Economic Nationalism and War

Russell,

Grow up, will you, little boy? Remove your cranium from your rectum before you speak.

I'll answer your nitwit comments one at a time:

"why do you continue to post economically ignorant answers on a blog that attracts people knowledgable in economics?"

First, "economically ignorant answers" is your opinion, and your opinion doesn't carry much sway. Second, this blog attracts "people knowledgable in economics" is farcical and empirically unprovable. Assuming, however, it were true, your inherent assertion that "economists" are unfallible is asinine.

"Is your purpose to play the fool? If so, keep it up -- yer doin' a great job."

Again, grow up. Your petty comments do not impress.

"You say "That answer is simple: If those American workers are unemployed and unable to contribute to the economy of the US, that has a negative impact on me and my prospects.""

Yes - and it's true. Full stop. There are ABSOLUTELY ZERO chinese who buy the goods and services I sell. NONE. ZILCH. NADA. NIL. Is zero a number you can comprehend? There are, however, many millions of US consumers who DO buy my services, at least indirectly, each and every time they use an ATM, Debit Card, Credit Card or make an electronic transfer. Therefore, your smarmy comment is off-point and patently wrong. (Note: I'm speaking of individuals located in the US, not of their birth nationality)

"It's absurd to say that, because when Chinese workers are unemployed and unable to contribute to the economy of the US (by trading with us), that ALSO has a negative impact on you and your prospects."

No, it is not. The employment level of your beloved chinese worker is functionally, practically and entirely immaterial to me. Apparently, for all your supposed "economic superiority" you're too caught up in your own egoism to do more than make nasty comments.

If all you can ever do - which is what it seems - is to denigrate everyone who doesn't think the sun shines out of your ass, then you, sir, are no longer worth responding to. Your comments are irrelevent and shall be ignored henceforth. You're dismissed.

Russell, good point.

faulttolerant: why do you continue to post economically ignorant answers on a blog that attracts people knowledgable in economics? Is your purpose to play the fool? If so, keep it up -- yer doin' a great job.

You say "That answer is simple: If those American workers are unemployed and unable to contribute to the economy of the US, that has a negative impact on me and my prospects."

It's absurd to say that, because when Chinese workers are unemployed and unable to contribute to the economy of the US (by trading with us), that ALSO has a negative impact on you and your prospects.

Bruce Hall,

Foreign auto manufacturers have provided thousands of jobs in Alabama, Tennessee, Kentucky, Mississippi, and South Carolina. Would you have the U.S. government prevent that investment in the U.S.?

GM, Ford, and Chrysler just haven't designed and engineered all the cars that Americans desire. Would you have the U.S. government prevent Americans from buying the cars they want?

Michigan and other Midwest states haven't provided the business-friendly environment many foreign manufacturers are looking for. Would you have the U.S. government force the will of the Midwest on the Sunbelt states?

In short, what are you proposing in order to remedy your "crisis"?

From the U.S. Department of Commerce:

Employment in the U.S. automotive industry is only slightly healthier than that of most other

domestic industries. BLS data show that total manufacturing employment, less the auto sector,


declined by 21% between 1990 and 2005, and by 18% since 2000. The auto industry gained 4%


between 1990 and 2005, but fell 16% after 2000. Industry employment is headed downward and


is not likely to recover for several years, if ever. Some declines are undoubtedly the result of


improved worker efficiency and productivity, but most losses are the product of the declining


fortunes of America’s two largest motor vehicle producers and the supplier base that relies on


them for business. Foreign-affiliated automotive companies have invested billions of dollars in


new production facilities in the United States and have announced plans for more factories to


come. However, the new jobs they create have, and will provide only partial relief for the severe


impact that the entire U.S. automotive workforce is absorbing. In fact, in the next 6 years, GM


and Ford will lay off nearly as many workers as all the foreign affiliates have hired so far.

Bye, bye Miss American Pie....

What about the Schumpeterian idea of "creative destruction?" Even though it's a long run solution: Workers displaced from one (presumably inefficient) industry are now freed up to work in new, "more efficient," industries.

I do not hear anyone arguing to protect typewriter manufacturers, horse-carriage makers,etc....

