History repeats itself on the protective tariff issue

[BillJones]

 

Some have said that the Trump campaign trade policy comments are a throwback to the 19th century. If he attempts to change policy with protective tariffs, they are right. candidates from Abraham Lincoln to William McKinley and beyond mentioned the protective tariff on their campaign items. Here is one of the most explicit examples from Benjamin Harrison's 1888 campaign.

 

At the time Great Britain was a major advocate for free trade. This is why "British pauper wages" are mentioned on the piece. In the 19th century American politians often benefited from "pulling the British lion's tail" now and then.

[physics-fan3.14]

You know who else liked Tariffs? Coolidge. And you see where that got us...

 

[World Colonial]

Today's "free trade" is actually managed trade. Governments create trade barriers (including tariffs) and under today's Bizzarro world economic thinking, it's necessary to have even bigger governments (hint: EU) and ridiculously complex bi-lateral and multi-lateral agreements to micro-manage "free trade".

 

Real free trade is the natural economic order. From an economic (as opposed to political) standpoint government functioning in the role of a middle man is unnecessary.

[numisport]

Free trade is really nothing more than currency manipulation. Of course then they can print as much money as needed to offset problems. The only people that get hurt is you and I.

[BillJones]

You know who else liked Tariffs? Coolidge. And you see where that got us...

 

I think that you might be pointing to wrong elephant here. The Emergency Tariff Act of 1921, which was fairly high, was passed during the Harding administration. The infamous Smoot - Hawley Tariff, which might be the one you had in mind, replaced the Act of 1921. That one was passed in 1930 under Herbert Hoover. It imposed the highest tariffs in American history and started a disastrous trade war which hurt the already damaged economy even more.

[physics-fan3.14]

You know who else liked Tariffs? Coolidge. And you see where that got us...

 

I think that you might be pointing to wrong elephant here. The Emergency Tariff Act of 1921, which was fairly high, was passed during the Harding administration. The infamous Smoot - Hawley Tariff, which might be the one you had in mind, replaced the Act of 1921. That one was passed in 1930 under Herbert Hoover. It imposed the highest tariffs in American history and started a disastrous trade world which hurt the already damaged economy even more.

 

Oops, yeah, Smoot-Hawley was the one I was thinking of.

[BillJones]

Free trade is really nothing more than currency manipulation. Of course then they can print as much money as needed to offset problems. The only people that get hurt is you and I.

 

Free trade, if the statists and advocates for croney capitalists stay out of the way, benefits consumers. The nations that can produce quality goods at lower prices get to supply to consumers. Economists call that "competitive advantage. "

 

High protective tariffs shield domestic producers from foreign competition, which makes potentially lower cost foreign goods more expensive and allows domestic producers to charge higher prices. The main beneficiaries are crony capitalists who end up with less foreign competition. Such systems can result in lower quality products at higher prices for consumers.

 

Those who work for shielded companies might or might not benefit. Wages are generally determined by the supply and demand for labor, not the extra revenues generated by rents created by protective tariffs. Those workers might have more job security, but the wage argument is far from certain.

 

[RWB]

RE: "High protective tariffs shield domestic producers from foreign competition, which makes potentially lower cost foreign goods more expensive and allows domestic producers to charge higher prices."

 

Check out the experience of Australia on this. Also a good illustration of reduced quality through lack of competition.

 

Historically, a lassies-fare approach benefits only a few while penalizing most. When economic management's prime goal is a fair and equitable market, then benefits tend to be more evenly spread without restricting new and growth business or competition. But, greed is a powerful influence.

[World Colonial]

Free trade is really nothing more than currency manipulation. Of course then they can print as much money as needed to offset problems. The only people that get hurt is you and I.

 

Free trade, if the statists and advocates for croney capitalists stay out of the way, benefits consumers. The nations that can produce quality goods at lower prices get to supply to consumers. Economists call that "competitive advantage. "

 

High protective tariffs shield domestic producers from foreign competition, which makes potentially lower cost foreign goods more expensive and allows domestic producers to charge higher prices. The main beneficiaries are crony capitalists who end up with less foreign competition. Such systems can result in lower quality products at higher prices for consumers.

