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Published: Fri, 22 Sep 2017 00:00:00 -0400

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Tribalism and Economic Nationalism Are Cut from the Same Cloth

Sun, 20 Aug 2017 08:30:00 -0400

I have no idea what goes on in Donald Trump's head, but I can imagine a connection between his refusal to renounce the support of alt-right white identitarians and his rejection of globalism—that is, the freedom of people to trade across national boundaries and to move, consistent with individual rights, as they see fit. When Steve Bannon says he hopes the Democrats will talk about nothing but racism and let the White House get on with its program of "economic nationalism," he may be showing his clever side. Perhaps he sees the connection—and has a magician's sense of misdirection. For the record, globalism and government intervention have no necessary relationship, whatever the rest of the political universe believes. The most eloquent promoters of unencumbered world trade were Richard Cobden and John Bright, the 19th-century "Little Englander" anti-imperialists and peace advocates. No one has an excuse for conflating free worldwide commerce—including the movement of workers, that is, immigration—with either empire or elitist rule through multinational bureaucracies birthed by politicians. As Cobden said, They who propose to influence by force the traffic of the world, forget that affairs of trade, like matters of conscience, change their very nature if touched by the hand of violence; for as faith, if forced, would no longer be religion, but hypocrisy, so commerce becomes robbery if coerced by warlike armaments. Anti-globalism and anti-cosmopolitanism might flow purely from economic ignorance, but it is hard to believe that's all it is for many people. Too often these attitudes suggest what Bryan Caplan calls "anti-foreign bias" combined with "antimarket bias." Caplan defines antiforeign bias as "a tendency to underestimate the benefits of interacting with foreigners," and he defines antimarket bias as a tendency to "underrate the social benefits of markets." (His book The Myth of the Rational Voter: Why Democracies Choose Bad Policies has the details about these and other relevant, common biases.) Why would anyone underestimate the benefits of interacting with foreigners? It might be because they are, well, foreign. Combine this bias with an ignorance of Adam Smith's "invisible hand" (spontaneous order) and a suspicion that exchange is zero-sum rather than positive-sum, and you have the making of an economic nationalist. If you are already a committed economic nationalist, you will have an interest in spreading distrust of foreigners and markets to others in order to advance your program or be elected president of the United States. (Some apparent tribalists may "merely" be demagogues pandering to authentic tribalists.) While I don't think one has to embrace racism or tribalism to be an economic nationalist, an affinity exists between the two dispositions: "I can't trust those people? Why would I want to trade with them?" Moreover, the distrust of foreigners and markets could readily carry over to subgroups in the domestic population that seem foreign—that is, groups which don't quite seem to embrace the "nation's culture" with sufficient enthusiasm. Maybe some members of the suspect group have a primary language other than English, or practice a religion deemed weird, or don't trust the police. In other words, someone who starts with a bias against foreigners and the social cooperation embodied in what we call markets is a prime candidate for bigotry toward domestic "foreigners" too. And that person might well see kindred spirits in groups that exhibit more-pronounced versions of those biases, even when their members have a taste for violence. After all, danger lurks, so who could blame people for being tempted to defend their values directly? Since social and economic change is inevitable—some of it introduced by The Other—those biases could also incline a person to lament the loss of a treasured past and harbor resentment against those who appear to be responsible for that loss. That person might, for example, see "the history and culture of our great country being ripped apart with the removal of o[...]

The Apocalyptic Faithlessness of Trump/Bannon Conservatism

Thu, 10 Aug 2017 08:15:00 -0400

(image) President Donald Trump's big foreign policy speech in Warsaw last month, crafted in part by nationalist Stephen Miller, included the startlingly pessimistic assertion that "The fundamental question of our time is whether the West has the will to survive." Trump, Miller, and populist strategist Steve Bannon often express such existential insecurity when talking about everything from immigration policy to refugee resettlement to bilateral trade deficits. If we don't soon address the latter concern with Mexico, Trump warned Mexican President Enrique Peña Nieto in a phone conversation leaked last week, "We will not be the United States anymore."