Josh/WildPegasus,

So, let me get this straight: You want respect and deference for your position but want to cast aspersions on others?

You say:

"It looks like you just made the case for interstate protectionism, too."

Nope - you asserted it.

"Your line drawing simply makes no sense."

Your failure to read makes no sense.

"Someone who talks about choice, but is determined to punish me for mine, has more chutzpah than brains."

Jeez, is it English you have problems with? Or maybe you just CHOOSE not to comprehend. Either way it doesn't matter. You've failed to master the art of reading, comprehension and good insults. Try again.

"You're free to do so. It's when you impose your choices on me that there's a problem."

How many times is it necessary to say "You may do as you wish" before it sinks in? Just because I think you're wrong, I've not said word one about making you do something different. I said "You are, indeed, free to hold any values you choose." Which part of this excapes your ability to understand? Most of it, obviously.

Ugh, HTML doesn't work?

- Josh

If those American workers are unemployed and unable to contribute to the economy of the US, that has a negative impact on me and my prospects.

If those Michigan workers are unemployed and unable to contribute to the economy of Michigan, that has a negative aspect on me and my prospects. It looks like you just made the case for interstate protectionism, too.

And if so, then Lansing must be protected from Detroit. And North Detroit from South Detroit.

Your line drawing simply makes no sense.

That's important to me. It may be meritless to you, but that's YOUR choice.

Someone who talks about choice, but is determined to punish me for mine, has more chutzpah than brains.

I make my buying decisions based on more than just the sticker price of the item.

You're free to do so. It's when you impose your choices on me that there's a problem.

Dewey,

I intentionally chose Michigan and Tennessee because of the number of new car plants that have gone up in TN.

- Josh

My belief is that the American economy and the American worker in the general sense is more important than a Chinese auto or steelworker OR and American Auto or Steelworker. In the end, protecting inefficient, overpaid American Auto and Steelworkers only damages the consumers, the economy as a whole and the other industries that depend upon them.

Allowing the market to work allows those workers to shift to places in the economy where they add the most value. Do I feel bad for Auto workers who are retiring on less than they expected? Well, a little, but not too much as they made far more than they were worth for far too long - while their largess was at the expense of others.

bruce hall: "Certainly, the lower paid worker in Tennessee will have a positive perception than the higher paid worker in Michigan who just lost his job because the auto parts he manufactured are now being sourced in China."

Interesting that you should compare workers in Michigan and Tennessee.

Japanese auto parts manufacturer OTICS has opened a plant in Tennessee. The plant will provide parts to the Toyota auto plants in Kentucky and Alabama.

Nissan recently expanded its Smyrna, TN, plant for the fifth time since it opened in 1980. The company relocated the annual production of 50,000 Pathfinders from Japan to Tennessee.

In 2003 Nissan opened an auto assembly plant in Canton, MS, outside of Jackson. I believe it initially produced the Quest minivan, but has now been expanded to include SUV and light pickup production.

As I understand it, all Nissan vehicles sold in the U.S., except for the Murano, are also produced in the continental U.S.

What are the protectionists in Michigan hoping to change? The exodus of the auto industry to Kentucky, Tennessee, Alabama, and Mississippi?

Bruce and Faultolerant,

You do realize that protectionism, boiled down, is just a regressive tax, don't you?

Protectionism takes money away from the people who benefit from lower prices, and redistributes it to a preferred group of workers - and to the industrialists who own the factories.

If you want to help the people who are temporarily displace by creative destruction, that's all well and good. But why do it with a severely regressive tax?

Faultolerant,

I think you have addressed the main issue quite well. You prefer to buy American whenever possible. Others, including myself, have no such preference. The open question is whether you would also prefer legislation to force your consuming preferences on others.

Josh/WildPegasus, you say:

"Are Michigan workers more valuable than Tennesse? Detroit more than Lansing? North of 8 Mile more than south of 8 Mile?

If no, why are American workers more important than Chinese?"

That answer is simple: If those American workers are unemployed and unable to contribute to the economy of the US, that has a negative impact on me and my prospects. If there's a chinese worker similarly unemployed it's fundamentally and completely immaterial to my interests. Full stop.

