Monday, July 11, 2011

In Defense of Protectionism...Liars and Crooks

At present there are a two hated words in our economic culture. One, is to be called a "liberal" and not relevant here. The other is to call for protectionism and I speak in its defense.
The economic history of the US begins with our constitution and the overall thinking behind it. Since it was mainly drafted along the lines of the Virginia Commonwealth by its leading thinkers, Jefferson and Madison. They envisioned a society whereby the people were self-sufficient, mainly small farmers. With their new found freedom, they would have the right to choose their individual direction for life, liberty and the pursuit of happiness. The nation was to promote their general welfare.
This is not to say that the nation would be all farmers. The industrial revolution had already started in England and the other nations of Europe were catching up. The founders who did not share the agricultural direction of the nation sought to establish the first national bank for the country. They wanted cheap credit to expand the nascent industry, mainly in the north. They were opposed by the agricultural block who wanted a strong currency to defend the price for their commodities. They compromised with gold and silver being directly included into the constitution, however, the first Secretary of the Treasury, Hamilton was allowed to construct the First National Bank with strong protections for the currency which would be backed by gold and silver. We could not print unless it had the backing of gold or silver. Although young and poor, we had a strong currency.
The Northern industries grew rapidly as many things came together. The DuPont Corporation started in 1802. Its chief product was gunpowder. The power loom was invented in England, but the natural resources along with cheap, immigrant labor forged its success in New England.
Whitney introduced the concept of interchangeability with his rifle and the government made the first big purchases of his rifles and DuPont's gunpowder, nevertheless agriculture was the nations largest employer until the 1870s. Our society grew economically through individual achievement as it spurred all areas and regions.
However, as the nation expanded on railroad lines, industry grew more as agriculture shrank. The industrial age had come of age in America along with the many negatives in its caboose.
 In Europe the writings of Dickens highlighted the exploitation of the rich over the poor through factory labor of the industrial revolution. In the US the first protest by workers was met with severe reprisals by management. Black listing and the hiring of guards who shot many strikers in situation-after-situation finally found a voice in Congress, although unions were not recognized until well after WW1. To remind the youth of today this is what a factory worker could expect. You would work six days from sunrise to sunset(14 hours)with no benefits. If you got hurt on the job, tough. Laid off? No unemployment. No representation. No voice and no unions allowed. If you lost a limb like many railroad workers due to excessive demands by management, sell pencils like the deformed veterans of the Civil War. The government would not assist you in any way. Ever hear of the TRIANGLE FIRE? Over 100 hundred women lost their lives due to excessive abuse and conditions on the job which paid .10 cents an hour with a 60 hour workweek. Welcome to the world that Republicans want: no unemployment benefits, no social security and no regulations. The party of Lincoln has been taken over by the rich and powerful and they are hypocrites as I will demonstrate.
Change of Heart
In the US the industrial revolution got bad press and an anti-trust candidate was elected president. The rich and powerful in this nation took note and used their connections to develop a new approach. We are no longer robber barons and monopolist; we are capitalist. Yes, we made mistakes, but our free enterprise system works and anyone can make it or become president.
It sounds good and for many years it had a lot of truth except the loopholes are being closed due to many factors. Globalization is the number one reason why it is failing and our nation is sinking rapidly. The lie of free trade by both political parties is the biggest sin.
The English aristocrats came up with the idea to combat the guild system in Europe. The guild system had worked for over 100 years, but due to limited growth was stagnating. Its one big strength, the use of monopoly by the master was now under attack. An individual could make a better product, but he could not compete with mass production. The writing was on the wall to end the guild system.
NEW THINKING: Social Democracy
The rest of the world developed differently. Socialist and communist had an listening audience for the abuses of the industrial revolution. In fact, their concepts are still in vogue today. The idea of government planning is one of their mainstays along with the concept of the welfare state. As unification spread throughout Europe many emerging nations took to the ideas of the socialist. Germany, the biggest economic power, lives by socialist thinking, especially today. Chancellor Bismarck introduced the first pension(social security) and what we call the welfare state with government assistance. He also spoke out against the idea of free trade(new name for trade society) because it was basically a self-interest concept formulated by the British. He put in place tariffs to protect German industries and utilized government assistance to develop large corporations. This is how Siemens, Mercedes, SAP and all the others grew. Socialist corporatism(SC). It is the same everywhere. Even though Germany was late to the Industrial Revolution, they became the leading economic power that has been copied by every nation except the US.
