuff.
Doesn't like war.
Good for him.
Doesn't like the empire.
But he's totally wrong on trade because on trade, which means at a deeper level, he is a collectivist.
His brand of collectivism is nationalism.
He thinks it's nations that trade.
Nations don't trade.
Individuals trade.
Nations don't trade.
The moment you start thinking in terms of these abstract entities, you're going to get into trouble.
So who cares?
And this is how I put it in the article.
Who cares that if the individuals who comprise Group A or call it Country A, if you like to, in the aggregate buy more from the individuals in Group B than the individuals in Group B buy from Group A?
Who cares?
I have a, I don't know, infinite trade deficit with my with Kroger, my local supermarket.
I buy from them every week, sometimes more than once a week.
They buy nothing from me.
They've never asked, paid me to edit an article or write an article, which are my products, right?
My services.
So I have a trade deficit with Kroger, I have a trade deficit with everybody I buy from because I don't sell anything to them.
But it doesn't matter.
Trump says we're losing money from our trade deficit.
That's bull.
I trade money.
When I trade money to the grocery store and get the cold cuts and all the stuff I buy, I've given money, but I didn't lose money because I wanted the stuff more than the money or anything else I could have bought with the money.
I mean, that's what trade is about.
Trade is positive some.
He thinks it's negative some.
And at the moment of the trade, both parties expect the benefit or else they wouldn't have traded.
Now, later they might decide they made a mistake, but that's not part of the story.
We live in a world of uncertainty.
I may decide, oh, darn it, I wish I hadn't bought that.
The point is that at the time I expect the benefit and the other person and we can both benefit.
In other words, it's positive some.
So the deficit, the deficits in accounting fiction, when they say trade deficit, they mean the merchandise deficit.
So we're talking about merchandise, right?
Goods and goods that are bought worldwide.
But that's only part of the accounting.
Well, isn't the point, though, that it's like an indication, though, the way they're saying it, I don't know which number would be the the correct indicator, but they're saying when the number is this high, it means that it basically shows that we're producing so much less than them, that it's undermining our ability to make money as producers.
It gives us cheap goods to buy, but maybe we won't be able to afford them if we don't have good jobs producing things, too.
Well, no one will sell here if we have no money to buy things.
So I guess that problem will take care of itself.
It's only it's not look, world trade in all things has to balance.
It's an accounting fact.
If you count everything, it's balanced.
There's a corresponding account to the merchandise account.
It's a merchandise account.
That's the goods that are traded, exports and imports.
If that's in deficit, there's a corresponding surplus on the other page.
What's the surplus in?
It's the capital account.
In other words, look, if you're let's say you're Japanese and you're an exporter now, you're getting dollars when you bring your goods here because we pay in dollars, but you don't really want dollars.
You can't spend dollars in your grocery store.
So that gives you a couple of choices of things to do with your dollars.
You can either buy American goods that would be U.S.
America, Americans exporting, but you have another alternative.
You could invest that money in the United States.
You can buy stock.
You could buy bonds.
You could buy real estate, which that's where that's the that's the opposite.
That's the other side of the coin of this, of the deficit.
We have a capital surplus.
In other words, an inflow of investment.
And here's the funny thing.
Trump seems to know that, but he doesn't connect it.
He and Wilbur Ross.
They say the tariffs are good because it will it will force foreign manufacturers to come here and open facilities.
But if they open facilities here, they're not buying American goods.
So in other words, they're going to be increasing the trade deficit while they're while they're also while they're also increasing the capital surplus.
You see, look, you can't buy American goods and use those dollars to invest in the United States.
Well, OK, but so and look, I obviously I'm playing devil's advocate.
And plus, I'm pretty ignorant of all this stuff.
So I'm oversimplifying.
But isn't their argument that, yes, we're taking water from the deep end of the pool and we're pouring it into the shallow end of the pool?
But that's where the Americans are.
So screw the Chinese.
Like, yeah, it all has to balance.
But we want the Americans to be, you know, on the winning end of the ledger because that's where we live.
That's not responsive to what I said.
People complain about the trade deficit.
Trump complains about the trade deficit.
Well, it doesn't mean we're losing.
We're not losing money when we send money to a seller.
We're not losing money.
Yeah, but it's yeah.
But who's the we?