On a second front: For every product I buy that says "Made in the USA" on it, I do more than just acquire a good that satisfies my desires. I also add to the pockets of American workers and, usually, American companies. That's important to me. It may be meritless to you, but that's YOUR choice.

Yes, I DO look at labels. My furniture is manufactured in Texas, Illinois and Pennsylvania. My cars are made in Texas and Michigan. My appliances were made in three different states, but still in the US. My shoes were made in Wisconsin. Most of the books in my library were printed in Connecticut and Tennessee and the bookcases they sit in were made in Dallas. My piano was made in Alabama and the vase that sits on it is from Grapevine, TX.

I can't buy a TV made in the US, or a cellphone or most electronics. More's the pity.

Yes, there are things in our home that are imported: Dinnerware and glasses are made in Britain and Ireland. Lighting was mostly made in Ireland. Carpets from Turkey and the silk in the curtains is from China.

Why does any of this matter? I'm not against imports, not by any stretch. I am, however, very much in favor of careful consideration of all aspects of my purchases. Wherever and whenever possible I buy American. I see no advantage to buying a product from China when I can get as good (or better) a product made in the US.

I do perceive there is an advantage to buying comparable products from US manufacturers over Chinese manufacturers. By directing my dollars to domestic production I delay, if only for a matter of moments, the complete deindustrialization of America. That, to me, has value - even if you don't believe it to be true.

You are, indeed, free to hold any values you choose. I have those same rights. I hold an American worker to have more value than a foreign worker. That will never change. Ever.

Petty comments from someone like Ben do not impress me at all. He's free to buy from anyone he likes - and I could not possibly care less. At least I think it's not possible to care less than zero.

If my views amount to xenophobia - fine. If that makes me racist - fine. None of those labels bother me, nor will they change my views. If nothing else, they make me that much more determined to support American workers and American companies.

Lastly, there are several posters here who have replied to my comments with the assertion that I am in favor of protectionism. I've said it before and I'll say it again (for the comprehension impaired): Other than very specific cases, I favor free trade. (I suppose that because I don't accept the theory of unfettered free trade I'm a protectionist. So be it). I make my buying decisions based on more than just the sticker price of the item. Some people make decisions based on "environmental impact" or other outside influencing factors. Why is it that "environmental factors" have merit and other influences don't? Or is this an example of Lib extremism trying to force its particular tired dogma down someone's throat?

Bruce,

The Dems are in charge now. If they think that protectionism is in their best interests, then they should pass legislation to bring it about. My prediction is that they will, that it won't work, and that they'll still be blaming other people for their problems a decade from now.

Don,

Ever thought of doing a post on 'The Economics of Scaremongering'?

Or on 'The Economics of Economists' Xenophilia'?

I suspect that there are two categories of workers who skew the employment statistics favorably:

1. workers who have lost their jobs and have *retired* (a large number of those in the automobile/related industries) at an income level far less than they anticipated.

2. workers who have lost their higher-paying jobs and have taken lower-paying jobs out of desperation.

In either case, the employment figures will look positive and the perception will be negative. Certainly, the lower paid worker in Tennessee will have a positive perception than the higher paid worker in Michigan who just lost his job because the auto parts he manufactured are now being sourced in China.

The dynamics of winner-loser statistics make it difficult to account for perception. I'm only offering up a possible explanation of perception... and perception is reality.

And, apparently, there is a larger group perceiving an economic problem than 2 or 4 years ago.

"Faultolerant wrote:

"But they (American steel workers) ARE more important than workers in the chinese steel and car industries."

But are they more important than American consumers?

Protectionism usually hurts the consumer far more than the worker benefits. Often it costs > $100k per $40k job saved.

Bruce Hall: "Cheaper imported goods are a benefit IF AND ONLY IF you have employment."

Say, like, 4.4% unemployment?