Such fundamental pessimism represents something new in the White House, I argue in today's L.A. Times, telling us something not just about the new populists, but the failures of the managerial class they have supplanted. Excerpt:

It's [the] inward-looking anxiety that distinguishes the blood-and-soil nationalism of Trump, Steve Bannon and Stephen Miller…from the Cold War confidence of Reagan and the us-vs.-them cockiness of post-9/11 George W. Bush. It's hard to imagine a National Security Council strategic planning director of any other modern president write, as the recently fired Rich Higgins did in a memo in May, that a broad section of the American political spectrum has "aligned with Islamist organizations at local, national, and international levels" to form a "counter-state" in which "they seamlessly interoperate through coordinated synchronized interactive narratives."

The apocalyptic style is hardly new to American politics: We're used to such howls from wilderness figures such as Pat Buchanan and 1992-era Jerry Brown. More heretofore successful pols, however, found ways to signal to their friends in the media that populist demagoguery is just a mask to be worn during primary season. Sure, the Hillary Clintons of the world would campaign against free trade, but in our hearts we knew they'd flip-flop. Part of the collective shudder of revulsion you can experience daily from the national press comes from the fact that Trump and the Bannonites appear to actually mean it.

More, including generous swipes at John Kasich and other handmaidens to the last 16 years of crappy public policy, here. I previewed the apocalyptic turn of American politics here back in December 2015.

How Freedom Made Us Rich

Wed, 09 Aug 2017 13:00:00 -0400

"In [1492], if you were going to bet on who was going to have a 'Great Enrichment,'" says University of Illinois at Chicago economist Deirdre McCloskey, "you would have been crazy not to bet on China because China had the most advanced commercial institutions, the most advanced ship building technology, [and] the most advanced machinery all together." But it didn't work out that way. "My claim," McCloskey says, "is that liberty was the key to modern economic growth." In her new book, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, the third volume in a trilogy, McCloskey argues that our vast accumulation of wealth over the past two hundred years— which she's dubbed "The Great Enrichment"—was the result of "massively better ideas in technology and institutions." Where did they arise from? &tag=reasonmagazineA"A new liberty and dignity for commoners," she argues, "expressed as the ideology of European liberalism." McCloskey sat down with Nick Gillespie at Freedom Fest, the annual convention for libertarians in Las Vegas, for a wide-ranging conversation on topics including the roots of "The Great Enrichment," why her gender reassignment surgery was an "expression of [her] libertarianism", and the importance of advocating policies that "actually help the poor" instead of just "making people feel good about helping the poor. McCloskey is also a Reason columnist. Her archive is here. Edited by Todd Krainin. Cameras by Meredith Bragg and Justin Monticello. Subscribe to our YouTube channel. Like us on Facebook. Follow us on Twitter. Subscribe to our podcast at iTunes. This is a rush transcript—check all quotes against the audio for accuracy. Nick Gillespie: Hi, I'm Nick Gillespie with Reason and today we are sitting down with Deirdre McCloskey. She's an Emeritus Professor of Economics, History, English, and Communication at the University of Illinois at Chicago and the author most recently of Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World. She's also a columnist for Reason Magazine. Deirdre, thanks so much for talking with us. Long time contributing editor to Reason as well. McCloskey: I'm extremely pleased to be here and ... Gillespie: Well, your latest column, because I think this puts us right into a lot of current discussions, is titled The Myth of Technological Unemployment. McCloskey: Yeah. Gillespie: The subhead is, if the nightmare of technological unemployment were true, it would have already happened repeatedly and massively. In it, you take issue with a lot of libertarian or free-market economists who are talking about how we've reached the end of technological innovation or productivity growth and yeah, we're going to have to find something to do for people who are replaced by robots. McCloskey: Yeah. Gillespie: What's wrong with that? McCloskey: I think it's just completely wrong. My friend, Tyler Cowen, my friends at George Mason think maybe it's time for an intervention and Tyler, we think maybe we should send him to dry out somewhere because he seems to have gone crazy on this and he's not alone. I mean, there are people like Bob Gordon wrote a book last year, which was very successful. Gillespie: Which argued that basically say goodbye to 2%, ... McCloskey: Exactly. Gillespie: ... even 2% economic growth. McCloskey: Exactly. Innovation in the United States is finished and we've invented all the window screens and drop ceilings we're ever going to invent. There are a whole bunch of things wrong with it. One is that it doesn't make a lot of quantitative sense. In Tyler's book, which is called Average is Over, he's got a chart, which he says, "Summarizes my point." It's terrible. See the falling share of labor in national income. You look closely at the chart, which is one of these Time Magazine charts, it goes down like that. It turns out it's gone from 63% to 61%, talking about 2%. Now, come on Tyler. Please. Then, Bob likewise, and lots of others. I mean, in fact, it's a very old theme. Pe[...]