I guess if you look at it in terms of the people who work on the assembly line, that's a better blue collar job than having two different waitress jobs or what have you like that.
Right.
But I've already addressed that in the previous section of this conversation, because if you if you try to stop that trade, you hurt other manufacturers.
Look, people in the industry that makes airplanes and automobiles and spare parts for those things by steel, by aluminum and by other materials to make those products.
Those are components to their finished products, which they often export.
So if you make steel more expensive, which is the whole point of having tariffs to make it more and more expensive, you've hurt them.
So all you've done and I addressed this at the final final section of my piece, the kind of people that you're now trying to, you know, characterize by giving their arguments, they're advocates of privilege, whether they know it or not.
They're saying the few steel workers ought to have privileges that the vast majority of other manufacturing workers should not have.
So you can't say a trade war will hurt these guys on the line.
What about other industries that have lines to the extent they still have assembly lines that have people?
What about the other ones, the downstream, the ones that use steel and aluminum?
So you haven't they haven't made a case that this is good for America.
They've made a case that it's good for a very tiny number of workers at the expense of all other workers, including including blue collar, you know, factory workers to the extent they we still have those things.
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Well, it seems like that might even be bad politics, then, if they actually, you know, if there's a special interest in the owners of a few different steel mills at the expense of the owners of so many other factories.
Forget labor.
What about the other Republicans here?
Look, it's it's it's Bastiat's what is seen and what is not seen.
If a steel plant closes, the local and even the national networks will rush there.
Right.
And show the gate with the lock and the chain on it.
And the workers leaving saying, look at this trade or whatever they want to blame has closed this steel company.
Do they ever run to the thriving, you know, auto parts manufacturer or airplane parts or airplane plant and say, oh, but these plants are thriving because they're able to buy inexpensive steel from Canada, Brazil, Mexico, you know, South Korea and China.
No, they don't do that.
They put they point out the bad news.
Oh, look at these people.
They lost their job.
The plant is closed.
They don't go to find the benefits from trade because those are very diffused.
You know, they're not real obvious.
It's not a big sign.
We're thriving because of trade.
But if the plant closes, somebody is going to be saying we're closing because of trade.
It's it's it's it's totally it's a totally skewed, distorted way to look at things.
And, you know, most reporters and news editors are ignorant of economics, so they don't even know.
They never even think that, oh, maybe we're going to find a thriving company that's doing benefits from trade.
You know how much X, how exports were stimulated by NAFTA.
And I'm not an unabashed fan of NAFTA.
There's plenty of state state intervention authorized by NAFTA.
But the extent that it put tariffs down to zero in North America and also the WTO, which did that, you know, in a much over a much wider area globally, exports have skyrocketed.
And most of what you know, most of what America imports are producers goods.
In other words, machines and stuff that go into products which then get exported.
You ever see that reported?
Never.
No, it's never pointed out.
You know, it's I mean, it sounds like you're burying the lead.
That should have been your very first point.
But yeah, that's been said a lot of times.
I know it's always frustrating to write about trade because there's like a zillion leads and you never know what to put.
Yeah.
No, I'm just.
Yeah.
That wasn't a real criticism, but I'm just saying, yeah, it's such a such a huge point to understand.
So we've lost the rebound.
My two words are rebuffed.
All right.
So now the world's greatest number one hero, Ron Paul, always opposed NAFTA and GATT because he said we ought to have real free trade.
We ought to repeal all the restrictions on trade.
We just have a new bill that says all those old restrictions are hereby repealed and then we're good.
And I don't really want to create a new world trade organization with this GATT thing.
And I don't want to do this even NAFTA with Mexico and Canada because it amounts to creating new government bureaucracies.
So I guess my question is, is that really a problem?
Or I mean, they they regulate in favor of freer trade so much that it's OK with you or you really are Ron Paulian on that?
You know, it's going to sound like a cop out, but look, it's complicated.
I wish things were more simple.
I another objection Ron Paul made to NAFTA and WTO.
It sacrifices our sovereignty.
And I don't like when people say things like that.
I don't care about sovereignty.
So look.
I agree with him, the ideal is world free trade.
The second best thing is unilateral free trade by the United States.
Just say we don't care what other countries do.
At midnight tonight, all trade restrictions are five minutes from now.
All trade restrictions are abolished.