I'm going to offer up a guess here about why there is a PERCEPTION that trade with Japan and China (and potentially India) is detrimental to the U.S. worker: trade has become increasingly a one-way street.

http://usinfo.state.gov/ei/Archive/2005/Jan/12-31762.html

Now the argument against such thinking boils down to one PERCEPTION: we are richer because of cheaper goods.

http://www.cato.org/testimony/ct-dg061198.html

It is the collision of these perceptions that results in the dynamics of this site's debates which boils down to this:

Cheaper imported goods are a benefit IF AND ONLY IF you have employment. However, if your job has been eliminated because of outsourcing, you are likely to be a minimal consumer who is living off savings and loans.

The growing fear of losing employment because of outsourcing may be unreasonable... except where it is not. Consequently, the growing fear that foreign competitors who are using "unfair" tactics such as currency manipulation (China and Japan) to bolster their industries and exports is unreasonable... except where it is not.

By the way, if currency manipulation, piracy and counterfeiting are so counter-productive, why has it been so successful (or is it an illusion?)

Steven Horwitz's response to my remarks makes no sense.

Political control over the borders of one's country, and over who is allowed to join one's polity, is the definition of national sovereignty. This has nothing to do with "collectivism" -- unless Mr. Horwitz contends that anything having to do with government is "collectivist" and hence bad. Frankly, that would be an ignorant and unrealistic position to hold. Libertarian extremism is no more worthy of serious consideration that Marxist dogma.

Horwitz's comments also illustrate the dangers of taking certain ideological positions too far. In his case, certain aspects of the free market ideology. Only someone with no knowledge of history or religion or sociology or anthropology could seriously maintain that political entities "should be" spontaneous orders. What does this even mean, after several thousand years of human history? We're not starting from a blank slate or state of nature here.

All "actully existing" cultures are not equal, as I'm sure Horwitz would acknowledge. Some promote values we enjoy (like economic freedom), others do not. (See most of the world.) Culture is fundamental. But culture is a function of people. And different people result in different cultures. This may be good or bad, depending on the particular peoples and cultures we're talking about, but it is foolish to believe that people and cultures are fungible.

daveinboca: "On another side of the coin, the newly elected Dems are so anti-immigrant that the Bush/Pelosi/McCain Wall Street Journal amnesty bill might still have problems in the House."

They're being painted that way, but I'm not so sure. Here's two quotes from Harry Mitchell, who is replacing staunch anti-immigrant Congressman J.D. Hayworth:

"In Congress, I'll make it a top priority to secure the U.S.-Mexico border and stop illegal immigration."

"I believe we should give families an opportunity to gain legal status if they pay a penalty for breaking the law, pay their taxes, learn English, and hold a job for a period of years."

For those like me who favor guest-worker programs, that's encouraging. The Congressman he's replacing:

- adamantly opposed a guest worker program;

- advocated reducing legal immigration;


- proposed changing our constitution to eliminate citizenship rights to those born here;


- would have undocumented immigrant workers be charged with felonies.

I have long felt Hayworth was out of touch with most Americans. Tuesday's results show he was out of touch with his own constituents.

The Weisberg article [or else another I read in the FT this morning] brought up Pelosi's fierce record on Chinese HR violations.

The Doha Follow-Up appears doomed, and fast-track will also disappear.

On another side of the coin, the newly elected Dems are so anti-immigrant that the Bush/Pelosi/McCain Wall Street Journal amnesty bill might still have problems in the House.

It's a simple as the Golden Rule, "treat others as yourself". Policy that treats different people in different ways for any reason not of their own making is sinful. And the wages of sin is death- in the case of economic nationalism, very literal death in the wars that are often the product of economic nationalism.

Can anyone seriously dispute that the Great Depression, a product of economic nationalism, was a huge contributor to that murderous episode known as World War II?

Four words: "dependence on foreign oil". Does anyone seriously think Iran wants to risk war with the United States or Europe if doing so will cut off their cash during and post-war for years to come? See Iraq example.

And one more serve:

"Explain why, then oh wise and learned one, how those chinese workers are more important than an American worker."

Well I'm sitting in New Zealand so what am I supposed to say? Should I roll dice? My answer isn't that they're equal. My answer is that the question doesn't make sense to me. I don't have a framework to think about it. I have no reason to think about a citizen in one country more or less highly than the other - what characteristic would you suggest I rank them on? Religion? Race? Language? Income?