Immigration Brings Out the Social Engineers

Sun, 06 Aug 2017 08:00:00 -0400

Immigration brings out the social engineers and central planners across the political establishment. We see this clearly in the debate over Donald Trump's support for legislation that would cut legal immigration in half while tilting it toward well-educated English-speakers and against low-skilled non-English-speakers. Even establishment opponents of Trump's position believe "we" must update the immigration system to better serve "the economy." But they disagree on particulars. Trumpsters think the economy needs only scientists and inventors (preferably future Nobel Prize winners, I suppose), while Republican and Democratic anti-Trumpsters counter that the economy also needs some unskilled workers to pick crops in the hot sun and do menial work in luxury resorts, which Americans apparently don't want to do. But what is this thing they call "the economy," which has needs? Social engineers of all parties and persuasions talk as though an economy is some kind of mechanism to be centrally fine-tuned and overhauled occasionally according to a plan. Even those who style themselves free enterprisers display the central-planning mentality when it comes to immigration. Contrary to this establishment view, the economy is not a mechanism. It is, rather, hundreds of millions of American producers and consumers, who also happen to be embedded in a global marketplace. Why can't they be trusted, without the direction of politicians, to decide for themselves what they need and to engage in social cooperation—that is, among other things, to trade goods and services—to obtain it? It is we whom the social engineers wish to manipulate. In the process they would cruelly keep poor people in perpetual misery and political oppression by locking them out of America. Why? Because the economy doesn't need them. Like all central planners, the immigration planners exhibit what F. A. Hayek called "the pretense of knowledge." Do these presumptuous frauds know what specific skills will be demanded in the future? To know that, they would have to know what products will be demanded in the future. But we don't know what we'll want because lots of things have not been invented yet. And we can't predict who will invent them. People who today have few skills and who speak no English will be among those who make our lives better. Let them come here to make better lives for themselves. That's their right, which is justification enough. But we will benefit too. Notice, also, that advocates of immigration control—progressive and conservative—often say the economy doesn't have enough jobs for the people already here. So how can we let more in? This assumes the "size" the economy is fixed and that more people would result in smaller shares for everyone. But if we stop thinking of the economy as a mechanism and start thinking of it as an unending series of exchanges between people seeking their betterment, we can see through this fallacy. Newcomers are both producers and consumers. Therefore their entry into our society presents new opportunities on both the supply and demand sides. In a freed economy this would portend higher living standards for everyone. (Regarding today's wage pessimism, see Bryan Caplan here.) Resources are not fixed, as evidenced by the fact that seven billion people are far wealthier today than much smaller world populations were in previous ages. In fact, resources—that is, useful materials—are not even natural. As the great economist Julian Simon taught us, what we call natural resources are merely useless things and even detriments until someone exercising intelligence—"the ultimate resource"—discovers how we may use them to make our lives better. Not so long ago, you would have paid dearly to remove crude oil from your land. Then a chemist distilled kerosene from it. Kerosene was better and cheaper than whale oil for lighting lamps; and so, suddenly, finding oil—"black gold, Texas tea"—on your land turned you into Jed Clampett. We indeed[...]

