Another free trade debate

This exchange with Louise Mensch on Twitter vastly amused me. In my book, it is right up there with the digression into sexbots in the James Miller debate:

Louise Mensch ‏@LouiseMensch
The idea you need free movement of people for a free market is a lie. We have free trade with USA without free movement

Supreme Dark Lord ‏@voxday
It’s not a lie. Read Mises: the same arguments apply. For full benefits of free trade, free labor mobility is required.

Louise Mensch ‏@LouiseMensch
no; we presently enjoy free trade with America no free movement between us either way

Supreme Dark Lord ‏@voxday
You can see exactly how NOT free UK trade with USA is here. Complete with tariff codes and rates.

Louise Mensch ‏@LouiseMensch
live animals?

Supreme Dark Lord ‏@voxday
3.8 percent on the sale of domestic rabbits, to be precise. Just one of thousands of examples. Demonstrably unfree trade.

Louise Mensch ‏@LouiseMensch
er… I honestly don’t think most people are going to count bees and rabbits Vox

Supreme Dark Lord ‏@voxday
It’s 5.7% on nuclear reactors. Would most people count them?

In fact, the USA and UK have neither free trade nor free labor mobility.


Brainstorm: Free Trade debate

At 7:30 PM Eastern time on Friday, June 17th, I will be debating Free Trade with Austrian economist Robert Murphy. Another notable figure of the Austrian School, Thomas Woods, will moderate the debate concerning the following resolution:

RESOLVED: Free trade is always economically beneficial in the long term,
and the more free trade is practiced by a country, the higher the
standard of living of its inhabitants will be.

The event is open and you may register for it here. The debate format will be as follows:

10-minute Bob opening statement
10-minute Vox opening statement
3-minute Bob rebuttal
3-minute Vox rebuttal
3 minutes for one Q&A between Bob and Tom
3 minutes for one Q&A between Vox and Tom
5 minutes: Bob asks Vox a question; Vox answers
5 minutes: Vox asks Bob a question; Bob answers
20 minutes: audience questions
3-minute Bob closing statement
3-minute Vox closing statement
1-minute wrap-up by Tom

Please don’t bother telling me what you think I should or should not do. You are not debating the subject. I am. The purpose of this post is not to gather new ideas or information. Moreover, it is not fair to the other participant to have multiple parties ganging up on him. Any suggestions or advice concerning free trade will be deleted.


Distribution is an issue

Free market capitalists might not like it, but the distribution of wealth is a legitimate societal problem and it is only going to get worse:

The rising cash holdings of U.S. corporations is increasingly in the hands of a few U.S. companies, with just five tech firms having grabbed a third of it. And nearly three-quarters of cash held by non-financial U.S. companies is stashed overseas outside the long arm of Uncle Sam.

Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco System (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody’s Investors Service.  That’s even more cash concentration in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors.

Corporate America’s rising pile of cash is becoming increasingly important to investors as profit growth and the stock market stalls. The amount of cash held by U.S. companies rose 1.8% in 2015. Unfortunately for U.S. investors, 72% of total cash held by all non-financial U.S. companies is stockpiled outside the U.S., up from 64% in 2014 and 58% in 2013 as companies try to avoid paying U.S. tax rates.

Remember, corporatism is not capitalism. And free trade doesn’t benefit a country if the money collected for its exports never enter it.


Brainstorm: Murphy vs Day

I’m pleased to announce that on Friday, June 17th at 7 PM Eastern, Brainstorm and the Tom Woods Show will be co-hosting an all-Austrian free trade debate between the well-known Austrian School economist Robert Murphy and Austrian School heretic Vox Day. The debate will be moderated by the noted Austrian School economist Thomas Woods.

It’s too soon to open registrations, but as always, Brainstorm members will have first crack at seats to the event. A transcript will be made available to Brainstorm members and the audio will be available via the Tom Woods Show.


Another strike against free trade

You may note that among my four points against free trade, I note that free trade is incompatible with democracy and national sovereignty. One argument I failed to note in this regard is the way in which free trade permits extortion by holding the national economy hostage:

Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

The Obama administration has lobbied Congress to block the bill’s passage, according to administration officials and congressional aides from both parties, and the Saudi threats have been the subject of intense discussions in recent weeks between lawmakers and officials from the State Department and the Pentagon. The officials have warned senators of diplomatic and economic fallout from the legislation.

Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

Dr. Miller mentioned that he couldn’t think of any way that foreigners buying up American assets could be a bad thing. But, once more, we have an object lesson in letting reason be silent when experience gainsays its conclusions. Free trade not only imperils democracy, but also endangers the rule of law.

Notice again that free trade theory fails due to the limited imaginations of its advocates and their inability to even conceive of potential problems that are actually occurring in the real world.

But speaking of Dr. Miller, I emailed him to broach the possibility of a second debate addressing a topic that more than a few readers observed we failed to discuss, namely, whether free trade necessarily requires the free movement of people or not. He agreed at once, although we both need to do a bit of research before we’re prepared to debate it. When we’re ready, I’ll let you know and we’ll hold another open Brainstorm event.


Mailvox: “one of the most substantive debates I’ve heard”

MC rather enjoyed the free trade debate:

This was fantastic.  Clearly one of the most substantive debates I’ve heard.  Both of you made your points well and it really gave the audience the ability to truly focus on the subject matter and the pertinent points of each argument.  I was impressed with Dr. Miller as he did not seem like your typical Academic, but really a guy that is interested in honest discussion (although naive).  Would love to hear more of these.

I am of the opinion that Free trade works well in theory, in a perfect world with honest players, but such a world does not exist this side of heaven.  I believe due to the fallen nature of man, protecting the nation-state is much more important than the benefits of open free trade, because of the eventual destruction of the culture and national identity.  I think the founders understood this much better than us, which is why they advocated tariffs and an American First mindset.

Great debate, I was very impressed, this is really good stuff.  More Please!

I’m glad everyone enjoyed it so much. I intend to keep doing this sort of thing and more at Brainstorm, and the more people that support Brainstorm by joining or simply showing up for the free events, the more high-quality guests like Dr. Miller and Dr. Hallpike will be interested in participating.

Speaking of the debate, some of you will recall that I felt the purely logical aspect of my critique of free trade could be improved and further refined. In that regard, a syllogism occurred to me that I believe  succeeds in succinctly and conclusively refuting Dr. Miller’s corruption argument for free trade.

  1. Dr. Mill argues that free trade is beneficial because it reduces corruption by removing power from the hands of elected politicians and transferring it to the board members and executives of multinational corporations, who are presumed to be less corruptible than politicians by virtue of being answerable to the Invisible Hand of the free market.
  2. But it is the board members and executives of multinational corporations who are the primary actors responsible for corrupting the politicians.
  3. And the causal factor of the process of corruption is, obviously, more intrinsically corrupt than the various parties being corrupted by it.
  4. Therefore, Dr. Miller is incorrect, the hypothetical ability of the Invisible Hand to rein in the corruption of the corporate interests is insufficient, and free trade will tend to increase corruption by transferring power from state politicians to multinational corporate interests.
  5. Therefore, free trade is not beneficial.

Notes on the free trade debate

First, Dr. Miller has graciously provided the audio of our debate at Future Strategist, which, among other things, once more demonstrates the astuteness of my decision to avoid pursuing a career in radio or anything that involves speaking in public. It’s as if the more clearly I am able to think through these complicated issues, the harder I find verbally articulating the path through them. At this point, I have to expect that if I ever come to correctly grok the fullness of all the myriad pros and cons of free trade, my verbal explanations will be reduced to seemingly nonsensical word bursts.

move… you know… war… people… um, mask of credit!

Second, since I didn’t have any reason to fully cite a few of the more interesting quotes I’d found, (for, as Spacebunny observes, a very particular definition of interesting) I thought some of you might find reading them to be illuminating. Since Dr. Miller didn’t put much effort into distinguishing between free trade in goods and free trade in labor, there wasn’t any point in doing more than mentioning these statements in passing. But many free traders do attempt to make the distinction, which is why I believe they are worth noting.


Milton Friedman, “What is America” lecture at Stanford:

There is no doubt that free and open immigration is the right policy in a libertarian state, but in a welfare state it is a different story: the supply of immigrants will become infinite. Your proposal that someone only be able to come for employment is a good one but it would not solve the problem completely. The real hitch is in denying social benefits to the immigrants who are here. Look, for example, at the obvious, immediate, practical example of illegal Mexican immigration. Now, that Mexican immigration, over the border, is a good thing. It’s a good thing for the illegal immigrants. It’s a good thing for the United States. It’s a good thing for the citizens of the country. But, it’s only good so long as it’s illegal.