Americans are free to do what they want.
I wish that could happen.
It's not going to happen.
The third best thing, then, are these agreements.
And they always put in stuff that I'm going to object to.
Absolutely.
You know, labor, labor conditions, environmental stuff, which then restrict trade on the grounds that, you know, it's bad for labor.
It's never pure.
Of course not.
But there is one sort of public choice argument for these agreements.
Let me say one other thing before I say that.
If those agreements had been defeated and I was involved in those fights, I was working in Washington, Cato and other places in the days of NAFTA and the WTO.
And the libertarians were divided.
Some were for those things and some were against.
If those things had gone down, had lost, do you think people would have said, oh, this is a victory for free trade?
Now we move on to unilateral free trade?
No, it would have been seen as a victory for the for the protectionists.
And it would have emboldened Pat Buchanan and Perot and the other protectionists.
So, you know, you've got to be careful what you ask for.
It wouldn't have been seen as a victory for free trade.
They would have ushered in free trade at that point.
But here's one thing that agreements do, and this is kind of a public choice argument.
If if if you can get a generally free trade agreement that puts tariffs down to zero, don't forget in those agreements, our tariffs are already pretty low.
Our tariffs have been falling since World War Two and GATT and those various agreements that preceded the WTO.
Ours were pretty low.
Other countries had higher tariffs.
So what those agreements tended to do, and I don't know, you know, Trump can't admit this because it goes against this whole narrative, it in effect benefited the American economy, if we want to talk in those terms, more than it affected the foreign, because they already had open access to our to our market.
It was American exporters that faced higher tariffs and other restrictions in Mexico and other places.
So it lowered those to zero or near zero.
There are exceptions, but but so, you know, I don't I don't quite understand what the Trump's objection is.
But here's what here's what an agreement can do that works to the benefit of free trade.
If the country, if the government signs one of these agreements like NAFTA, then when they get then when the president gets or Congress gets pressure from a domestic producer saying, I need relief from imports, give me relief from imports help.
Instead of saying, no, I can't, I'm not doing it.
And then, you know, getting constituencies mad and then they might lose the next election, they can say, hey, look, my hands are tied.
We've signed this agreement which opens their market, but also opens our market.
So there's nothing I can do.
It gives it protects the politician who likes free trade and needs and needs to be able to say no to people.
It's much easier to say, hey, we have this world agreement.
You know, what can I do about it?
I'm sorry.
Now, that's all that's like political expediency.
I agree.
But I want to get to free trade.
We open our markets not as a favor to other countries.
We open our markets because we want goods and services.
That's what the Wealth of Nations is all about.
Look what Adam Smith meant by that title.
He was saying the Wealth of Nations is not your gold, your gold stock, your gold hoard, or your in other words, your cash.
It's access to goods.
That's what makes for wealth.
So that he was rebutting the protectionist and the mercantilist by pointing out what wealth actually consists of.
It's access to goods.
It's having goods and services at your disposal, low prices.
And so we open up.
We shouldn't think of ourselves as opening our markets as a concession in order to get them to open their markets.
We open our markets because we want the goods.
Darn it.
Right.
OK, but now, so what about the leftist argument that, you know, the empire is just part of capitalism and that capitalism has to keep expanding?
And of course, as long as there is a Marine Corps, they'll hire the smedley butlers of the world to kick open those doors when the rest of the countries of the world probably would prefer to not have free trade and would prefer to have their own protectionism, whether that's because they're smart or they're dumb, according to you, in terms of how they make those value judgments.
But that basically the free trade zone of the world is formerly known as the British Empire.
Now it's the American one.
And that without American military force, we wouldn't have the globalization of trade.
It takes the globalization of government to create this situation of, quote unquote, free trade.
Well, excuse me, you can easily divide free trade, the principle of free trade from the principle of empire.
It's not one doesn't entail the other.
We're going to have free trade.
Look, I think it's wrong to say there's only global trade because there's a US empire.
People have increasingly realized their gains from trade, even if the people live on the other side of a national border.
So people would be would be drawn toward trade with or without the US empire.
We don't need the US empire to have global trade.
But look, if other governments don't want to open up their markets and let their people be free, our government should not be forcing that.
I mean, I don't want to even have a government, but assuming we have one, that's that's their business.