Trump's Narrow View of 'Civilization'

Thu, 06 Jul 2017 17:12:00 -0400

"I declare today for the world to hear that the West will never, ever be broken," President Donald Trump vowed near the end of his doctrine-defining speech today in Warsaw's Krasinski Square. "Our values will prevail, our people will thrive, and our civilization will triumph." Set rhetorically and physically against the backdrop of Poland's inspiring courage and perseverance in the face of long adversity, Trump's address, at turns apocalyptic and motivational, was an attempt to summon similar will to the shared project of defeating radical Islamic terrorism. "Together let us all fight like the Poles: for family, for freedom, for country, and for God," he said. But Trump's policy recommendations for this clash of civilizations were disproportionately inward-looking, borderline paranoid; and his depiction of what constitutes "Western" values was cramped and incomplete. The foundation of the modern "West" as applied to Europe is about more than just faith and family and NATO (the latter of which the president was careful to emphasize in this Russophobic, alliance-loving former satellite state). Free Europe as we know it was built upon free trade, and as Donald Trump will hear earfuls about over the coming days, his mercantilist, zero-sum views on international exchange threaten to inflict harm on the very civilization he aims to protect. To confront the "oppressive ideology" of expansionist Islam, the president today pointed largely to immigration policies, surely music to the ears of the Polish government, which, like those in Hungary and Austria, is currently taking flak from the European Union for refusing to admit relocated refugees. "While we will always welcome new citizens who share our values and love our people," Trump said to applause, "our borders will always be closed to terrorism and extremism of any kind…. We cannot accept those who reject our values and who use hatred to justify violence against the innocent." Trump then identified two other sources of trouble that threaten to erode western resolve: the "destabilizing activities" and "support for hostile regimes" by nearby Russia (which may or may not have been target of the immediately preceding paragraph, which covered "propaganda, financial crimes, and cyberwarfare"), and also…well, would you believe bureaucracy? Finally, on both sides of the Atlantic, our citizens are confronted by yet another danger—one firmly within our control. This danger is invisible to some but familiar to the Poles: the steady creep of government bureaucracy that drains the vitality and wealth of the people. The West became great not because of paperwork and regulations but because people were allowed to chase their dreams and pursue their destinies. This is where not just Trumpism, but a whole lot of libertarianism and conservatism, collides into a paradox. Trump is entirely right that the West became great in large part through "allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty and justice," as Adam Smith put it in 1776, at the dawn of modern liberalism. This brilliant new idea in admittedly imperfect settings changed the world forever. "The boldness of commoners pursuing their own interests resulted in a Great Enrichment—a rise in Europe and the Anglosphere of real, inflation-corrected incomes per head, from 1800 to the present, by a factor, conservatively measured, of about 30," the economist Deirdre McCloskey wrote in these pages earlier this year. So what's the paradox? In an E.U. setting, that the transnational body itself has been the single most effective mechanism for reducing barriers to trade and movement throughout the bloc. Americans look at Brussels and imagine Bernie Sanders or Bill de Blasio, forever soaking the rich and telling farmers how to curve their bananas. But many Europeans recognize it as the body that dismantled state ownership of airlines and car factories, and allowed Polish plumbers[...]

