Buchanan on reindustrialization

[BigBagel]

I heard Pat Buchanan holding forth on "Morning Joe" Scarborough on WABC radio NY while I was driving.

His idea:
Eliminate corporate income taxes.
Establish a 5% tariff on all manufactured goods from every country not just China.
Gradually increase the tariff over a few years to 30%

He says he's channeling Alexander Hamilton and that we'll attract capital and re-industrialize quickly.

A trade war will of course result but would it work? He's one of the few that even thinks about our lack of an industrial base.

[Aetius Romulous]

Re: Buchanan on reindustrialization

If there is one dusty old economic philosopher who is really taking a beating in this mess it has to be David Ricardo.

The entire "global economy" rests on his theories of "comparative and absolute advantage". This 2004 article pretty much sums up both the strategy as it has been implemented for thirty years, and the slow realization that perhaps something was amiss.

Removing the driving piece from a world wide economic movement unilaterally just has to have serious implications.

Shaking Up Trade Theory - "For decades economists have insisted that the U.S. wins from globalization. Now they're not so sure "


"Ever since Americans began fretting about globalization nearly three decades ago, economists have patiently explained why, on balance, it's a boon to the U.S. Yes, some Americans lose their jobs, either to imports or because factories move to cheap-labor countries such as China or India. But the bulk of this work is labor-intensive and lower skilled and can be done more efficiently by countries that have an abundance of less-educated workers. In return, those countries buy more of our higher-value goods made by skilled workers -- for which the U.S. has a comparative advantage. The lost jobs and lower wages in the U.S., economists say, are more than offset when countries specialize like this, leading to more robust exports and lower prices on imported goods."

[c1ue]

Re: Buchanan on reindustrialization

Shaking Up Trade Theory - "For decades economists have insisted that the U.S. wins from globalization. Now they're not so sure "

It is a nice discussion, but reality doesn't jibe well with this idealistic economic theory discourse.

The reality is that it isn't just outsourcing of jobs to lower wage countries - it is also FIRE activities increasing costs in the US. The absolute difference in wages matters and FIRE activities have accelerated the delta.

The other reality is that few nations are truly 'free trade'. Between currency pegs, agricultural subsidies, import taxes, and what not - it is disingenuous to say that the world trade environment is 'free'.

In this respect Buchanan is right in a general sense. But in the immediate sense - what he speaks of will raise prices exactly in a stagflationary environment, and the 30% final rate still might not be enough to offset the FIRE induced labor delta.

Russia, for example, has relatively low wages as well as an effectively 37% import tax rate, but still the forces of domestic manufacture are not significantly advantaged vs. imports.

[Aetius Romulous]

Re: Buchanan on reindustrialization

Yup, it's theory alright. And it remains theory. My issue is yours as well - there is a difference between theory and reality.

Since Ricardo s time it has been theory that has driven policy - theory that becomes ideology. Trade barriers are part of that ideology.

I'm not sold on the idea of protectionism, but I am leaning that way. My principle concerns are about what the shift in ideology will signal, and how a global economy will react. At this level it is more than economics.

I do know this - America has to deal with it's trade imbalances, and however they choose to do it the results will be unpredictable.

[c1ue]

Re: Buchanan on reindustrialization

Since Ricardo s time it has been theory that has driven policy - theory that becomes ideology. Trade barriers are part of that ideology.

I'm not sold on the idea of protectionism, but I am leaning that way. My principle concerns are about what the shift in ideology will signal, and how a global economy will react. At this level it is more than economics.

I do know this - America has to deal with it's trade imbalances, and however they choose to do it the results will be unpredictable.

Complete agreement.

I would just add that it is more likely those seeking advantage used convenient theory to justify policy and ideology - because inconvenient theories like Schumpeter were ignored despite all observational evidence.