When you answer, don't forget to mention how the world is meant to be a better place with this kind of stupidity in it.

Faultolerant

I couldn't figure out in your first comment whether you were for nationalism or against it. I just thought your comment made perfectly clear both a) the zero sum nature of nationalism, in that precisely same comment but with nationalities swapped could be made in China, thus highlighting the utterly arbitrary nature of nationalism, and b) the crassness of saying person A is worth more than person B depending on which side of an invisible, arbitrary line each lives on.

Ok, you were being serious and think nationalism has merit.

I think its a stupid idea for the reasons I've just explained. Get over it.

No, my attack is most definitely not ad hominem. One, I attacked the idea. Two, I'm not rejecting it because of some unrelated personal characteristic of the person saying it. That's what ad hominem means.

Sorry if you find this position threatening, but tell me which part of nationalism does make sense in view of its arbitrariness.

In any case, anyone actually interested in the welfare of their nation and who recognises people living in nations that trade are better off that those living under protectionism should automatically reject economic nationalism as being against the national interest.

faultolerant,

Are Michigan workers more valuable than Tennesse? Detroit more than Lansing? North of 8 Mile more than south of 8 Mile?

If no, why are American workers more important than Chinese?

- Josh

Where I live we export wheat and airplanes to China. Will the economic nationalists please stop trying to put our farmers and airplane workers out of a job. For the love of God, we grow the best wheat and make the best airplanes in the world it is not our fault that our fellow countrymen in other industries cannot handle the heat.

P.S. The American auto industry lost me a long time ago, and they had lots of chances.

Mr. Warshawsky writes:

Certainly, there are benefits to be had by certain types and amounts of immigration (see U.S. history)...

Funny how someone so committed to free trade is so willing to try to centrally plan the movement of people and the arrangements that employers might wish to make with workers. If you really know which "types" and "amounts" of immigration are optimal, why not go whole hog and socialize/nationalize physical capital too?

After all, this seems more in the spirit of the collectivism you espouse elsewhere in your comment, by analogizing a country to "your house" and referring to its rituals as "yours" and "your culture."

The culture of a country emerges from those who choose to be a part of it. Political entities are, or at least should be, spontaneous orders too. We should have no more right to define who's in and who's out than we should to define which people should own what.

Even if it were true that there's no logical contradiction in believing in free trade but not free immigration (which I think is contradictory), it seems profoundly immoral to allow goods to go where they are valued but prevent people from doing the same.

Ben, OK, so you have all the answers do you?

"Which pretty much sums up the intrinsic stupidity of nationalism: people on this side of a political border have greater value than those on the other."

Explain why, then oh wise and learned one, how those chinese workers are more important than an American worker. Your obvious non-response will be: They're equally important.

To whom?

Maybe to people like Dr. Boudreaux there is no such thing as nationlism - and he has the right to believe it. You both have the right to think any way you choose. It does not, however, make you right nor your choices right for others.

As far as your petty adhominem about nationalism being "stupid"....that's your opinion and opinions are like buttholes, everyone has one.

"Americans in the steel industry AREN'T more important than Americans in the car industry. But they ARE more important than workers in the chinese steel and car industries. That's the whole point."

Now factor in the workers here in Milwaukee producing mining equipment for China at a factory brought back from bankrupcy by that export business. How important are they and the trade which generated their jobs?

I think there is an important distinction to be made here between free trade and free immigration. These are very different issues, and there is no inconsistency in being for free trade in goods but not in people.

Put simply, I may be willing to pay you a desirable wage to do some job for me, or I may buy the produce you grow or the object you build, but that doesn't mean I want you living in my house or participating in the social and political rituals I find meaningful in the context of my culture.

Goods and services are much more fungible than people. Just imagine switching the entire population of the United States with an equal number of Chinese or Indians or Africans or Western Europeans. Plainly, this would no longer be the same country, would no longer be as rich or as innovative or as capitalistic. This isn't racism or xenophobia; it's reality.