Trump Administration Announces Its NAFTA Renegotiation Concerns

Fri, 19 May 2017 21:30:00 -0400

Donald Trump's rhetorical hostility to free trade and his apparent desire to manage U.S. companies' investment decisions over an obsession with "balance of trade" has been one of his most alarming characteristics to some libertarians. Letters from Trump's U.S. Trade Representative Robert Lighthizer to various congressional leaders sent this week set forth the current contours of the Trump administration's concerns over renegotiating NAFTA, which can be summed up as, to quote the letter: new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises. It also notes they want "aggressive enforcement of...commitments made by our trading partners." And they start with the nerve-wracking declaration that a prime goal in trade deal renegotiating will be to "support higher-paying jobs in the United States" and "improving U.S. opportunities" (by which they almost certainly don't mean opportunities for citizens and companies to buy abroad as cheaply and efficiently as they'd like). A lot of that language quoted above sounds like the Republican Trump administration just echoing lots of traditionally labor union and Democratic Party concerns over the alleged damage that allowing freer overseas trade causes. Some trade reporters are pleased that the Lighthizer letters don't seem dedicated to completely upending NAFTA, an act which, whatever NAFTA's flaws, would be worse (with Trump's trade opposition ideology ruling executive policy) than the alternative. John Brinkley at Forbes, for example, is pleased that Lighthizer's letters "included none of the bluster and hostility that President Trump has directed at America's NAFTA partners, Canada and Mexico" and notes that despite bluster about improving rule enforcement under NAFTA in a more U.S.-friendly direction, that "since 1994, the United States has prevailed in every NAFTA ISDS [Investor State Dispute Settlement] complaint that it has filed or has been filed against it and that has proceeded to a final ruling. It's going to be hard to improve on that." Brinkley is hopeful that the reference to "small" enterprises in Lighthizer's letter, quoted above, might mean that the administration wants to "focus on ways to make it easier for small companies to qualify for duty-free treatment under NAFTA....It's easy for big corporations to comply with the myriad rules and regulations that cover imports, exports and free trade agreements; they can hire armies of lawyers and trade specialists to manage compliance with them. Most small firms can't do that and many find that compliance isn't worth the time and money. So, they don't export. Or they export without applying for duty-free treatment under NAFTA." An article in Business Day is similarly optimistic, noting for those scared about earlier Trumpian rhetoric that the Lighthizer letters: omitted many of the thorny points cited in an earlier draft, such as leveling the playing field on tax treatment and bulking up "Buy America" procurement provisions — goals that might meet stiff resistance from Canada and Mexico.... Still, Lighthizer made it clear the US wants to see Mexican manufacturing capacity return to America, an approach sure to create friction with Mexico ahead of a general election next year. Mexico would also likely oppose efforts to compensate US producers for Mexico's VAT, which refunds taxes charged on inputs used to produce exported goods. While US politicians have called the tax an unfair subsidy, Mexico argues the system is in line with international trade rules. Talks with Canada could trip up over irritants including access to the country's supply-managed dairy sector or the ongoing dispute over softwood lumber exports to the US The US president will be under pressure to reach a deal that shows his election promises weren't emp[...]

Trump Targets NAFTA, But Will an 'Update' Just Be an Excuse for More Government Meddling?

Thu, 27 Apr 2017 15:45:00 -0400

(image) President Trump's push on trade and NAFTA this week appears more motivated by the symbolic 100 day mark emphasized by Trump and the media than any coherent approach to trade neogtiations.

The Trump administration followed up the imposition of a 20 percent tariff on Canadian lumber—a long-standing stalking horse for the timber industry—earlier this week by floating the idea that the U.S. would withdraw from the North American Free Trade Agreement (NAFTA), which liberalized trade between the U.S., Mexico, and Canada. Shortly after, the White House announced that in phone calls with Canada's prime minister, Justin Trudeau, and Mexico President Enrique Peña Nieto, President Trump "agreed not to terminate NAFTA at this time" and that the two leaders " agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation of the NAFTA deal to the benefit of all three countries."

As Republicans alarmed by the prospect of a NAFTA withdrawal speculated yesterday, the threat was a "negotiating tactic" to bring Mexico and Canada to the table or otherwise extract a better deal. Yet there's little indication either Mexico or Canada needed such a push for new negotiations. The election of Trump, who campaigned on a protectionist platform that was one of a few principles he's held on to consistently for decades, sufficed.

The perception of bringing Mexico and Canada to the negotiating table over NAFTA can be chalked up as a victory, but it doesn't contribute to any clarity on what might happen next. Trump has not articulated what kind of "improvements" he wants to negotiate. His trade views are mostly based on the idea that foreign competition is bad, and that returning Americans to factory jobs would make America great again. The whole thing could just more noise signifying nothing, a tactic explained in the Art of the Deal.

Commerce Secretary Wilbur Ross told senators the administration was interested in "updating" NAFTA, not not withdraw from it, Sen. John Cornyn (R-Tex.) told Politico. Given the prevailing anti-trade mood in Washington, it's doubtful that such an update would involve reducing government interventions instead of increasing them.

The troubling migration of anti-trade rhetoric from left to right is nevertheless unsurprising. It's easier to convince people their problems are caused by foreigners than by their own government's policies, and more politically beneficial for those deploying such rhetoric in a quest for public office, especially when politicians who understand that free trade benefits everyone are unwilling or unable to articulate it effectively.

Related: Have Republicans Turned Against Trade? We Asked Them.

