Dartmouth economist Matthew Slaughter explains that “the Nippon Steel deal is good for America.” Three slices:
Democrats and Republicans alike are assailing Nippon Steel’s prospective purchase of U.S. Steel as a threat to national security. The complaints are misplaced. Essential to national security is economic competitiveness, which is strengthened by global connections such as inward foreign direct investment.
A more competitive economy is better able to fund the military and ameliorate the inevitable guns-for-butter trade-offs. Consider the Cold War. Fast labor-productivity growth after World War II expanded America’s tax base to fund investments in defense, science and space exploration. America eventually won the Cold War largely because the Soviet empire couldn’t deliver the goods. The Berlin Wall fell in part because people behind the Iron Curtain yearned for Mercedes sedans rather than Trabant beaters.
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Inward foreign direct investment by companies like Nippon Steel boosts America’s economic competitiveness. Although U.S. affiliates of foreign multinational enterprises comprise less than 1% of U.S. companies, in 2021 these affiliates in America accounted for 13% of business spending on research and development, 17.3% of investment in plant and equipment, and 23.6% of total goods exports.
All these activities contribute to successful businesses and high-productivity, high-paying jobs. In 2021 these affiliates employed more than 7.9 million U.S. workers, of which 35% were in manufacturing, far higher than manufacturing’s 9.7% share of all U.S. private-sector jobs today. Total annual compensation at these companies averaged $86,859 per worker—about 22% above the average for the rest of the private sector. Workers at globally engaged companies tend to earn more than comparable workers at purely domestic companies because global engagement fosters innovation and growth.
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Global commerce needs checks to protect essential defense technologies and products. But beyond these, America can’t be fully secure without a globally competitive, high-productivity economy. International investment and trade strengthen America. That’s how the world can help bolster our national security.
GMU Econ alum Jon Murphy examines the case for protectionism from an untypical angle.
GMU Econ alum Scott Drylie busts a myth about Adam Smith and school funding. A slice:
Smith is rejecting Montesquieu’s method of turning to these authorities for policy wisdom, and by extension he is rejecting what Montesquieu takes from them—faith in governmentalization of education (in The Spirit of the Laws, 1748). Montesquieu is a figure lost in modern historiographies of education, but in Smith’s time he had provoked a heated (and frequently referenced) proxy debate specific to Britain. It was a debate between best-selling moralist John Brown who embraced Montesquieu’s idea and prominent figure Joseph Priestley who opposed Brown (Brown 1765; Priestley 1765). This fleeting reference to Montesquieu—missed in modern scholarship to my knowledge—places Smith in the focal debate of his age, alongside Priestley as an opponent of governmentalization.
This represents a nearly 30% wage increase, and it defies economics and common sense to think that businesses won’t adapt by laying off workers. Some may try to pass on their higher labor costs to customers. McDonald’s and Chipotle Mexican Grill have said that they plan to raise prices. But how many people will pay $8 for a Big Mac?
Restaurants will probably deploy more automation to the extent they can, but fewer workers will mean longer waits in the drive-through. Pizza Huts are shaving their costs by out-sourcing delivery service to apps like DoorDash and GrubHub—ironic given how unions have fought against gig work.
Pat Lynch asks if Chef Javier Milei can persuade his fellow Argentines to change their menu choices. A slice:
Milei is standing before a nation asking for sacrifice and patience because he understands how difficult this process will be. The intellectual depth that Milei exhibits is remarkable both for his knowledge of the vast literature of liberty, but also for his profound, very Reaganesque faith in his people.
Milei is the first Argentine president who believes in his fellow citizens. He believes in the possibilities and provides a blueprint of hope. He may not be Reagan when it comes to hopeful soaring prose and cities on hills. But the changes he’s trying to implement and the mission he’s undertaken are monumental and will empower the people to be free and productive. Reagan would have appreciated that. Whether he can achieve his political goals remains to be seen, but he’s obviously equipped to defend his policies. Now it’s up to Argentina to decide the next step.
Here’s more wisdom from Arnold Kling.
Roger Clegg shares a sad truth:
If Donald Trump or President Biden were asked today what had caused the Civil War, they could say absolutely anything, and it wouldn’t matter. If Trump answered, “Chinese donuts,” it wouldn’t hurt him; if Biden had answered, “The British tax on tea,” it wouldn’t hurt him. For different reasons, we have such low expectations of each of these candidates that they’re bulletproof. And they are our two front-runners.
A report by the New Brunswick, Canada, auditor general’s office found that the provincial Department of Public Health could not provide documentation to support any of a sample of 33 policy recommendations it made during the COVID-19 pandemic. “The department was unable to provide requested documentation, acknowledging that they ‘did not create a compendium or a repository of all of the scientific articles, papers, publications and analyses it consulted during the pandemic and therefore we cannot provide a fulsome and detailed list of all of the evidence consulted and used when recommendations were being formulated,'” according to the report. According to the Canadian Broadcasting Corporation, the report did not say what those 33 decisions were or what percentage of total decisions they represented.
