Never underestimate the role of the person who puts a good book in your hands. Particularly if he imagines you could expand your views thanks to it and perhaps use it to see the world from perspectives you did not imagine before.
Walter did precisely that to perhaps countless people, some of whom honoured his sagacity by building on his insights, becoming thoughtful academics or serious think tankers.
In the last few years, when he was already seriously debilitated by illness, Walter did that predominantly by e-mail, engaging with a younger generation of libertarian scholars and authors that he perhaps never met in person. I was privileged to be in his e-mail list. Walter was not sending around comments or reviews to show his erudition off: he was writing about works he considered important and eye-opening, to carefully assembled mailing lists of people that he thought could benefit of those. I have myself met him only once, in early 2020 (before Covid). I know he corresponded, and rather intensely, with colleagues whose faces he never knew.
Clay maintained that import tariffs could be used to give American manufacturers a leg up over European goods, while also cultivating “infant industries” that he deemed to be in the young nation’s strategic interests. Topping off the package, Clay proposed a spending spree on federally subsidized “internal improvements,” such as roads and canals to facilitate internal commerce, and a strong central bank to facilitate the financing of large government programs through the issuance of sovereign debt. In total, the program amounted to a comprehensive attempt at economic planning around the mistaken belief that trade is a zero-sum game, and countries were locked in a continuous struggle to maximize their industrial outputs by subsidizing themselves and taxing their perceived foreign competitors.
If all of this sounds vaguely familiar, it should. It’s part of the protectionist-tariff playbook we witnessed during the Trump presidency. Or maybe it’s better seen, as William Galston asserts, as representing “an effort to bring some ideological coherence to the impulses Donald Trump represents—nationalism, isolationism, social conservatism, and hostility to immigration.” Indeed, Robert Lighthizer, the former Trump cabinet official who was responsible for international trade policy, recently called for the adoption of a “New American System” based on Clay’s 1824 proposal at a speech in Washington, D.C. Henry Clay’s scheme similarly assumed center stage at the recent National Conservatism Conference in Miami, Florida, when historian Michael Lind depicted him as the true successor to the American founding, by way of Alexander Hamilton. Clay’s ideas have also found an institutional home at the American Compass, a think tank set up by Oren Cass, Mitt Romney’s former economic advisor. It would be difficult to overstate the rapid pace at which Clay’s ideas have surged out of obscurity and into political discussions on the right. Barely two decades ago, discussions of it were almost entirely relegated to the peripheral fringes of American politics. Today, Florida Senator Marco Rubio invokes Clay as a model for constructing a US industrial policy to counter the economic rise of China.
The fundamental problem with this line of reasoning is that it rests on bad economic history, overlaid with the logical fallacy post hoc ergo propter hoc.
Even the basic claims of this story are in error. As economist Douglas Irwin has shown, proponents of the theory that tariffs drove American economic growth “have tended to present statistics that overstate late nineteenth century US growth in comparison to other periods and countries.” After examining the empirical evidence, Irwin concludes, “It is difficult to attribute much of a positive role for the tariff because import tariffs probably raised the price of imported capital goods, thereby discouraging capital accumulation.” He accordingly rules out the theory that trade protection, the main plank of Clay’s platform, caused the United States to become a world economic power.
The legislative progeny of Henry Clay’s doctrines finally came to a catastrophic head in 1930 when Congress enacted the Smoot-Hawley Tariff. The measure passed in a desperate attempt to shield special interests from the 1929 stock market crash, although its legislative origin predated “Black Monday” – October 28, 1929 – by several months. The congressional record shows that Smoot-Hawley took its direct inspiration from Clay’s doctrines. The debate on the bill commenced in the House of Representatives earlier that May. Making the case for the protectionist side, Rep. Hamilton Fish (R-NY) declared that “the Republican Party has just one viewpoint, and that is to protect American labor and American industry, not through a competitive tariff but through a tariff that actually protects.” To reinforce his point, Fish quoted “a brief extract from a speech of Henry Clay in favor of a protective tariff…which has never been improved on and has constituted the Republican tariff doctrine for the past 70 years.” After quoting Clay’s American System speech from 1824, Fish offered his rationale for adopting a renewed protectionist policy in 1929. It reads like a talking point from Oren Cass’s American Compass today….
First, lawmakers [DBx: legislation makers] should reform interventionist policies that lower most Americans’ living standards and discourage them from changing jobs or locales. Simply moving from high-cost, heavily regulated cities such as New York and San Francisco to more affordable ones like Houston and Pittsburgh can mean a better life and more financial stability, especially for low-skilled or less-educated workers. Yet current federal, state and local policies increase Americans’ economic burdens in expensive cities, while mortgage subsidies, welfare rules and employer benefit mandates make it costlier to move or change jobs.
Next, policy makers should implement market-oriented measures on education, remote and independent work, home-based business and employee benefits to maximize worker autonomy. Surveys show that Americans increasingly value flexibility over wages and independence over employment security. Business creation and job switching have both surged. Still, many in Washington think of American workers as helpless, static and in need of government protection from cradle to grave, despite their registered preferences and the documented harms that such policies as European-style labor regulations can inflict on them and the U.S. economy more broadly.
Time and again, we’ve seen that freer markets can best deliver vital goods and services, often in new and once-unimaginable ways. We’ve seen that protected, subsidized and overregulated markets, by contrast, produce higher prices, fewer choices and shortages when problems inevitably arise. And we’ve seen that through their own initiative, American workers can not only survive our disruptive and messy world but eventually thrive—if governments let them.
Inspired by a new paper by economist Michael Strain, my intrepid Mercatus Center colleague, Veronique de Rugy, explains that the link between worker productivity and compensation paid to workers isn’t broken.
And Emma Camp reports on China’s backing away from its deranged pursuit of zero covid. Here’s her conclusion:
For those in countries that have largely left pandemic restrictions behind, it is important to remember just how punishing it can be to live in a nation hellbent on controlling your every move as part of an ultimately unwinnable public health game. Zero-COVID might be on its way out, but we would be wise not to forget it.
Strict school lockdowns severely increased learning loss, w/low income students losing on average 3 semesters of reading and math skills. Twitter shut down debate on these policies by shadow banning Stanford Professor Jay Bhattacharya, according to internal Twitter docs.