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Trump's Lumber Tariff Shows He is a Depressing Continuation of the Status Quo

Tue, 25 Apr 2017 16:20:00 -0400

The Trump Administration announced yesterday that it would be slapping tariffs averaging 20 percent on soft-wood lumber coming from Canada (they're not sending us their best trees you know), marking the first substantive protectionist action taken by the Administration. The dispute over Canadian lumber exports to the US is a long simmering one between the two NAFTA partners. But to read some media accounts of the event, one would think this was a unique triumph of Trumpain aggression. The news aggregator Axios described the move as a "big win for Steve Bannon." The Huffington Post, while saying the tariff was expected, still managed to find itself shocked at "the enthusiasm with which the new American administration flung itself into the lumber hostilities." Even the New York Times ran with a headline describing the lumber dispute as a "new trade front." In fact, cheap Canadian lumber is one of the oldest boogeyman in the US timber industry, right up there with the fiendish agropelter. As such it makes more sense to view this latest action by Trump as another case of the president being a depressing continuation of the status quo, as opposed to a nightmarish departure from it. As far back as the 1980's US timber interests have been raising their old saw about stumpage fees charged to Canadian loggers. In Canada, most logging is done by private companies on public land, for which they must pay a "stumpage fee" to the government. The US timber industry's claim has always been that these stumpage fees are artificially low, and as such amount to an unjust subsidy to Canadian lumber. The first investigation of these fees by the US Commerce Department in 1983 found that they did not amount to an unjust subsidy, temporarily thwarting the US lumber industries plan to impose countervailing duties on their northern competition. But following a toxic combination of a more aggressive Commerce Department and a better funded, better organized industry effort, the US government started to see things a different way. In 1986, the Commerce Department reversed itself and sought to levy a 15 percent tariff on Canadian wood. That decision 1986 action has since set off some three decades of US tariffs, Canadian protest, and international arbitration before both NAFTA and WTO courts, who have mostly sided with the Canadians. Full-blown trade war has generally been avoided through bi-lateral agreements that see the Canadians voluntarily reduce their exports in exchange for the US lumber industry agreeing to not pursue countervailing tariffs. However, these bi-lateral agreements have always been temporary band-aids on this long simmering trade dispute, and their expirations has seen the reapplication of US tariffs in both 1992 and 2001. The latest of these bi-lateral agreements expired back in October 2016. In June 2016, President Obama and Prime Minister Justin Trudeau released a joint statement saying that they were committed to finding a "durable and equitable solution" on the issue of lumber imports, but despite the two's supposed bromance, no deal was forthcoming. Thus when the US-Canada deal did expire in October, the US Lumber Coalition fulfilled its historic role of filling a countervailing duty claim with the US Department of Commerce. And now the Trump administration is sticking closely with historical precedent and siding with US lumber. Commerce Secretary Wilbur Ross released a short statement yesterday saying that his department had found it necessary to levy some $1 billion in import duties on Canadian lumber, adding that "his is not our idea of a properly functioning Free Trade Agreement." Also true to form is the Canadian response, in which their Ministers of Natural Resources and Foreign Affairs have promised to "vigorously defend the interests of the Canadian softwood lumber industry, including through litigation." So while it is right an[...]

How Protectionism Shields United Airlines From Competition

Thu, 13 Apr 2017 10:20:00 -0400

As Brian Doherty observed here yesterday, the United Airlines outrage does not require new laws, though that is certainly news to microphone-hogging pols like New Jersey Gov. Chris Christie. In fact, let's round up some of the opportunistic political responses, shall we? * Rep. Jan Schakowsky (D-Illinois): her bill "will end the practice of involuntarily 'bumping' passengers from oversold aircrafts once and for all. If an airline chooses to oversell a flight, or has to accommodate their crew on a fully booked flight, it is their responsibility to keep raising their offer until a customer chooses to give up their seat." Schakowsky said her legislation also will require that any dickering over how much a passenger will get for voluntarily relinquishing a seat is "carried out before they board the aircraft. These fixes would prevent the situation we saw on video from ever happening again." * Sen. Chris Van Hollen (D-Maryland): he is readying legislation to prohibit airlines from forcibly removing passengers due to overbooking or to free up seats for crew. The Maryland Democrat released a letter to colleagues seeking sponsors for what he has called the "Customers Not Cargo Act." There is another way, I argue in today's L.A. Times. If lawmakers really want United to feel the lash, they should remove the politically motivated protectionism that blocks foreign competitors from driving customer-unfriendly American airline behemoths out of business. Excerpt: Foreign companies and individuals—think Richard Branson and Virgin Atlantic Airways—are forbidden by U.S. law from owning more than 25% of a domestic airline. That's why Virgin America could be sold last year to Alaska Airlines over the express wishes of Virgin's famous founder: He just didn't have enough votes. The differently headquartered are banned outright from servicing routes between two American cities, a practice with the sinister-sounding name of cabotage. And carriers from Singapore to the Gulf States are not only barred from competition, but subject to sneering taunts by American legacies from behind the protectionist firewall, such as when United CEO Oscar Munoz this March said that companies including the well-regarded Emirates "aren't real airlines." What on Earth justifies such pre-Trump xenophobic mercantilism in our increasingly globalized world? According to North America's Air Line Pilots Assn.: "These regulations ensure the national security of our country and the integrity of our airline industry." Or translated into honest-ese, "These regulations ensure the job security of unionized U.S. nationals and the continued existence of poorly run U.S. airlines." Read the whole thing here.[...]