[thriftyandboringinohio]

Re: Buchanan on reindustrialization

"Ever since Americans began fretting about globalization nearly three decades ago, economists have patiently explained why, on balance, it's a boon to the U.S. Yes, some Americans lose their jobs, either to imports or because factories move to cheap-labor countries such as China or India. But the bulk of this work is labor-intensive and lower skilled and can be done more efficiently by countries that have an abundance of less-educated workers. In return, those countries buy more of our higher-value goods made by skilled workers -- for which the U.S. has a comparative advantage. The lost jobs and lower wages in the U.S., economists say, are more than offset when countries specialize like this, leading to more robust exports and lower prices on imported goods."

It's even easier to move high skill knowledge workers to India and China. Electrical and mechinal designers. Accountants. Computer programmers. Chemists. Their work inputs and outputs can be emailed at zero cost, no shipping charges for off-shoring those jobs.

I think tariffs would work again. Tariffs were what presidents Washington, Adams, Jefferson and Madison used to fund most of the federal budget, and those guys thought such tariffs were a good way to protect American industry. I agree with those fellow almost every time.

[Starving Steve]

Re: Buchanan on reindustrialization

Pat Buchanan has a terrible idea.

In a trade protectionism with tarrif barriers, we would go back to the days of one-lettuce leaf packaged at the grocery store in winter and offered for $1. This is what trade protectionism meant on Vancouver Island a few years ago.

To-day, I get my lettuce and all my groceries on Vancouver Island at the same price as they cost in California. My lettuce comes from Salinas, California, and my blackberries come from Watsonville, California or from Guadalajara, Jalisco. Or sometimes I get my berries from Chile.

Free trade is wonderful. It lowers my cost of living.

I do NOT want walls on the borders, nor English-only, nor tarrifs. I think this Pat Buchanan has terrible ideas: trade protectionism, tarrifs, Hoover- economics, English-only, border walls, and xenophobia.... He scares the hell out of me.

Every dollar hike in my cost of living means one less dollar that I could spend on buying things---- things like a new car from Detroit. So protecting American industry means that American industry wouldn't be able to sell its products to the world. This is junk economics; it used to be called, "Hoover-economics", and it does not work.

[bcassill]

Re: Buchanan on reindustrialization

Pat Buchanan has a terrible idea.

In a trade protectionism with tarrif barriers, we would go back to the days of one-lettuce leaf packaged at the grocery store in winter and offered for $1. This is what trade protectionism meant on Vancouver Island a few years ago.

To-day, I get my lettuce and all my groceries on Vancouver Island at the same price as they cost in California. My lettuce comes from Salinas, California, and my blackberries come from Watsonville, California or from Guadalajara, Jalisco. Or sometimes I get my berries from Chile.

Free trade is wonderful. It lowers my cost of living.

I do NOT want walls on the borders, nor English-only, nor tarrifs. I think this Pat Buchanan has terrible ideas: trade protectionism, tarrifs, Hoover- economics, English-only, border walls, and xenophobia.... He scares the hell out of me.

Every dollar hike in my cost of living means one less dollar that I could spend on buying things---- things like a new car from Detroit. So protecting American industry means that American industry wouldn't be able to sell its products to the world. This is junk economics; it used to be called, "Hoover-economics", and it does not work.

Free trade only works if EVERYONE is playing by the same set of rules. The problem is that it doesn't work because EVERYONE is gaming the system with currency manipulation, barriers to entry, and yes, subsidies to select industries. The current system is a complete joke. Globalization was a lie from the beginning and was used primarily to cram down wage costs and to circumvent domestic environmental and workplace safety laws. All the money from these "savings" flowed right into the pockets of those who controlled the assets. So now we have stagnant wages in the U.S. (actually declining wages when accounting for inflation), and places like China are one giant cesspool of toxic waste. Just wait for the next spike in oil prices. Things will come back because the costs to ship furniture and teddy bears halfway around the world will be prohibitively expensive.

Oh, and you can forget about your berries from Chile. They'll be too expensive as well.

[Aetius Romulous]

Re: Buchanan on reindustrialization

This is essentially my feeling at the moment - a graduated set of walls around selected manufacturing that would rise and fall with the current account. Somehow LOL.