It's unfortunate they're hurting their own people, but that shouldn't stop us from having our markets wide open.
Like I said, unilateral, unconditional free trade is a good thing.
Even so, even if no one else is practicing free trade, we should.
Of course, we'll be setting an example and other people will want to emulate it when we see how wealthy we are.
But it doesn't have the fact that some imperialists have talked free trade doesn't mean free trade is an imperial imperialist policy.
You can be a free trader and an anti-imperialist.
Richard Cobden and John Bright, the great free traders and anti-imperialists of 19th century Britain, show that.
Frederick Bastiat was another one.
The William Graham Sumner was a great free trader and part of the anti-imperialist league.
There's no logical connection between those two things.
Hmm.
Well, I mean, I guess the thing is, if capitalism, as you've pointed out oftentimes, that that phrase was actually coined by Marx to describe a system of state power.
It never meant really just free markets in the freest way.
And that's why you don't use the big C word all the time there.
But so, you know, the leftist argument is, hey, as long as there's a state, obviously businessmen are going to create a military industrial complex and a world empire out of it if they can.
Well, first of all, Marx wasn't actually the first to use that.
Capitalist was used disparagingly by the radical libertarians of early 19th century England, like Thomas Hodgkin.
So it even predates Marx.
Marx read those people.
So maybe he got it from that.
And you're saying this was also a guy who was criticizing the system of state favors for businessmen rather than the idea of property and businessmen.
Right.
He was against privileges to capital, the owners of capital.
Exactly right.
So I'm trying to think what your point was after that.
I got fixed on the Marx, your Marx point.
Well, just that, you know, every businessman will get on the dole if he can.
And if that means and in practice, according to a leftist perspective, and I think maybe just a realist one, that as long as there's a state and it's not anarcho capitalism, it's just capitalism, then, yeah, it's going to be mercantilism and empire, because as long as there's a government to bribe, they will bribe it.
So their solution is to make the state even bigger and give it give it comprehensive control over the economy.
I don't see how that's a solution to their complaint.
They do kind of have a point, though, about the right being, you know, a bunch of socialists, too, in other words.
When it comes to things like this, when it comes to military matters, they're socialists.
That's right.
The military, of course, is a huge socialist, state socialist institution.
And you can see how it spreads the trade, because they'll buy any trade restriction if you tell them it's for national security, which then can end up including everything.
So in principle, they're totalitarian socialists as well.
And they're nationalists, they're collectivist nationalists.
And they have this nationalist religion, which they're willing to sacrifice a great deal to.
And I don't quite understand how it can also claim to be for individual liberty and and free market.
They sometimes use the word free markets and limited government because they're clearly not.
Yeah.
Well, and so, see, my thing is, I have a lot of sympathy for this leftist argument, basically, that capitalism with a police force is fascism.
And so but then the question is, so what are you going to get rid of property rights and free exchange or get rid of the cops?
And then to me, the answer is pretty simple.
It's the government.
That's the problem.
It's not the profit motive itself.
I mean, what are you going to do?
I'll lay down and starve to death.
Well, look, we need to make conceptual distinctions here.
So the fact, like I said, the fact that an imperialist might have talked free trade, although they didn't always talk free trade.
I mean, Smith was was opposed to the British Empire because it was mercantilist, because it protected English merchants and English industrialists.
He was against all that.
I mean, his book is a good part of his book is a brief against trade restrictions and and, you know, and the empire.
So free imperials aren't don't count on imperials to be free traders.
But even if you can find one that says we need an empire because we need to open up those foreign markets, that's not free trade.
Coppola's got a great quote about how if you apply violence to trade, you change its very nature.
And he compared it to applying violence to religion.
In other words, if you force religion on people, you change you're changing its very nature.
Same thing.
If you apply violence to trade, you've changed its nature.
So he he was a free trader, but he did not want the British fleet opening markets with with guns.
Yeah.
All right.
So now back to the original point.
How bad is this going to be?
This is a huge new distortion and disruption in pricing in the market.
So what's going to happen?
Well, it's going to harm, like I said, the downstream producers who use who need steel and aluminum.
But like to a great degree and quickly, it's going to be a disruption really bad or what?
What do you think?
It could throw marginal firms out of business, the ones that are already sort of at the edge, if you increase the prices of of key inputs, you know, there's probably a lot less steel and aluminum being used these days than, say, 20 years ago, 30 years ago, just because of new materials.
