Category Archives: Economics (Fair Trade)

Trade Deficits In The Context Of State-Managed Trade And Systemic Debt


By ilana mercer

In the turbulent times of Trump, it seems like an eternity, but last week, Gary Cohn, the president’s chief economic advisor, resigned from his position. President Trump had asked “Cohn directly” if he could be relied on to help implement tariffs. Cohn said no, by Bloomberg Politics’ telling. Hours later, he was out.

Asked and answered—also in the presence of Mr. Cohn, back in November of 2017—was another important question. At the Wall Street Journal CEO Council, august CEOs, a room full of them, were asked if they’d increase capital investment in American workers, pursuant to Trump’s business-friendly tax plan. A pitiful few raised their hands.

Globalist Gary, as he was known by the near-extinct Bannon faction of the West Wing, remained unperturbed. Formerly chief operating officer of Goldman Sachs, the affable Democrat had formed part of the Kushner-Cohn opposing axis, in this fractious White House.

Cohn had helped pass the Trump tax plan, which—judging by the election outcome in Pennsylvania’s Trump friendly, 18th congressional district—might not have been a legislative chart-topper.

For Mr. Cohn, it’s always been big business above all. But Trump’s promise to pass tariffs, the kind Mitt Romney proposed in 2012, and George Bush passed in 2002—Cohn would not tolerate because, as big media keeps mouthing, “he’s a free-trade guy.”

Though it’s true that Cohn’s successor, TV economist Larry Kudlow, similarly bills himself “a free-trade guy”; untrue is the idea that the US, or any country, for that matter, practices the ideal of free trade.

Free trade is an unknown ideal.

What goes for “free trade,” rather, is trade managed by bureaucratic juggernauts—national and international—central planners concerned with regulating, not freeing, trade; whose goal it is to harmonize labor, health, and environmental laws throughout the developed world. The undeveloped and developing worlds generally exploit and pollute as they please.

One of the promises Candidate Trump had made and hasn’t yet violated was to simply make these statist organs and trade agreements work for the American people. To wit, the president believes in reducing trade deficits.

Far be it from me to endorse tariffs as a means of reducing trade deficits. I am only here questioning the totemic attachment free-traders have to trade deficits, given that Americans live under conditions of systemic debt and state-managed trade that is anything but free.

If free trade is an unknown ideal, it is quite appropriate to question the alleged glories of an aggregate, negative balance of trade, in this “rigged system,” as Trump would say.

As to systemic debt: Yes, libertarians ought to oppose tax increases, which is what tariffs are. We hold that voluntary exchanges are by definition advantageous to their participants. Trader Joe’s, my hair stylist and the GTI dealer—all have products or skills I want. Within this voluntary, mutually beneficial relationship, I give up an item I value less, for something I value more: a fee for the desired product or service. My trading partners, whose valuations are in complementary opposition to mine, reciprocate in kind.

Ceteris paribus (all other things being equal), there’s nothing wrong with my running a trade deficit with Trader Joe’s, my hair stylist or my GTI dealer, as I do—just as long as I pay for my purchases.

And there’s the rub: The data demonstrate that we Americans, in general, are not paying for our purchases.

Americans, reports Fortune.com, actually have more debt relative to income earned than Greeks. “Indebted U.S. households carry an average credit card balance of $15,706, according to NerdWallet.”

Corporate America is likewise heavily leveraged.

The Federal government is the definition of debt. The U.S. national debt is over $20 trillion without federal unfunded liabilities. Those exceed $210 trillion, by Forbes’ 2017 estimate. Total public debt as a percent of Gross Domestic Product, announced the Federal Reserve Bank of St. Louis, is 104 percent.

Our improvident government’s debts, liabilities and unfunded promises exceed the collective net worth of its wastrel citizens.

Given these historic trends, it seems silly to dismiss the yawning gap between U.S. exports and U.S. imports as an insignificant economic indicator.

Because of decades of credit-fueled, consumption-based living, the defining, current characteristic of our economy is debt—micro and macro; public and private. Unless one is coming from the pro-debt Keynesian perspective, is this not an economically combustive combination?

Non-stop consumption—enabled by government monetary and regulatory policies—has coincided with a transition from a manufacturing-based economy to a service-based one; and from an export- to an import-oriented economy. For some reason, this reality continues to excite the febrile imaginations of Beltway libertarians.

Libertarians at CATO, for instance, love that, historically, America’s annual trade deficit has been rising: “[t]rade deficits do not cost jobs. Rising trade deficits,” they say, “correlate with falling unemployment rates. Far from being a drag on economic growth, the U.S. economy has actually grown faster in years in which the trade deficit has been rising than in years in which the deficit has shrunk.”

Much to CATO’s delight (presumably), the U.S. Bureau of Economic Analysis announced, in 2017, that “the goods and services deficit was $53.1 billion in December, up $2.7 billion from $50.4 billion in November, revised. … Year-over-year, the average goods and services deficit increased $6.1 billion from the three months ending in December 2016.”