Certainly, there are benefits to be had by certain types and amounts of immigration (see U.S. history), but the notion (for example) that America benefits by having a huge proportion of the (mostly poor and uneducated) Mexican population living here is balderdash. THEY may benefit -- clearly they do (indeed, most people in the world would) -- but most Americans certainly do not. After all, if given an opportunity to vote their preference ("utility"), I have no doubt that most Americans would vote to significantly reduce immigration.

One can quite logically support free trade with [fill in the blank], but prefer that most [fill in the blanks] stay on their side of the border.

Faultolerant wrote:

"But they ARE more important than workers in the chinese steel and car industries."

Which pretty much sums up the intrinsic stupidity of nationalism: people on this side of a political border have greater value than those on the other.

Swimmy,

Americans in the steel industry AREN'T more important than Americans in the car industry. But they ARE more important than workers in the chinese steel and car industries. That's the whole point.

The unfortunate thing about economic nationalism is that it fails as nationalism. The rhetoric is there, certainly: the foreigners are taking our jobs, we have to strengthen our country, etc. But the fact is, most Americans are damaged by protectionism, both consumers and businesses that use foreign imports. It is not even beneficial to the nation--only to a particular subset of interest groups and businesses within the nation, at the expense of the others. I'll never understand what makes Americans in the steel industry more important than Americans in the car industry.

This is all well and good. I fear the rise in economic nationalism, too. But clearly those of us who support free markets and free trade are, well, losing the debate. So, what's there to do?

I'd submit supporting an overhaul -- and this likely means a net expansion -- in the safety net. I want that safety net to be as lean and as efficient as possible, mind you. And I'd much prefer that any new programs or improvements be funded by shifting funds (from, say, farm subsidies, or from rich retirees) rather than by increased spending. But at the end of the day, the social contract in America seems to be increasingly weak, if not broken. For me that social contract means: if you do the right thing (graduate high school, work hard, remain law-abiding, do your best to raise the necessary children that keep the whole cycle going in the first place, etc.), you should have some reasonable assurances that in this, the richest nation ever, you'll at least have a few basics like decent housing, healthcare coverage (and no, going to the emergency room isn't the "coverage" that anybody I know wants), high quality schools, etc.

It's a shame, really, because free trade/free market policies are the very same ones that maximize growth, and enable us to afford the kind of safety net that non-elites need. Still, the elites who typically fight tooth and nail against the types of programs other rich democracies take for granted (even fast growing rich democracies like Ireland, Australia and Britain), Republican elites, that is, are now paying the political price for focusing their policy efforts at, um, crazy things like denigrating Charles Darwin, hassling gay people, and spreading firearms ownership (rather than paying attention to the quality of life, and the economic security, of the masses).

Way to go, idiots. You may have just bought yourselves a big can of Lou Dobbs whup-ass.

My brother-in-law kept bringing up Sherrod Brown's polemic, "The Myths of Free Trade." I didn't read the book but saw the list of 6 myths on the Amazon.com description of the book. Most of the what Brown states as the claims of free trade supporters are figments of Brown's imagination, such as "we've always had free trade" and "free trade is inevitable." Those that have studied trade and politics know neither one is true.

According to my brother-in-law, Brown's major point was that it's not a level playing field since our trading partners are totalitarian regimes. I responded by poining out that Milton Friedman wrote a long time ago that capitalism is a necessary but not sufficient condition for democracy. I cited the example of how in an interview Friedman was asked if he was disappointed that the Pinochet regime fell in Chile (Friedman had advised that regime)and Friedman's response was not at all because with economic freedom people will begin to demand political freedom. I also mentioned the examples of Taiwan and South Korea where economic liberalization lead to democracy. But my brother-in-law ignored my examples (It's different this time.)

I also pointed out how countries that trade don't fight each other. He came back (a month or so later) with there was a shipment of wheat on its way to Germany when the U.S. entered W.W. II.

sigh....

There's also a very convincing essay from Frederic Bastiat on that topic. Can't remember the title.

Charlie,

Read the links to Polachek's work and Weede's.

Is there any evidence whatsoever that free trade promotes peace? This shibboleth is something we all want to believe, and it's recycled endlessly in the press, but is it true? My own reading of economic history is that the relationship is ambiguous -- but I'm happy to be proven wrong.