So, you know, I don't know exactly.
I'm not an econometrician, assuming that those guys can even figure things out, but they're going to be marginal firms that that the higher price for those inputs now might be make the difference between them being viable and not being viable.
That's always the danger.
So if they close, then jobs are lost.
What about the hardship to those people?
Well, we don't give a damn about those people.
Consumers will pay more for products.
The whole point is to raise prices.
That's why you put a tariff on.
It's not just that you're packed, you know, they presented as a we're taxing and penalizing those foreign countries.
No, you're you're you're penalizing the buyers of their goods, including the American buyers of those goods and any goods that that those things go into and make new goods, you know, different goods further down at all the way down to the consumer level.
So it's good.
Yes, it will be disruptive.
The changes will have to be made.
Maybe maybe some of those companies will switch from steel and aluminum to some other, you know, substitute plastic or whatever modern materials that have come along that that can function as substitutes.
If the pricing differences are right, they may shift, which means you haven't you haven't helped the steel workers or the aluminum workers.
If companies are shifting out of aluminum and steel and buying substitutes, who have you helped?
Well, you can say you help the buyers, the sellers of the substitutes.
But it's a distortion.
See, the key thing is, again, I say I put this in the article.
You have to understand what the price system is.
And, you know, it sounds like a dull, dry subject.
Nobody cares about it.
The price system is this massive guide to entrepreneurs and producers about what to produce and how the changes in relative prices give clues.
They're not perfect, but nothing is perfect.
They give clues to what's in demand, what's not so much in demand, what's plentiful in terms of resources and labor services and what's not so plentiful, all comparative, of course.
And then it guides.
It's like, you know, it's like beacons in the sky, like lighthouses for entrepreneurs to say, OK, I think we need to shift out of producing this X and shift into producing Y because the return looks like it's going to be better there.
And the return means there's a demand, a greater demand for it than the for X, where the demand and return was lower.
And all that's constantly changing.
It's a very sensitive guidance system.
The government's going to come in and distort the signals, which means that it's not a good guide anymore.
And you're going to get all kinds of things out of whack.
It's just like his talk about NAFTA.
Oh, we're going to cancel NAFTA if we don't like how they renegotiate.
That is going to be so disruptive.
He has no conception of the of the intricate web of suppliers and vendors and, you know, buyers of different materials and all this stuff that go into throughout the this North American economy.
I say North American here in this case because we're talking about NAFTA.
If he were to cancel that tomorrow, it could be chaos because suddenly all these arrangements will be thrown, you know, into uncertainty.
You know, the prices will change things.
We won't be able to get things we want that we need.
He's risking a great deal of dislocation, and that means flesh and blood hardship.
It's not just abstract.
It's people being out of jobs and facing higher prices.
And he and he claims America first.
He wants to protect American workers.
It's it's complete nonsense.
And again, I don't know if he's stupid or if he's a demagogue.
And I don't know which would be worse.
I guess he could be both.
But if he's a demagogue, he's saying to himself, look, I know this is all bull, but I'm going to tell people this anyway, because this is what my base wants to hear.
On the other hand, if he's stupid, he's saying, hey, I really do believe this, so I'm going to say it.
So I don't know which the case is and I don't know which would be worse.
Yeah.
Well, I mean, again, yeah, these don't have to be exclusive concepts.
He can think it's a good idea and a great one to flog to, you know, whatever extent.
Now, so let's go ahead and be alarmist and crazy then here.
You mentioned Bastiat says when goods don't cross borders, soldiers will.
And that reminds me of and I guess this would have been I don't know when Bastiat died.
But after his time in 1851, there you go.
So, yeah, a little while later anyway.
But Jim Powell's great book, Wilson's War, about how everything in the whole world is Woodrow Wilson's fault.
He says that, you know, a big part of what happened with the outbreak of World War One was it was basically two competing free trade zones ended up coalescing into the allies and central powers in that war.
And that they were, you know, already sort of de facto alliances in a commercial sense, but and working against each other in kind of a in a competitive mercantilist sort of collectivist way.
And that this ended up helping lead to the war itself.
I'm almost positive that was Powell's book.
I'm 99 percent sure that it was where he talks all about that.