In arguing their point, trade-deficit deniers point out, correctly, that America ran trade surpluses during the Great Depression. But from the fact that the US had trade surpluses during some very bad times—it does not follow that the nation’s current trade deficit is inconsequential as economic indices go. It could just as well mean that the economic fundamentals today are worse than they were during the Great Depression; since this country has never before been as deeply and systemically in hock as it currently is.

Far from comprising discrete parts, the economy is ineluctably interconnected. The trade deficit belongs to a nation enmeshed in debt.

Contra the Keynesians who control the economy—and whose thinking many free-traders appear to be propping up intellectually, in their indifference to credit-fueled consumption—real wealth is created not by printing paper money and galvanizing the globe’s governments to buy our government’s bonds, but by the production and consumption of products.

Considering that an abundance of goods, not money income, is what makes for an increase in wealth; it’s not unreasonable to want to see a natural shift take place in the U.S., from an economy founded on consumption and credit to one rooted in savings, investment and production.

 

Ilana Mercer has been writing a weekly, paleolibertarian column since 1999. She is the author of “Into the Cannibal’s Pot: Lessons for America From Post-Apartheid South Africa (2011) & “The Trump Revolution: The Donald’s Creative Destruction Deconstructed” (June, 2016). She’s on Twitter, Facebook, Gab & YouTube

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Why Tax Breaks Won’t Stop High-Tech, H-1B Human Trafficking


By ilana mercer

“If the tax reform bill goes through, do you plan to increase your company’s capital investment?”

The question was posed to a sizeable group of CEOs at The Wall Street Journal’s CEO Council, in the presence of White House economic adviser Gary Cohn.

A pitiful show of hands failed to wipe the smirk off Mr. Cohn’s face. But at least the knaves were candid. Tax cuts for American big businesses are unlikely to move corporations to deploy that capital to raise the wages of the little guy, the worker.

The repatriation deal planned for fat-cat multinationals is particularly sweet. But don’t expect the “one-time tax rate of 12 percent on cash returns and five percent on non-cash for corporate money repatriated from overseas” to spur investment in the U.S.

Ideally, policymakers would prefer, as Business Insider quips, for companies to “reinvest in their core businesses, as this holds the most direct bearing on economic expansion.” All the president’s men certainly preach it.

But President Trump’s plan to grant the multinationals, tech titans included, a tax holiday, is more likely to see capital used to tinker with share prices. Repurchasing shares, a share buyback, will boost stock prices and benefit large shareholders.

Where a multinational also traffics in human labor, globally—as do the likes of Apple, Cisco, Microsoft, Oracle, Qualcomm, etc.—a lower tax rate on their repatriated earnings is unlikely to redound to American computer programmers and engineers.

In the event these tax holidays encourage American high-tech to “reinvest in their core businesses”—it will not be an investment in employing American talent, which will continue to be replaced apace with foreign workers.

For accretion in employment among Americans to occur, the president would have to turn off the H-1B (and other visa) spigots. He has not.

Multinationals consider the world their labor market. High-tech traitors will continue to replace the worker bees of American STEM—science, technology, engineering and mathematics—with reliably mediocre, culturally aggressive, foreign workers.

And not necessarily because foreign workers are cheaper. Importing workers from India calls for enormous in-house bureaucracies to handle immigration applications and renewals, attendant litigation, and family importation and resettlement packages for tribes of new arrivals (also known as chain migrants). This isn’t necessarily cheaper than employing your local lass or lad.

The H-1B visa racket is, however, a taxpayer-subsidized, grant of government privilege. Duly, profits remain private property.  The costs of accommodating an annual human influx are socialized, borne by the bewildered community.

Moreover, with the exception of Indian companies, such as notorious H-1B hogs Infosys and Tata, visa holders in “marquee high-tech firms like Google and Microsoft” are not paid inferior wages. That’s against American labor and anti-discrimination law.

From the fact that an oversupply of high-tech workers has lowered wages for all techies, it does not follow that the (average) men and women imported are being exploited. Rather, it is the glut of average worker bees—their abundance—that has depressed wages for this particular, high-tech cohort.

So, please conservatives, quit crying croc over alleged exploitation, in the high-tech industry, of poor, foreign-born, “indentured slave-labor.” Misplacing compassion does not add force to the argument, for these are the facts:

Again, H-1B visa holders are not paid inferior wages; they’re getting a fabulous deal. Remember: Voluntary exchanges are by definition advantageous to their participants. They involve giving up something one values less (life in Calcutta) for something one values more (life in Seattle), and finding someone else with “opposite valuations”: An Amazon or Microsoft CEO who values people from Calculate more than kids from Kent.

Humor aside, ceteris paribus (all other things being equal), the H-1B visa holder forfeits his (unexceptional) labor for a salary many times the salary he’d get in India or China or Pakistan. If he were not incalculably better off than he was in his previous life, he would not have taken a calculated risk … in a plush American office or a well-capitalized US laboratory.

No, it’s the American STEM worker who is stiffed.

