17A005 Protectionism by Jim Davies, 1/31/2017    

It has never worked, and it never will.

Aside from that, Trump's wish to protect America's industry is fine. Unlike his recent rival, he does at least perceive the problem; that much of the rest of the world can produce goods cheaper than they can be made here, and so US workers have lost jobs. To "protect" them in some way so as to restore the lost prosperity is a noble aim.

Protectionism, however, is one specific way to try to do that, and it's always failed. It is to erect barriers to imports. A tax or tariff is placed on them, or certain classes of import are banned altogether, or US firms wishing to use cheaper labor by moving factories abroad are in some way prohibited or hindered from doing so.

What that kind of protection has always done is to cause domestic manufacturers to become fat and lazy, being insulated from the rigors of competition, while slowing down overseas trade and so preventing domestic buyers (like you and me) getting the best bargain. The slow-down is the worst effect, because foreign governments naturally retaliate and so goods become more expensive everywhere, so less of them are made everywhere, and so fewer employees are needed everywhere; worldwide unemployment is created out of whole cloth. It was in exactly this way that the US Depression of the 1930s was "exported" following the disastrous Smoot-Hawley Tariff Act.

Meanwhile the collected import taxes flow into government coffers, enabling governments to wreak even more havoc - and to employ some of those thrown out of useful work. Thus, its net effect is to increase prices and shift resources from business to government, or about the opposite of what one might expect from a businessman in the White House.

What then is the alternative way to tackle the problem of the rust belt?

Step One is to analyze why the decline took place, and Step Two is to reverse those causes. It's not hard. This is rather elementary problem-solving. If the light goes out, you first check the bulb, then you check the fuse, then perhaps the cord or plug. First determine the cause, then remove it.

So... WHY is a large segment of US industry no longer competitive? Let's count the ways; and all of them took a long time to develop. We must look back many decades.

1. Government empowered trade unions to acquire an unnatural negotiating advantage, enabling them to place employers over a barrel and obtain for their members more wages and benefits than the market would have provided. There is no dispute about this: unions themselves claim (and boast of) it, when seeking new members. This has been going on for more than a century, and the rust belt is the consequence.

Remedy: all the laws that provide those advantages should be repealed. Employees could then associate and bargain as they wish, but without escaping obligations under contract.

2. Government obliged employers to furnish "occupational health and safety" goodies to employees which an unfettered market might never have brought about. All of them cost money, raising the cost of hiring people. No doubt all of them are "desirable" in some abstract sense, but only in a free market can it be seen whether or not such benefits would have been provided in order to attract and keep workers.

Remedy: repeal all of those laws, and let the labor market determine which benefits are preserved.

3. Governments levy taxes on both employers and employees, once again raising the cost of hiring and reducing the net reward for being hired. Local governments especially see large plants as cows to milk, in their communities. That cost all gets built in to the price of the products, and so makes them less competitive.

Remedy: repeal them all. Such functions of local, state and federal governments as people wish to buy, they will (in a ZGS) buy - on the market. The rest will be scrapped.

4. Governments require employers to provide health insurance to those they hire, and the cost of doing so has in recent decades risen to absurd heights due to ever increasing government participation in the health-care industry. This is a huge contributor to the high cost of US-made goods, and a major reason why foreign ones of the same quality are frequently cheaper - even when the high costs of long-haul shipping have to be paid.

Remedy: repeal that requirement on employers, and get government completely out of the business of medicine. State-of-the-art health care was provided prior to 1900 at very affordable prices, without any government participation (beyond ordinary laws of liability and negligence, which will in any case have counterparts in the ZGS justice system) and that can prevail again, when that participation ends.

Thus, in at least these four ways government is the cause of the rust-belt problem, and it will be solved when government disappears, ie is replaced by a ZGS. Can it happen before then? - theoretically yes, it will happen when these four sets of laws are all repealed, so slashing the power and scope of government by around 80%; but that won't happen; the purpose of power is more power, not less power. The new President, for example, sees much of the problem but has not proposed any of these remedies.

Was the Carrier case (in which that firm's plan to relocate a plant to Mexico were cancelled after Trump and Pence intervened) an exception? - maybe. It was a complicated deal, in which the State of Indiana provided a tax break and Trump promised to be "friendlier to businesses by easing regulations and overhauling the corporate tax code." This may exemplify a partial use of the remedy to #3 in the list above. Trouble is, there were other factors too. Carrier is part of United Technologies, which makes engines for the vastly expensive F-35 fighter-bomber, which contract UT would be most unwise to disturb. Inside the Military Industrial Complex, things do get awfully messy.

So Trump is far, far preferable to his erstwhile rival Hillary, a fact which I may have to remember quite often in the next four years - but he is no libertarian, yet. He sees part of the problem, but not much of the remedy. The only adequate fix is the one presented right here - the total replacement of government by a free society. Will anyone be able to convey that to him, during that period? - there is much more hope that someone might, than for any of his recent predecessors; for he is, explicitly, outside the establishment. I wonder whether on his radar will be Jeremy Tuccille Sr, for example, who wrote his unauthorized biography thirty years, ago, and is one of the original Libertarian group led in NYC by Murray Rothbard. We shall see.