 

Those who work for shielded companies might or might not benefit. Wages are generally determined by the supply and demand for labor, not the extra revenues generated by rents created by protective tariffs. Those workers might have more job security, but the wage argument is far from certain.

 

You are correct but there is also another aspect to it which I don't recall ever being mentioned, though others must be aware of it.

 

The manufacturing base of the US and several other countries (such as the UK) has been weakened or gutted. I have always admired British culture but the fact is, their economy has probably been weakened more than any other through financialization. When the credit mania implodes (as it MUST), what exactly are they going to be able to sell that anyone else wants to buy? Their standard of living is very vulnerable to a crash landing.

 

Last I read, China has the capacity to make in the vicinity of one BILLION tons of steel per year. I believe this approximates the rest of the world combined but if not, it is still an outsized proportion and is a noticeable multiple to the US.

 

At some point, there is going to be another great power war because contrary to opposing claims, military combat has not been made obsolete to be replaced solely by economic or even electronic warfare. Combine this steel capacity with China's ability to produce other military related products and the result is going to look a lot like when Germany had to face the US in WWII. It isn't an exact analogy but I think the implication should be self evident.

[Raisethis2]

I fall on the side that says free trade is great but needs to be properly controlled too. Having many, many goods made in China to save a few cents here and there is great until you find yourself unemployed and unable to buy those goods at any cost, for lack of money.

 

Regarding a worldwide power struggle I think there would be many factors to consider before any nation decides to go that route. It would be prudent to have the capacity "in house" to do what's necessary if that day ever arrived.

 

Regarding the British pauper wages token, I think it can be argued that many Americans today can sympathize with their sentiment. The difference today is that those affected aren't into the issues like folks were 132 years ago. Today's underemployed are too busy looking at their smartphones.

 

 

 

 

 

 

 

[BillJones]

Last I read, China has the capacity to make in the vicinity of one BILLION tons of steel per year.

 

Perhaps China has more steel capacity than it needs. Back in the 1930s Stalin with his five year plans pushed the Russian steel capacity to very high levels. That sounds great except for the fact that they had shortages of everything else because of that. They had put steel into everything because they didn't have lighter raw materials that would have produced better products.

 

That's one of the big problems with the socialist / communist planned economies. The central planners push the production what they think the country needs at the expense of what a free market might demand. Furthermore the planning and logistical problems associated with getting the right raw materials at the right place at the right time are huge.

 

That's part of the reason why the old Soviet Union fell to pieces under its own bureaucratic weight. The Chinese were headed in the same direction which prompted them to integrate some capitalism into their system.

 

[BillJones]

I fall on the side that says free trade is great but needs to be properly controlled too. Having many, many goods made in China to save a few cents here and there is great until you find yourself unemployed and unable to buy those goods at any cost, for lack of money.

 

Sadly the days when you could acquire a skill or get an education and then stay in the same job for 50 years until you could get your gold retirement watch are over. Young people are going have to change careers multiple times in their lives. If you can't be flexible about that, then you are going to be like an antique. You have to learn new skills all the time to survive in the modern economy. The politicians can't save you regardless of what they promise.

 

It's not going to be any better if we going to borderless countries that some people dream will happen. In fact it will get worse. If you can't control your borders, smuggling will bring free trade to fruition. Smuggling is really a form of free trade.

 

If you go way back in history that's how John Hancock got rich. He evaded the British trade quotas and tariffs.

 

[World Colonial]

Last I read, China has the capacity to make in the vicinity of one BILLION tons of steel per year.

 

Perhaps China has more steel capacity than it needs. Back in the 1930s Stalin with his five year plans pushed the Russian steel capacity to very high levels. That sounds great except for the fact that they had shortages of everything else because of that. They had put steel into everything because they didn't have lighter raw materials that would have produced better products.

 

That's one of the big problems with the socialist / communist planned economies. The central planners push the production what they think the country needs at the expense of what a free market might demand. Furthermore the planning and logistical problems associated with getting the right raw materials at the right place at the right time are huge.

 

That's part of the reason why the old Soviet Union fell to pieces under its own bureaucratic weight. The Chinese were headed in the same direction which prompted them to integrate some capitalism into their system.