Perversely, companies such as Qualcomm, Hewlett-Packard and Microsoft pair aggressive demands for more H-1B visas (those shortages, you know) with a ruthless downsizing of domestic workers—this worker deserves your tears, not his imported replacement.

The price of labor in the high-tech labor market is a function of a political, artificially created, ceaseless supply of immigrants. Prattle about the price at which American workers will do certain work is meaningless without a reference to borders and to the thing they bound—communities. Render asunder the quaint idea of borders—and the world is your labor market; communities be damned.

Realize that this ceaseless supply of labor is maintained not through peaceful market forces, but through the use of political power, wielded by wealthy men and women with access. At work here is their Brave New Borderless World, not the invisible hand we love.

Look deeper before maligning the Profit Motive, as the Left wants you to do. Power, more than profits, is what animates high-tech. Just imagine the thrill of seeing your idea of virtue turned into policy that affects the greatest economy in the world.

For tech superstars are true believers in the borderless multicultural state. These arrogant CEOs and their minions are social-justice warriors, first; giants of industry, second.

Already billionaires, tech execs derive greater pleasure from signaling their virtue (via immigration) than from turning a profit. They aim for stardom in Davos, Switzerland, not Des Moines, Iowa.

 

Ilana Mercer has been writing a paleolibertarian column since 1999, and is the author of The Trump Revolution: The Donald’s Creative Destruction Deconstructed (June, 2016) & Into the Cannibal’s Pot: Lessons for America From Post-Apartheid South Africa (2011). Follow her on Twitter, Facebook, Gab & YouTube.

State Censorship, Corporate Censorship: A Libertarian View


State Censorship, Corporate Censorship:
A Libertarian View
Sean Gabb
6th September 2017

Every age we have so far known has been one of censorship. This is not to say that opinion has been equally constrained in all times and places. Sometimes, as in the Soviet Union, it has been oppressive and omnipresent – even extending to an imposition of orthodoxy on the natural sciences. More often, it has been focussed on perceived criticisms of the established political and religious order. Sometimes, dissent has been permitted among the intellectual classes – especially when expressed in a language unknown to the people at large, and only punished when communicated to the people at large. Sometimes, a diversity of political orders has limited any particular censorship to an area of just a few square hundreds of miles. Sometimes it has been limited by a general belief in the right of free expression. But I can think of no time or place where publication has been absolutely unconstrained. Read more

Robert Henderson: A Case for Protection


Robert Henderson

As Sean has referred to my position on judicious protectionism here it is.

Economic history tell this story: a strong domestic economy is necessary for sustained economic growth and stability. The freer the trade with foreign states, the less stable and secure the domestic economy. It also tells us that the most effective general strategy to promote economic development in a country is to allow competition within the domestic market (where it does not create serious social discord) whilst regulating international trade through protectionist measures sufficient to maintain the general capacity of a country to point where it can maintain itself in an emergency such as war or blockade and be sovereign in most circumstances.This would require the judicious use of embargoes, tariffs and quotas to ensure that all the vital industries remain as a presence in Britain. Read more

‘Tariffs’, the ‘Lib Dems’ and (yes you’ve guessed it) the EU (Ronald Olden)


Ronald Olden

The subject of ‘Tariffs’ like many others, seems to have become something beyond which debate is no longer permissible. But we know from experience, that when any dogma arrives at that status of unchallengeable, the conventional wisdom is nearly always wrong. Usually because no discussion of the subject is permissible in ‘liberal’ company.

Until the early 1980s the ‘Left’ in Britain were not merely in favour of high selective tariffs, but demanded PHYSICAL import controls (but only, of course for unionised and nationalised industries). Anyone who said otherwise was a ‘Thatcherite’ bent on ‘destroying’ British Industry, or, unfashionably ‘Old’ Labour. Read more

The Curious Case Of America’s Waning Whites (Likely Britain’s, Too)


By ilana mercer

An “aging white population [is] speeding [up] diversity,” blared a headline on The Hill.

Once again, a Fake News outlet has confused cause and effect, giving readers the impression that the two trends—whites dying-out and minorities thriving—are spontaneous and strictly parallel.

The reverse is likely true. Corrected, The Hill headline should read:

Could speeding up diversity contribute to a decline in the white population? Read more

Globalism, a tired philosophy


By D. J. Webb

Something interesting is afoot. We appear to be witnessing the re-emergence of the nation-state. Although it is true that the Western powers have for decades followed anti-national policies, ones that have unpicked much of the cultural fabric of a historic nation-state, geopolitical realities are gradually forcing change.

An example of this can be seen in Angela Merkel’s policies. She may personally be the product of earlier decades that laid stress on geopolitical co-operation, the co-ordination of policy internationally, multi-culturalism and similar globalizing causes. This suggests that she would prefer the uncomplicated spirit of international co-operation of earlier decades. However, she operates against a background of US relative decline and the failure of the euro project. Germany has been pushed to the fore, willy-nilly, to manage the Greek debt crisis, the Syrian migrant problem and relations with Russia and the Ukraine. Read more

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