Looking Backward and Losing

President Trump is attempting to tilt trade in our favor at the expense of our trading partners.  His focus, using national security as the justification as well as the assertion that our trading partners are taking advantage of us, is based on discredited economics and policy.

Other nations are focusing on the fast growing sectors that reflect advances in technology, which is what his predecessors did because new industries contribute to being the world’s leader.   The President is looking backward and focusing on  once iconic industries that are shrinking as a share of our economy.

The President wants to increase exports at the expense of imports.  What he ignores is that increased exports come from increased production.  In a global economy we get those increases by being a more efficient producer than our competitors.  As economists have repeatedly pointed out, we need the market and not government to generate winners.  The president thinks that because we are the world’s largest economy, we can bully our way to achieving his export objective.

He’s wrong, just as nation states of prior centuries were wrong in pursuing mercantilism which is based on the belief that maximizing net exports is the best approach to national prosperity.  To make mercantilism work, nations engaged in protectionism which is what the President’s tariff policy is trying to do. Mercantilism was a flawed and failed policy in the 18thcentury and it just as flawed today. Adam Smith’s Wealth of Nations demonstrated that trade could be mutually beneficial and that exports should be driven by a nation’s comparative advantage, which is based on productivity.

In 1978, Milton Friedman pointed out that if the Japanese flood us with steel, it will reduce employment in the steel industry but increase employment in industries that use that steel.  The dollars that the Japanese got from selling us subsidized steel eventually found their way back here as demand for US goods and services.  In his concluding remarks, he asked, “ why should we object to their giving us foreign aid.”

In an interconnected global economy, it is a fool’s errand to attempt to protect declining industries.  Attempting to shield them from global competition simply makes them more dependent of government and stimulates crony capitalism.

President Trump and his economic Svengali, Peter Navarro, claim that the tariff policy is being pursued for national security reasons. But that has been widely shown to be totally bogus.  Further, A review of industrial policy initiatives decades ago in the journal Science, ended this way. “Here the historical record seems, for a change, unequivocal. Unequivocally negative.”  Nothing has changed since then.  The President’s policy is producing bads; not goods and the bads will just get worse.

 

 

A Different War of Attrition

Steve Hayward’s recent Wall Street Journal opinion piece provides an important reminder of the life cycle of advocacy driven environmental issues and the importance of persistent, fact-based resistance to counter campaigns based on ideology and visions of impending catastrophes.

Going back to the 1960s, we have witnessed an unending series of apocalyptic threats created by ideologues who have tried to use them promote increased political control by entitled elites. In all cases running from the population bomb to the limits of growth, to the war on pesticides, and climate change over the last 30 years, the problem has always been activities promoting economic growth and the solution has always been a reduction in personal freedom, serious constraints on market-based progress, and increased control from the center. Federalism and the Constitutional based limited government are treated as quaint ideals that have long outlived their relevance.

Steve Hayward takes us through the five stages that climate change has passed through to go from the “center of public concern …into a prolonged limbo.” He baes his narrative on a1972 article by Anthony Downs, Up and Down With Ecology.

The stated objectives of climate advocates have been to eliminate fossil fuels from the globe’s energy budget, to bring atmospheric CO2 levels down to pre-industrial levels, to promote wind and solar as substitutes for fossil fuels and reduce the carbon foot print of all. All of these objectives are championed as necessary to save the planet. The real objective has been increased political control of the economy by self-ordained elites. We should not forget that in the early 2000s, French President Jacque Chirac called for a world government. And, Christiana Figueres, the former Executive Secretary of UNFCCC, prior to the 2015 meeting in Paris bluntly stated “This is the first time in the history of mankind that we are setting ourselves the task of intentionally, within a defined period of time to change the economic development model that has been reigning for at least 150 years, since the industrial revolution. “

While some ideologues may have entertained the notion that decarbonization objectives could be achieved in a matter of a few decades, no one who understood how the world works could seriously believe that. Instead, advocate leaders championed lofty and unattainable goals recognizing that incremental progress was the real objective. And since the time of Kyoto, they have promoted actions that incrementally would reduce the role of carbon in the global economy. But over time the costs of forced decarbonization have become more apparent and as they have counter pressures has increased. Germany, the leading advocate for alternative energy, is rolling back its Energiewende in the face of growing emissions and costs and the US is undoing much of the Obama initiatives. Other nations, as evidenced by the Paris Accord, have moved from supporting binding targets and timetables to accepting a voluntary agreement that will be honored in the breach while they pursue economic growth and higher standards of living..

There are two major reasons why the march to global government and rapid decarbonization have stalled. First, the public has never ranked climate change as one of its top priorities. Nor has there been any indication that the public at large is willing to sacrifice the benefits that come from continued economic progress. Second, while those opposed to draconian climate change actions are relatively small in number and underfunded, they have been well focused and persistent in pointing out the flaws in the climate orthodoxy and the folly of mandated decarbonization. Climate advocates have imposed significant cost from their actions and policies but those costs are far less than they could have been. And, as Steve Hayward insightfully observed, “Treating climate change as planet scale problem that could be solved by an international regulatory scheme transformed the issue into a political creed for committed believers. Causes that live by politics, die by politics.”