Japan made use of its favorite son using another favorite son, the keiretsu bank. The government would use long-term planning through its Ministry of International Trade and Industry(MITI)and the Ministry of Finance to direct their economy. They channeled bank loans, import licenses and legislation to favorite firms like Toyota, Sony, etc. Socialist corporatism.
In Korea, the government developed their industry with creating Chaebols. They used planning which included loans, legislation whatever it took to take market share. S.C. again! In Indonesia it was cronyism. Same technique as the others. In China the communist party utilizes the same formula. These nations are causing the world two problems. They cause over capacity which results in recessions and because of their favoritism which is really picking winners and losers, they will create conflict for resources. The end result of these socialist economies with monopoly companies is totalitarianism. Totalitarianism will lead to conflict and then, wars. Want a second opinion? Alexis de Tocqueville grew up in France. He knows Europe. He stayed in the US and he noted the difference in democratic thinking and personality or temperament between the two. Democracy(US)extends the sphere of individual freedom, socialism restricts it. Democracy attaches all possible value to each man;socialism makes each man a mere agent, a mere number. Democracy and socialism have nothing in common but one word: equality. But notice the difference, while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude. These are invisible signs of their economies. The visible signs are tariffs, road blocks like licenses, product safety, things that protect the domestic economy. The average tariff in China on American products is 25%. A Florida pink grapefruit cost $8. in Tokyo. A K-car cost over $35k in the early 1980s in Korea. How many did they sell? Forget that for a moment. How many of the greatest car ever built for the money, the 289 Ford Mustang ever sold in foreign countries? What nobody ever admits is that foreign nations have an unwritten rule that to buy American is to buy luxury and at the same time you could be causing a neighbor to lose their job. The only thing that our press would cover is to mention someone damaged some one's Toyota in a union parking lot back in the 1970s.
This is the real reason why we are losing jobs, industries and our way of life. Our free enterprise is competing against government sponsored entities. Socialist versus private. Fiat versus gold. Gresham's Law states that bad money will drive out good money. Ever see a silver quarter? Forget that, you'll be lucky to find a copper penny. This is what I add: Fiat, socialist systems will drive our free, capitalist systems and it does not matter whether it is set by law or market evaluations. If we don't start protecting what is left, we will surely die. The reason Republicans are hypocrites(Democrats just have their hand-out)is the fact that producers owe their initial success to the town and region where they started. The local workers put in an extra effort for the success of the company and the local citizens supported the company product. Now, the plant is out-sourced for cheaper labor and bigger profits. Nike could not make their sneakers here with the price that they charge? Of course, some producers had to out-source just to survive. However, if we do provide protections, this is what we can expect.
Immediately, the world will first complain and then, retaliate. So, what! We will begin to collect tariff's that will reduce our deficit. When manufactures see that they can trust these protections, they will re-open old plants, build new ones and our unemployment will fall to less than 4%, which will be a new record. Our exports will fall too. Who cares. They only account for 14% at best and if we keep doing what we were doing with the lie of free trade, those same companies will be under attack and eventually go out of business. This will help them in the long run. In addition, our local and state governments will be able to balance their budgets with higher revenues, not to mention the federal government. By the way we will need to end ALL TRADE AGREEMENTS. NAFTA, CAFTA, all of them 'cause it should read SHAFTA!(which is what they were doing all along) Eventually, the global world will stabilize and at that point, if we don't make the best products, at the best price, well then, we are gonna lose. Remember this, we are the country of self-reliance, creativity and freedom of thought. If our government returns to the thinking of the Founding Fathers, we will finally be doing what they placed into our constitution - promoting the general welfare. God Bless America!...and we gonna need it after you read the next piece.
LIARS and CROOKS: the whole Atlanta education system. It seems that the school teachers needed to raise the standards in the classroom. After extensive meetings and overtime, they found a solution. The teachers and principals would gather after tests were given to "go over" the results. They would change all the wrong answers to the correct answers and "lo and behold" the Atlanta school system achieved remarkable standards, not to mention the hugh turn-around in results. Supervisers stated this was "only" in elementary and middle levels. Yeah, right! Did Michelle Bachman go to school there? Why? In New Hampshire for the first time, she shouted out for joy that it was so great to be in the state that fired the shot heard around the world(Lexington and Concord).