Protectionism to Poverty, Remember Smoot-Hawley?

By: Taggart Bennett

Narrated by: Virtual Voice

Protectionism and tariffs are things that nightmares are made for the destitute pleb masses. This is true if you are living in a mixed economy under a government claiming to be capitalistic, socialistic, communistic, all three, or some blend thereof. There's a slight difference, however, as in theory in both socialism and communism the tax revenue pulled via tariffs would go back to the people in the form of reimbursement that can be seen in a nation's social welfare programs like education, healthcare, housing, etc... The truth, however, is usually much different on the ground, and the reality is that, regardless of what system you are living under, you pay the taxes when you purchase products, not the importer or exporter, but the customer. Duties result in less economic activity in countries, and citizens of countries with heavy taxation on imports and exports have poorer people with less purchasing power. Tariffs on China are the only thing that is agreed upon by the two major political parties in the US, the Democrats and Republicans, and nearly all nations that are part of the European Union. Unfortunately, this is a mistake and makes both regions poorer, and it results in greater economic hardship in the Americas and in Europe. We need free trade, and despite China taxing all imports and exports at 100%, the free market wins every time as the flaws with entitlements are always exposed, which has precedence in nearly every country that has tried socialism and communism throughout history. Flat taxes on imports across the board or on specific countries results in retaliation tariffs, and citizens in the US know how the Smoot-Hawley Tariff Act of 1930 ended, i.e., we had the Great Depression and WWII. No thanks. People around the world, including people in China, don't need a bunch of bureaucrats making laws that only benefit big government to intercede in the natural forces of the free market; governments have a horrible track record with getting taxation correct, and it generally leads to the masses being impoverished and pitted against each other in unnecessary wars. Adam Smith's invisible hand is not only free, meaning it doesn't cost anything, but will always correct the errors in the free market as people can vote with more money in their pockets regarding the goods that are desired through buying them, the velocity of money is higher as a result of more economic activity within nations and between states, and international trade brings better products at fairer prices in conjunction with education via cultural exchange to countries and people that embrace it. Globalization will never die as humans need humans, the exchange of ideas and goods across borders throughout history has given us a competitive advantage as a species, and we are psychologically predisposed to continue doing things that benefit our livelihood. Why on Earth would anyone want to stop free trade?

"As history has repeatedly proven, one trade tariff begets another, then another - until you've got a full-blown trade war. No one ever wins, and consumers always get screwed." -Mark McKinnon

Tariffs and Protectionism

Good break down of the overall effect of tariffs and protectionism. Good book and gets to the point quickly.

It would be better to develop the ideas more, but I generally agree with the author.

On Russia: The author is wrong about Russia. We have military intelligence that Moldova is next to be invaded and the US has already deployed troops to Lithuania. It can be said that hate begets hate and violence begets violence, which would make it tempting to have no military be the ideal policy. And yet, if there is no punishment for evil, then that will result in the worst of possible outcomes. It’s the paradox of peace: how are we to have peace, by collectively denying ourselves the right to war and upholding that collective freedom by defending countries which are attack. We beat up the bullies essentially. If anything, the U.S. should be spending more than 5% of their military budget and winning that war. If you want a simple rule as to what action will bring peace, just follow what the U.S. military industrial complex is advocating and then support the opposite side. It’s many of the same companies that spent millions of dollars and years of effort to manipulate Americans to stay in Iraq and Afghanistan who are now saying we need to stay out of Ukraine. The U.S. military industrial complex did the same thing in WW1 and WW2. They knew that if the U.S. entered the world wars, that they would be the deciding factor, so the military industrial complex campaigned on isolationism to prolong the wars for years, to sell weapons to Europe, and eventually be brought into the war thus maximizing their profits. The U.S. should have entered both world wars at the same time as the British. Had we done so, tens of millions of lives would have been saved. If Ukraine falls, it will be WW3 with trillions of dollars wasted, and millions of lives lost.

On healthcare: I understand that you are a libertarian and prefer smaller government and more freedom, but to be a credible libertarian, it’s important to recognize that the government objectively does a better job than the private sector in certain areas. Take US healthcare, the U.S. spends more on healthcare than any country on earth and yet the results are mediocre with medical emergencies being the leading cause of bankruptcy and millions of Americans avoiding medical care out of cost. My oversimplification would be that the only kind of relationships that last are mutually-beneficial and that relationship doesn’t work one side has what the other needs. People will pay anything to get what they need, which leads to exploitation in the private sector as they charge $1000 for insulin. Power corrupts, and that power can come from governments being too powerful but it can also come from companies being too powerful. The people have a vested interest in limiting both the public and private sectors. In some countries, medical professionals are paid by the result, thus incentivizing them get things right. In the US, customers are charged by the number of procedures done, thus incentivizing medical professionals to increase unnecessary costs, especially if one has good insurance. See the problem? Also most Americans get their healthcare from their work. I don’t know about you, but that right there sounds like communism. Most employers are interested in running their business, not in the healthcare of their employees. This makes US companies less competitive. If your employer is in charge of your healthcare and the healthcare of your family, then you aren’t exactly free to start that business you’ve been working on, or take the new job.
There are many types of universal healthcare models that the U.S. could adopt: one where all health insurance is nationalized, one where there medical facilities are nationalized, one where there is full coverage for those working 40 hours or more a week, but the idea that AI will solve it or that medical professionals should be paid less that’s completely avoiding the structural problems with US healthcare.

On Janet Yellen: the biggest problem this century is climate change, or rather, the sustainability crisis of which climate change is only a part. The economy needs to switch from being extractive in nature to being regenerative in nature. Economies need to become more circular as they pursue prosperity without growth.

On Agriculture: it is not the root of economic wellbeing, productivity is. Most of rest you are right on, trade imbalances don’t matter, free trade is a much better weapon against communism than embargoes, Trump’s trade wars and protectionism economics will kill the U.S. economy.

As a whole, it was a good book. We desperately need more people discussing the threat of protectionism and the stupidity of these tariffs and Trump trade wars. I have some criticism. I thought you were needlessly patronizing at times (let the strength of your arguments speak for themselves). That tends to needlessly create tension with readers who you might have otherwise won over, I thought you were needlessly speculative (“medical malpractice is probably the leading cause of death”), which even if true, as a writer you should know that that sort of speculation isn’t doing you any favors. You touched on too many topics and then dealt with them trivially. I would have preferred a more narrow subject matter with greater clarity and explanation.