Ludwig von Mises, Liberalism, Chapter 8. Freedom of Movement

The natural conditions of production and, concomitantly, the productivity of labor are more favorable, and, as a consequence, wage rates are higher, in the United States than in vast areas of Europe. In the absence of immigration barriers, European workers would emigrate to the United States in great numbers to look for jobs. The American immigration laws make this exceptionally difficult. Thus, the wages of labor in the United States are kept above the height that they would reach if there were full freedom of migration, whereas in Europe they are depressed below this height. On the one hand, the American worker gains; on the other hand, the European worker loses.

However, it would be a mistake to consider the consequences of immigration barriers exclusively from the point of view of their immediate effect on wages. They go further. As a result of the relative oversupply of labor in areas with comparatively unfavorable conditions of production, and the relative shortage of labor in areas in which the conditions of production are comparatively favorable, production is further expanded in the former and more restricted in the latter than would be the case if there were full freedom of migration. Thus, the effects of restricting this freedom are just the same as those of a protective tariff. In one part of the world comparatively favorable opportunities for production are not utilized, while in another part of the world less favorable opportunities for production are being exploited. Looked at from the standpoint of humanity, the result is a lowering of the productivity of human labor, a reduction in the supply of goods at the disposal of mankind. Attempts to justify on economic grounds the policy of restricting immigration are therefore doomed from the outset. There cannot be the slightest doubt that migration barriers diminish the productivity of human labor. 

Gary North, “Tariffs as Welfare-State Economics”, Mises Institute

The ethics and economics of restricted trade surely apply to the person who wants to trade on the other side of the invisible line known as a national border. If the arguments for restricted trade apply to the American economy, then surely they apply to the other nation’s economy. Logic and ethics do not change just because we cross an invisible judicial line.Any time a government sends out a man with a badge and a gun to restrict trade, this is an act of war. Nobody should favor a restriction on other people’s trade unless the results of that trade are comparable to the results of trade during wartime.

What I find interesting about these defenders of the free movement of people, or if you prefer, free trade in labor and services, is that although the greatest among them, Ludwig von Mises, clearly recognized the potential flaw in his pro-free trade position, he not only uncharacteristically chose to wave it away, but to the extent he considered it at all, he reached what is now obviously a completely wrong conclusion.

This issue is of the most momentous significance for the future of the world. Indeed, the fate of civilization depends on its satisfactory resolution. It is clear that no solution of the problem of immigration is possible if one adheres to the ideal of the interventionist state, which meddles in every field of human activity, or to that of the socialist state. Only the adoption of the liberal program could make the problem of immigration, which today seems insoluble, completely disappear. In an Australia governed according to liberal principles, what difficulties could arise from the fact that in some parts of the continent Japanese and in other parts Englishmen were in the majority?

To continue from my observation in last night’s debate, this is a 20th century defense of an 18th century argument that sounds utterly insane in the face of 21st century realities. Consider the application of this argument to current events:

In a Sweden governed according to liberal principles, what difficulties could arise from the fact that in some parts of the country Syrians and in other parts Swedes were in the majority?

What difficulties indeed?  Anyhow, it has become increasingly apparent to me that the lack of concern about national sovereignty shown by free traders is akin to that demonstrated by libertarians, and reflects a fundamental conflation of the concept of “the nation” with the concept of “the state”. They simply don’t understand that their positions are logically self-refuting in addition to being empirically false.

UPDATE: The paper I mentioned, Trade Wars, Trade Negotiations and Applied Game Theory, by Glenn W. Harrison and E. E. Rutström, can be found here


Thus proving the Alt-Right right

Actual headline and subtitle at the increasingly mistitled Reason:

The Alt-Right Is Wrong: Trump Is an Enemy of Western Civilization, Not Its Champion

If your candidate opposes free trade and free speech, he’s not a defender of classical liberalism.

This is almost astonishingly ignorant. It amazes me to have to point out that classical liberalism is not Western Civilization, which predates classical liberalism by literal centuries.

Moreover, it is free trade that poses a deadly danger to Western Civilization, as the combination of cheap travel and communications technology, relaxed border controls, and the free movement of people that is necessary for the operation of free trade are putting Western Civilization in the greatest peril it has known since the Turks were knocking at the gates of Vienna.