But, as I said above, these can't be unilateral and have geopolitical implications that stretch beyond economics. A very tough sell when it represents a 180 about face where there are national economies that have done very well at America's "mistake".

I'm still on the fence, but I like the economics of it anyway. I think.

[BigBagel]

Re: Buchanan on reindustrialization

http://www.humanevents.com/article.php?id=36002

Buchanan's column from today on the same subject with historical context.

[Starving Steve]

Re: Buchanan on reindustrialization

http://www.humanevents.com/article.php?id=36002

Buchanan's column from today on the same subject with historical context.

Maybe if the U.S.A. had a goods and services tax (GST), then consumption would not run wild. Maybe if the Putz from Princeton was thrown-out, and someone like Paul Volcker took command at the Fed, maybe then interest rates would go up substantially and savers would be rewarded. And maybe if the U.S.A. had socialized medicine like the rest of the world, then the cost of doing business in the U.S. would be competitive with the world. Then, just maybe, some of America's lost manufacturing jobs would relocate back to the U.S.

It's an easy solution, really. It means sucking the air out of your stomach, tightening your belt, and learning to compete with the world.
And it's a solution that doesn't require bail-outs, zero interest rates, border walls, tariff barriers, tax holidays, English-only, nor "buy American".

Starving Steve to Pat Buchanan and even to President Obama: are we connecting here?

[c1ue]

Re: Buchanan on reindustrialization

Maybe if the U.S.A. had a goods and services tax (GST), then consumption would not run wild.

Steve, you need to re-read (or read) Elizabeth Warren's work.

Consumption in the US has not run wild - it is lower proportionally than in the 1970s.

Certainly the US as a nation consumes more than the 'average' world citizen, but then again - Canada consumes more energy on average than in the US.

Yet Canada isn't in the same situation.

Nationalized Health Care in turn is a difference, but is not the only difference. Canada as a low population country with high proportional natural resources - in turn as a resource exporter - is a fundamentally different society than the US.

Brazil in turn consumes far far less energy per person than the US or Canada - and probably will always do so. Not having to generate heat for winter is a big factor.

Merely cutting consumption isn't going to do it - this has already been going on below the top 10th percentile for a generation.

[Aetius Romulous]

Re: Buchanan on reindustrialization

I think there is a huge gulf between what is theoretically correct, and what is politically possible. It makes absolutely no sense to be wasting time and energy on policy that is never going to be enacted.

Stepping back to the "doable" requires compromise and empathy - two things that just don't exist at the moment because of the grand ideological battle that everyone is twisted into knots over.

Which brings me to Elizabeth Warren, who I believe is a champion of common sense who has managed to avoid the arrows of ideologues. Two or three more Elizabeth Warrens in the discussion would make one hell of a difference to the future at this point.

EW rocks!

[Raz]

Re: Buchanan on reindustrialization

...Which brings me to Elizabeth Warren, who I believe is a champion of common sense who has managed to avoid the arrows of ideologues. Two or three more Elizabeth Warrens in the discussion would make one hell of a difference to the future at this point.

EW rocks!

AWWW, come on now, don't you think these guys have our future in mind?

[Roughneck]

Re: Buchanan on reindustrialization

The globalists and financial elites don't care about America or it's workers. I think Pat raises a good point about our trade defecits and the money we spend buying the necessities of life from other countries. Free trade really is a misnomer. How can the US compete with a country that devalues it's currency and has dirt cheap labor and no environmental laws? I would gladly pay 10 or 20 bucks more for a pair of shoes I buy once or twice a year if it meant a job for an American worker. Of course we were told that "free" trade would mean more high tech jobs for us and help our exports etc. etc. That the US would "mature" as an economy and jobs would shift to other productive enterprise. More lies from the FIRE economy oligarchs. A true globalist believes that good should be produced in the cheapest place possible to maximize profits and make goods cheaper. They have no allegiance to any country.