Tuesday, January 24, 2017

In Defense of Protectionism

In our present environment the two most hated words is to be called, "a liberal." I'm not going to enter that fray here. However, I will say that my approach to my fellow man is open minded. The other word is to call for protectionism. It is a populist mantra, but condescended by the elite. They control the media and school system, and especially the military. Their shills spend half the budget on the military and decry the expense of social security which is the worker's money that already has been paid into the system. In addition, they pound out misinformation year-after-year in defense of free trade.
In theory
one cannot argue against free trade, but in reality, it is a fantasy. In my unpublished work, I have a meme that all things are connected. If I go off on a tangent, it is because there is a connection. However, space limits of a blog do limit in depth discussion.
The free trade idea is that the best product at the best price gives consumers the best choice without tariffs. It does sound like economic Darwinism, and to me, this is flawed because I BELIEVE. The flaw in this economic survival is the unseen hand of the state behind its national company versus the single entity corporation. The state uses tricks of the trade to help its domestic like passing regulations, currency manipulation, corporate espionage, stealing or violating patents and delaying licenses amongst others. If I was in charge, I would've put huge tariffs or even banned trade with countries with such violations. If we were strong right from the beginning, we wouldn't have these problems now.
Anyway, the root of free trade dates back to the English aristocracy who financed the push to industrialize Great Britain. In those days, they used the term, "Trade Society." In seeking to expand(self-interest) their market, they had to defeat the European guild system. At that time, due to limited growth, the system was stagnating. Its one big strength, the use of monopoly(protectionism) under the master concept, was put under attack by the English. A master could make a better product, but he couldn't compete with price and mass production. Although its time passed, the system forged the first economic freedoms for citizens and it is the root of the middle class.
As a result, industrialization wiped out the value of labor. The respect of labor would not return until the power of unions developed. This is the heart of the struggle. It is the value of labor to run the machines versus the value of money to build a plant with the machines. Look at it this way. Your state spends money to build a bridge and they put a toll on it to pay for it. How come when the tolls receive enough money to cover the cost of the bridge, the tolls not only don't come off, but go up in price? The owner of the plant not only becomes rich, he wants more. In seeking better returns, he betrays the labor who originally made him a success.
1st Protections
The English won, but the rest of Europe caught up with them. A new thinking emerged, "Social Democracy." It found a voice for the abuses of the industrial revolution. The thinking leaned heavily toward socialism. It took hold in Germany. Chancellor Bismarck introduced the first pension(social security) and concepts that we classify today as the welfare state. He spoke out against the idea of free trade which was the new name for a trade society because he said the idea was a mask to cover self-interest. He was right back then, and still, even today. He put tariffs to protect German industry and he utilized the assistance of government to develop large corporations. This is the root of Siemens and many other German international companies. Protectionism helped Germany become the top economy of Europe.
In nation after nation, protectionism follows the same playbook as Germany. In Japan, the root falls under cronyism with the "Keiretsu bank." In South Korea, the root of government favoritism is the "Chaebols." In China, it is the Communist Party. This is why a Jeep cost over $100,000 in China(protectionism). They use the government to pass laws and you can't buy a Harley over there. In Tokyo, a pink US grapefruit cost $8.00 (protectionism) and on and on in every nation. Free trade is a lie! Every nation uses protectionism. It is also an unwritten law in many nations that if you buy American, you are buying luxury and possibly, putting your neighbor out of work. Proof in the pudding? How many Mustangs, quite possibly the greatest car ever made for price, style, durability and performance were purchased in foreign lands? There is no such thing as free trade! Even in the US, we have protectionism under a mask called agriculture subsidies and government contracts. We just don't have anyone with the guts to call a spade a spade. Trump does and so do I.
Fiat v. Private
No company can match the resources of a state backed corporation and the writing is on the subway walls just like the guild system. Capitalism has brought up our living standards and along with our freedoms developed our great nation. By betraying our labor, capitalism is destroying itself with outsourcing. They will lose to state sponsored entities. Our middle class has been gutted.  Gresham's Law states that bad money will drive out good money. You cannot find a silver dime today. Heck, you can't even find a copper penny.
JFL's Law: fiat nations will drive out capitalist nations and labor will return to the abuses of earlier eons, if we don't protect. This is why I hope Trump can do it. If he fails, there will be nothing left to protect and nations like China could threaten us with all the value of the bonds that they hold. We will be economic indentured servants to agencies like the WTO and IMF and nations like China. Let's hope he can do it.