 

Yes, I agree with you on the economic aspects. I was attempting to point out there are other (in this instance military) considerations. Foreign investment did not build all of China's infrastructure, but it certainly helped a lot.

[World Colonial]

I fall on the side that says free trade is great but needs to be properly controlled too. Having many, many goods made in China to save a few cents here and there is great until you find yourself unemployed and unable to buy those goods at any cost, for lack of money.

 

Sadly the days when you could acquire a skill or get an education and then stay in the same job for 50 years until you could get your gold retirement watch are over. Young people are going have to change careers multiple times in their lives. If you can't be flexible about that, then you are going to be like an antique. You have to learn new skills all the time to survive in the modern economy. The politicians can't save you regardless of what they promise.

 

It's not going to be any better if we going to borderless countries that some people dream will happen. In fact it will get worse. If you can't control your borders, smuggling will bring free trade to fruition. Smuggling is really a form of free trade.

 

Spot on.

 

The competition is going to be greater than ever for wage earners and employees with economic security much less for most people than it has been since working for someone else came to predominate after WWII. The challenge though is that the corporatocracy is making it more and more difficult to make an independent living and maintain your self reliance. There is going to be a massive surplus of labor and its already showing up in the labor participation rate (lowest since the 1970's) today. Government fiscal policy has implemented a variety of gimmicks to offset it for now, but that's not going to be affordable forever.

[RWB]

"...since working for someone else came to predominate after WWII."

 

I think you mean before WWII (ignoring farming).

 

The US economy shifted about 20 years ago and the result, as exacerbated by the Bush Depression, is low unemployment and low job growth. People who were semi-skilled factory and service workers earning middle class wages, were (and are) unable to make sufficient improvements in education and skills to find comparable paying work when local manufacturing ceased. In earlier times, some of these workers would have opened their own businesses. But now, the local economic system in many communities has been broken by big-box discount stores. These are commonly low-wage businesses that do not reinvest cash flow into the local economy in the way that most small businesses once did. The spiral continues downward until equilibrium - a welfare-based minimum - that can only be changed by concerted State and local partnerships to educate and retrain for specific employment...maybe not in the local area.

[World Colonial]

"...since working for someone else came to predominate after WWII."

 

I think you mean before WWII (ignoring farming).

 

The US economy shifted about 20 years ago and the result, as exacerbated by the Bush Depression, is low unemployment and low job growth. People who were semi-skilled factory and service workers earning middle class wages, were (and are) unable to make sufficient improvements in education and skills to find comparable paying work when local manufacturing ceased. In earlier times, some of these workers would have opened their own businesses. But now, the local economic system in many communities has been broken by big-box discount stores. These are commonly low-wage businesses that do not reinvest cash flow into the local economy in the way that most small businesses once did. The spiral continues downward until equilibrium - a welfare-based minimum - that can only be changed by concerted State and local partnerships to educate and retrain for specific employment...maybe not in the local area.

 

Yes, I did mean before WWII and yes, the economy since 2000 is actually a contained depression and I don't mean just the "Great Recession". I agree with your assessment except your closing comments.

 

I don't believe large scale retraining is viable on a long term basis. From what I see, the opposite seems to be happening where employers require more and more specialization where even those with prior but not (relatively) recent direct experience are supposedly not qualified. The trend toward "credentialism" (university degrees and ridiculous professional certifications) also creates barriers to labor flexibility, even for jobs which logically don't need it. I see the prospects as essentially zero that any critical mass of displaced workers in one field or profession will be retrained for another. Employers would rather hire recent graduates or those with direct current relevant experience and don't want to train them either.

 

On the welfare based minimum, I have read claims that the solution is a guaranteed minimum income. It may happen temporarily but on a longer term basis, good luck with that. In times of (relative) prosperity, it may be affordable but the trend is one of economic decline with the concurrent outcome where its entirely likely that a noticeable minority (if not majority) will not be in a position to "earn their keep" or even make any economic contribution at all.

 

As for how that's likely to be addressed, you can read the novel "That Hideous Strength" where the central planners behind the N.I.C.E told the protagonist that the population would be "provided for" and by that, they certainly didn't mean any handouts.