A Short History Of Trade Protectionism-------Crony Capitalism That Always Hurts The People

I’m a fan of much of Pat Buchanan’s “America First” foreign policy writings in which he expresses the supposedly outrageous idea that the purpose of the national defense establishment should be to defend against foreign aggressors, and not be the aggressor.  Defense, not offense.  But his “America First” economic writings in defense of protectionism are completely wrongheaded, and often historically inaccurate.

The main reason for the wrongheadedness is Buchanan’s pervasive error of the post hoc ergo propter hoc fallacy (“after this, therefore because of this”).  An example of this fallacy would be:  1) A rooster crows in the morning; 2) The sun rises shortly after the rooster crows; 3) Therefore, the rooster crowing must cause the sun to rise.

In Buchanan’s case, his entire argument for protectionism rests on a slightly different version of the post hoc ergo propter hoc fallacy.  Buchanan’s fallacy is: 1) The Republican Party ushered in forty years of protectionist tariffs, beginning in 1862; 2) There was a lot of good economic news for Americans during that period; 3) Therefore, the Republican Party’s protectionist trade policies caused the economic good news.

In a recent column entitled “Who’s the Conservative Heretic” Buchanan repeats this mantra, which he has written over and over for the past several decades, by citing the high tariff policy of the post-Civil War era, along with declining prices, higher real wages, 4% per year increases in  GDP, increased industrial production, etc. and claims that ALL of it is the result of high tariffs.

But during that time period international trade accounted for less than 10 percent of the entire economy, so that high tariffs could not possibly have had such huge impacts.  Moreover, the economic impacts of the GOP’s protectionist tariffs were uniformly bad.  The main beneficiaries of the Party of Lincoln’s protectionism were the politically-connected corporate one-percenters of the day, whose corporate profits were “protected” from competition.  As John C. Calhoun once accurately stated, what average Americans are “protected” from with protectionist tariffs is lower prices.  Buchanan’s beloved high, post-war tariff rates allowed protected industries to rip off their American customers while all other industries were expanding, innovating, and dropping their prices.  This is always and everywhere the fundamental effect of “economic nationalism”:  the politically connected benefit at the expense of their fellow citizens.

Many of the post-Civil War tariffs were imposed on capital goods that were used by American manufacturers to produce other products, thereby making those American manufacturers less competitive on international markets.

Farmers were plundered mercilessly by the high tariffs championed by the Party of Lincoln.  American farmers sold much of their product in Europe. Three-fourths of Southern agriculture was sold in Europe shortly after the war, for example.  But when high protectionist tariffs deprived our European trading partners of revenue by prohibiting them from selling in America, they had fewer (or no) dollars with which to buy American agricultural products.  Thus, farmers were plundered twice:  Once by having to pay more for a lot of “protected” products shielded from competition and therefore higher priced; and then a second time from lost sales abroad.  This is why American farmers became a powerful political force in favor of a federal income tax: They were promised lower tariffs in return for their political support.

Farmers did help get the income tax adopted, and the average tariff rate was lowered in 1913 when the income tax was adopted.  But then they were once again abused by the Party of Lincoln which, in 1922, just nine years later, passed a huge tariff increase known as the Fordney-McCumber tariff, which Buchanan praises to the treetops with another silly post hoc fallacy:  “For the next five years, the economy grew 7 percent a year,” he writes.  Farmers ended up with high tariffs and an income tax.

Protecting politically-connected corporations from international competition is the surest way to make them fat and lazy, as the steel and automobile industries demonstrated in the post-World War II era.  It was only after Japanese, German, and other manufacturers cleaned their clocks, so to speak, that they were finally motivated to shape up.  On this point Buchanan cites the old blowhard and mentally unstable Teddy Roosevelt, calling him “the Rough Rider,” as saying that it is competition, not protectionism,  that produces “fatty degeneration of the moral fiber.”  What an economically clueless gasbag was Teddy Roosevelt.

Another of Buchanan’s protectionist heroes is Congressman Justin Morrill, who sponsored the Morrill Tariff of 1859, which finally passed both the House and Senate by early 1861.  Morrill was a steel manufacturer and got into politics solely for the purpose of using state power to rip off his American customers and line his pockets.  The same is true of another of Buchanan’s protectionist heroes, Henry Clay, who was known as “The Prince of Hemp” for operating a large slave plantation in Kentucky that grew hemp.  Clay proclaimed that he got into politics, like Morrill, to impose high tariffs on foreign hemp so that he could (legally) plunder his customers.  At least Clay’s hemp tariff did not ignite a Civil War, as did Morrill’s tariff, which caused the hyper-protectionist Abe Lincoln, another of Buchanan’s protectionist heroes, to declare in his first inaugural address that it was his “duty to collect the duties and imposts” but “beyond that, there will not be an invasion of any state.”  The Morrill Tariff had just more than doubled the average tariff rate two days earlier, which Southerners had been protesting and threatening secession over for the previous thirty years.  Lincoln literally threatened “invasion” of his own country over tariff collection, leading to a war that, according to the latest research, may have cost as many as 850,000 American lives.  Going to war to fatten the wallets of plutocrats is what Buchanan’s hero Justin Morrill should be known for.

Buchanan seems absolutely giddy when he quotes an 1895 “History of the Republican Party” that declared, “The Republican Party . . . is the party of protection . . . that carries the banner of protection proudly.”  The party  of corporate one-percenters, in other words.  Some things never change.

Buchaan is dead wrong when he makes the red herring argument that “free traders” claim that the Smoot-Hawley Tariff, signed into law by Herbert Hoover in 1930, caused the Great Depression.  No one I know of has ever made that argument, and I’ve been studying economics for 44 years now, as a student, professor, researcher, and author.  The Smoot-Hawley tariff increased the average tariff rate to almost 60 percent and ignited an international trade war that shrunk the volume of world trade by two-thirds in three years, but it was not the sole cause of the Great Depression, which was another bust cause by the Fed’s boom-and-bust monetary policy.

Buchanan is also dead wrong when he tries to argue that NAFTA  was an example of “free trade” when exactly the opposite is true.  NAFTA was several thousand pages of fine-print legalese, written by corporate and labor union lobbyists and sympathetic congressional staffers, that centrally plans international trade in a thousand different ways.  It was all written up under the supervision of Clinton administration lawyer/lobbyist Mickey Kantor who had quite the reputation as a lobbyist for corporate fat cats, but no reputation at all as a free trader or as someone who knew much of anything about economics.  On this point, Buchanan throws in yet another post hoc fallacy:  After NAFTA, “Communist China” became “the world’s No. 1 manufacturing power.”

Hillary Clinton would be totally, one-hundred-percent supportive of Pat Buchanan’s Quixotic protectionist crusade.  It would benefit the corporate one percenters who she and her husband have expertly shaken down for years, and who would jump at the chance of benefiting from another round of “pay to play.”  This is the political game in which corporations funnel many millions to the Clintons and their cronies personally, and to their party, in return for onerous protectionist tariffs on their competition that would spike their profits by allowing them to, once again, rip off their American customers.  And of course, there is the old Democratic Party labor union machine that has always been in favor of protectionism for obvious selfish and greedy reasons.  Pat Buchanan just might be Hillary Clinton’s ideal running mate.

One thing Pat Buchanan is right about is that “economic nationalism” has always been the defining characteristic of the Republican Party.  That is why the party has  been such an economic curse on America, having transformed the nation into a corporate welfare/warfare state during the Lincoln regime.

 

https://www.lewrockwell.com/2016/05/thomas-dilorenzo/bad-arguments-economically-historically/

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