Things I’ve Learned Recently

I have learned a lot since Donald J. Trump was elected president. Or perhaps it’s more appropriate to write that I have unlearned some things that turned out to be wrong.

Like most members of my social and economic class, I was a committed globalist on the basis of both a sense of idealism – if “All men are created equal” in the eyes of God and, ideally, the law, that surely includes people from other countries – and the economics I learned in school and business: comparative advantage rules! Sourcing products overseas not only made economic sense, it was the right thing to do because it undoubtedly helped improve the lots of otherwise-poor people in developing countries.

And, oh by the way, the flood of inexpensive, foreign-sourced goods lowered costs for everybody – especially folks like yours truly who could afford to buy lots of cool new stuff. I even believed, along with the consensus of Western policymakers, that the increasing prosperity of developing nations that flowed from international trade would inevitably foster ideas of property rights, and eventually democratic ideals, among those whose cultures hadn’t previously valued such notions.

Seemed like a win-win-win. And, to be clear, from an economic perspective, for people like me it was.

***

The first set of shocks to my comfortable and, in retrospect, simplistic, belief that international trade is a very nearly uniformly positive force in human affairs was delivered by President Trump via his tariff war with China.

Tariffs, I had been raised to believe, were economic poison; and if Smoot-Hawley hadn’t actually caused the crash of ’29, it had been responsible for turning that overdue adjustment in market prices into the Great Depression. And there’s undoubtedly some truth to that history: the worldwide tariff wars that followed Smoot-Hawley clearly made the world’s economies considerably less efficient than they otherwise might have been.

Even so, Trump’s arguments that for at least a generation China has been stealing American technology and using unfair mercantilist strategies and, effectively, slave labor, to create dominant positions in vital industries rang true. Further, with the imprisonment of a million or so Uighurs, the violations of the one country/two systems agreement regarding Hong Kong, the militarily aggressive and illegal seizure of territory in the South China Sea and Chairman Xi’s assumption of emperor-like, for-life powers, I realized that China sees itself not as a trading partner to the US, per se, but rather as at least a strategic rival, and perhaps even – God forbid – an actual enemy. If America’s ideals are flat out incompatible with Xi’s “China Dream” of world dominance, who knows what form the inevitable competition between our nations could take?

The notion that a serious, non-market-driven recalibration of our commercial relations with China must happen is even clearer now as a result of the Chinese government’s responsibility for the Covid-19 disaster.  

Whether the virus escaped from a mismanaged lab or originated in the Wuhan wet market doesn’t matter to me; what does matter is that through the Chinese government’s suppression of news of the virus among its own doctors and people, its assertions, long after it knew them to be false, that no human-to-human transmissions were possible and its having allowed the free movement of infected people in the early days when the spread of the virus could have been stopped, China’s government made a pandemic inevitable. Its penchant for secrecy is causing untold, worldwide misery.

This is not my idea of a great trading partner.

***

But even apart from these China-specific problems, there are profound moral questions regarding the fairness of the great international trade flows of the last thirty or forty years that are highlighted here (https://americanmind.org/essays/end-the-globalization-gravy-train/ ) by JD Vance, the author of Hillbilly Elegy.

Vance argues in part that it’s simply wrong for us to allow tariff-free trade with nations that don’t have comparable minimum wage, health and safety and environmental protection laws to our own. In the absence of balancing tariffs, economic logic will inevitably dictate that such regulatory differences result in all but the highest value-added manufacturing moving to places without such protections. At the most extreme, by permitting such unfettered trade, we might be putting out of work the employees of an otherwise viable company in, say, Appalachia in favor of sourcing cheaper products from de facto slave labor by imprisoned Uighurs. Does that sound fair?

Even granted that God loves all his children equally, He can’t possibly think it’s right for us to move all the manufacturing jobs to places where the workers and the environment are systematically abused for the benefit of ?Apple? and/or the local oligarchs. Nor does it ultimately benefit our country to do so. The hollowing out of our manufacturing capacity and our supply chains has, again, been highlighted by the Covid-19 crisis; it turns out that most of our drugs and our hospital PPE (like so much else) is now made in … China. Who knew?

***

A mea culpa:

As you doubtless know, I am a lifetime member of what might be described as the knowledge-worker class. I was anointed with prestigious academic credentials, then became a banker, then an entrepreneur. Odds are, since you’re reading this “rather verbose, but sometimes thoughtful”* blog, you are a member of the same socio-economic class.

We are the ones who have benefited most from globalization; really cool stuff has gotten cheaper and cheaper for us, and we weren’t the ones worried about losing our jobs to lower-cost foreign manufacturing – quite the contrary, we were profiting from it through inexpensive goods and ever-higher stock prices. It was oh so easy for us to sing from the Globalization hymnal.

So I plead guilty: I never gave a second thought to the downsides of too-easy global trade. I was a free trade absolutist.

For what it’s worth, though, I’m thinking about the trade offs between efficiency and fairness now – and the national interest, too.

M.H. Johnston

* I love this line. It’s from a comment a reader made about a recent post. She sent the comment to a friend, mistakenly copying me. Gave me a good laugh, because it’s true.

3 comments to Things I’ve Learned Recently

  • Anonymous  says:

    Always and still enjoy your logic and insightful views of the world we’re living in. Though I’ve never been a globalist I’m even more so against it now.. We’ve helped other countries my entire life and yet we have record homelessness here. With the government waste we Could help our own but they spend it foolishly and then ask for more. I for one am tired of this vicious circle.

  • Anonymous  says:

    Verbose? I find you pithy and succinct. Thank you.

  • Anonymous  says:

    Thanks for comments on trade; it does seem we’ve been kidding ourselves for some time about the power of trade to spread and empower democratic ideals.

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