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Here’s an e-mail sent to me yesterday from former Cleveland Fed president Jerry Jordan. (I thank Jerry for his kind permission to allow me to share it publicly.)
Don, in your on-going series about trade nonsense, you might point out that Trump and his mercantilist trio of advisors have a strange way of going about achieving “balance” in US trade with Mexico. By scaring the wits out of investors in Mexico, the peso plunges and makes all those Fords built in Hermosillo even cheaper for American consumers! Slap a big tariff on Mexican-built cars and the peso falls further, making other things made in Mexico even cheaper for US buyers, while making products made in US ever more expensive for Mexican consumers. Good job guys!
(To ensure against misunderstanding, Jerry’s final sentence is facetious.)
The sad reality is that mercantilism is again riding high. The newly elected president of the United States proudly proclaims the validity of nearly every mercantilist tenet and boasts of his support for nearly every mercantilist policy proposal. I do not here intend to suggest that Mr. Trump knows what the word “mercantilist” means. He likely is unfamiliar with the term. But in all of his bloviating about trade, Trump shows himself to be about as pure a mercantilist as has ever breathed – which is to say that Trump is a fine specimen of 17th-century man. He’s a multi-volume encyclopedia of economic ignorance, misunderstanding, confusion, illogic, and error. And he’s about as dear a friend of crony capitalists as can be imagined.
Trump, in short, is precisely the sort of ignorant and rapacious scoundrel whose economic doctrines Adam Smith, especially in Book IV of The Wealth of Nations [2], exposed as ludicrous. Yet here we are, 241 years after the publication of the Great Scot’s great book, and we in the alleged Land of the Free are pursuing economic policies as if economics from the time of Smith through today had never existed.
It’s mightily depressing. (By the way, “Progressives” shouldn’t gloat: they’re not much better on this matter, and their current favorite musketeer, Bernie Sanders, is as much a fan of unreconstructed mercantilist ignorance as is Trump.)