So I wonder if, first of all, you agree with that, because I know you know everything about everything.
And then I wonder whether you could translate that to current data.
Do you think that this would end up leading to some kind of real conflict or that it's more likely to than not or some kind of thing?
Well, I'm not I'm not I'm not up on my World War One revisionism.
It's not something I've been focusing on lately.
I don't think I don't think we can say World War One was the result of free trade.
If you look at well, this be more about what if if if I'm if I'm saying it right, I think it was competition between two competing free trade zones that did not have free trade with each other, that it was more.
But they were it was the beginning of these sort of supranational markets in these two separate alliance and competing alliances.
Yeah, the fact that you could have trading blocks that are that are relatively or pretty free inside doesn't really solve the whole problem or doesn't doesn't deliver all the benefits of free trade, because if the blocks are protectionist toward each other, like the EU is not open, the EU maybe have free, you know, has free trade within it, but it doesn't have free trade with the rest of the world.
I mean, the US either has or is negotiating a trade agreement with the EU.
Why do we need to negotiate?
Why don't we just have trade?
What do we need an agreement for?
So, yeah, that would still be a protectionism.
Look, it just as a matter of stands, the reason is just a matter of common sense that when people are trading that that puts any hostility and resentment sort of on the back burner and can end up fading away, because when people trade, they're looking for ways to cooperate.
Trade is cooperation.
It's the ultimate in social cooperation.
I don't know why the left isn't more interested in trade, especially worldwide trade.
It's social cooperation.
Mises pointed out how between the wars, protectionism is what really helped deliver the Second World War in his book, Omnipotent Government.
You have well, you have Germany trying to achieve autarky, which means sort of self-sufficiency, which is kind of an idea Trump seems to like.
But that means when there are resources beyond your borders that you need, you don't want to trade.
So you're thinking about conquest because you need this stuff, right?
Germany couldn't produce everything it needed, so it needed to get stuff and it didn't want to have peaceful trade relations.
So it had conquest on its mind.
So protectionism yields hostility, resentment, tensions and conflict and trade.
I'm not saying it's perfect.
Nothing's perfect.
And politicians can always screw things up.
Even if you have free trade, politicians might still find a reason to get into war, might get insulted, like Trump might get insulted that somebody snubbed them.
And maybe we'll go to war.
The point is, though, it seems to me you reduce the chances of war if people are trading with each other because, you know, why do you want to bomb the market where you send your goods?
Yeah, well, you know, a good example of that, right, was in the very early months of the first Bush Jr.administration when the Chinese forced down the spy plane and basically Colin Powell acting on behalf of Wall Street said, we are not escalating this.
We are going to make nice.
And even if we have to lose a little bit of face, we are going to work this out because you got, I don't know, however many hundreds and hundreds of different billionaires and hundreds of millionaires up there in New York saying, yeah, we like getting along with China on a day to day and a month to month basis.
And you idiot Republicans aren't going to screw that up for us.
And at the end of the day, thank God what they say goes, you know, at least on that issue.
Well, you know, when people were saying, oh, the reason Trump wants friendly relations with Russia is because he's got these business dealings.
He's got money on the line.
My answer to that was good.
That shows that makes no point.
If people are doing business with each other, they're probably going to go to war.
So if anything, it proves it proves the free trade point.
If Trump is only only wants to be friendly with Putin because he's got some business interests involved.
That makes my point.
Good.
Good for him.
Right.
Yeah.
Good for us.
All right.
Hey, we should leave it at that.
We're way over time anyway, but I just love talking with you.
Thanks for doing the show again, Sheldon.
Anytime, Scott.
Talk to you soon.
All right, you guys.
That's the great Sheldon Richman.
He's my partner over there at the Libertarian Institute, Libertarian Institute dot org.
And this article, he does one every Friday.
TGIF.
The goal is freedom.
Every Friday.
And this one is called Trading Places.
And or actually trading places.
It's probably the better way to enunciate that at the Libertarian Institute.
And so I'm Scott Horton, Libertarian Institute dot org, Scott Horton dot org, YouTube dot com, Fool's Aaron dot US for my book, Fool's Aaron, Time to End the War in Afghanistan and Antiwar dot com for a bunch of great, horrible stuff to read.
And follow me on Twitter at Scott Horton Show.
Thanks, you guys.