It’s not just a stupid headline writer either, as Robby Soave doubles down in the body of the article itself:

No presidential candidate who fails to grasp why unrestricted trade across national borders is the hallmark of a civilized society is fit to lead one, and no leader who seeks the power to shut down newspapers who criticize him can be trusted to defend classical liberalism from its enemies.

Apparently Robby is not only ignorant of European history, but of American history as well; no American president has ever favored unrestricted trade across national borders, not even Bill Clinton or George Bush.

And, again, classical liberalism is not Western Civilization. The temporal and conceptual subset should never be confused with the set.


Free trade’s fundamental flaw

It is little wonder that utopians of various flavors, from Communist to libertarian, are enamored of free trade. Because it now requires a utopian-level credulity to believe that free trade is a viable option in a fallen world.

When I was growing up we were taught in sixth grade that Democrats wanted “tariff for revenue only;” Republicans wanted protective tariff to keep manufacturing – and jobs – at home. Abraham Lincoln said of tariff, if he buys a shirt from England, he gets the shirt but the money leaves the country and pays wages to Englishmen; if he buys it from a US manufacturer, he has the shirt, and the money stays in America, paying American workers. This is, according to Ricardo, far too simple an analysis; but it appeals to reason. American goods may cost more without overseas competition, but the money and jobs stay/ cheaper goods are not always appealing to those who have no jobs to give then wages, and must rely in government to pay them for not working; and a sizeable number of “workers” resent being on the unemployment role and getting welfare aid.

The US establishment went to war in 1940, and suddenly produced tanks, rifles, airplanes, trucks, bandages, ammunition, cargo ships and battleships; when the American people rose up they drowned Germany and Japan in war materiel. The German war machine used animal drawn transport to supply much of the Wehrmacht; The United States turned the last cavalry regiments into mechanized units and the Red Ball Express that supplied Patton. I used mules to plow cotton fields during World War II; but our soldiers did not depend on mules for ammunition. If all our plants had been in Frankfurt instead of Detroit, the outcome might have been different.

It’s not as if China is the enemy of the West or manufactures anything  militarily important, right?


Already at trade war

Cuckservatives, and economically maleducated conservatives, don’t realize that the fact one is not fighting a war does not mean one is not already engaged in one:

In retort to Trump pointing out a necessary shift in trade position (a shift to put American interests first – a shift to stop the dependency on cheap import goods – a shift to use China’s dependency on access to our market to OUR advantage) Jeb Bush came back with an example of Boeing manufacturing.

Donald Trump, responding to Jeb’s Boeing example, pointed out China is forcing Boeing to open a manufacturing plant in China.  As typical from a candidate who is unfamiliar and unbriefed on the issue Jeb looked back incredulously and said:

    “C’mon man”…

There you have it.  There’s the disconnect.  Almost everyone missed it.  There, in that exact moment, is the spotlight upon all that is wrong with a professional political class; globalists dependent on Wall Street for their talking points.

Trump was 100% correct.

But the issue is bigger.

Not only is China demanding Boeing open a plant in China, the intent of such a plant provides an opportunity to explain why Trump is vitally important – and time is wasting.

China is refusing to trade with Boeing if the company does not move.  Why? It’s not about putting Chinese people to work, it’s about China importing their research and development, Boeing’s production secrets, into their country so they can learn, steal and begin to manufacture their own airliners.

This is just how China works.  In time, Comac, a state-owned, Shanghai-based aerospace company will then use the production secrets they have stolen, produce their own airliners, kick out Boeing, undercut the market, and sell cheaper manufactured airplanes to the global economy.

Boeing, the great American company that Jeb Bush thinks they are, becomes yet another notch on the Asian market belt.

All of those Boeing workers, those high-wage industrial skill jobs that support the American middle class, yeah – those jobs lost.   And the cycle continues.

Theory, logic, and fifty years of free trade experience all demonstrate the same thing: free trade impoverishes a wealthy nation and lowers its per capita wages toward the global average. And those are just the negative economic consequences. No amount of magical thinking and repeated chants of “ricardosmith ricardosmith” are going to change that.

If you want to go into more detail on the subject, read the relevant chapter of Cuckservative: How “Conservatives” Betrayed America.