Congressional Republicans Introduce a Trump-Pleasing Tax Hike

Fri, 31 Mar 2017 13:01:00 -0400

Q: What kind of tax hike can 21st century Republicans get behind? A: One that pays for a border wall, and can be sold, inaccurately, as an "Illegal Immigrant Tax." Rep. Mike Rogers (R-Ala.) yesterday introduced the Border Wall Funding Act, imposing what he describes as a "2% fee on remittances sent south of the border." The bill has yet to be posted online as far as I can tell, but according to The Plainsman of Auburn the tax would apply to monies sent to "more than 40 Latin American countries." Rogers's sales pitch: "This bill is simple – anyone who sends their money to countries that benefit from our porous borders and illegal immigration should be responsible for providing some of the funds needed to complete the wall. This bill keeps money in the American economy, and most importantly, it creates a funding stream to build the wall." Traditionally, nationalistic controls on capital flows have not been associated with liberal democracy and the rule of law. According to a skeptical analysis published last week by the World Bank, other countries currently considering such a levy include "Bahrain, Kuwait, Oman, Saudi Arabia…and the United Arab Emirates." Previous efforts in Gabon (2008) and Palau (2013), "have not worked," World Bank author Dilip Ratha asserted, because the "tax collections were found to be insignificant." As Nick Gillespie pointed out a year ago, after then-candidate Donald Trump proposed cracking down on remittances to pay for his wall, the idea is fundamentally corrupted by "the assumption that the government has the right to unilaterally stop people from spending the money they earn and possess; that the feds have a right to tell you where you can and cannot go or even send checks." That has not stopped the likes of National Review from editorially endorsing such a nationwide tax. The United States is by far the leading source of remittances in the world, with its residents sending to other countries $135 billion in 2015, some 23 percent of the global total, according to research published this month by the international banking conglomerate BBVA. Monies sent to Latin America and the Caribbean accounted for 38.5% of the U.S. total, BBVA estimated, led by Mexico ($27 billion, or more than the country's annual oil revenue), then Guatemala ($7 billion) and the Dominican Republic ($5 billion). As a percentage of the host-countries' GDP, however, Mexico's 2.6 percent lags far behind Haiti (24.7 percent), Honduras (18.2 percent), and Jamaica (16.9 percent). There is no reason to assume that the bulk of these funds derive from illegal immigrants. Of the 41 million or so foreign-born residents of the United States, an estimated 11 million are not authorized to be here, and are probably less likely than their legal brethren to use money conduits that are traceable by the feds. (And as any Cuban can tell you, there are plenty of U.S.-born hyphenated-Americans who wire money back to the island, further broadening the pool of donors, and again underscoring the truism that measures taken against illegal immigrants also pinch the freedom of natural-born citizens.) The money they send back is critical in ameliorating poverty and jump-starting economic activity. In other words, it helps create the kinds of conditions that may keep an increasing number of would-be migrants at home. According to the World Bank analysis, "In 2016, migrant remittance flows to developing countries amounted to $440 billion, more than three times the size of official development aid flows. In many countries, remittances are the largest source of foreign exchange. In India and Mexico, they are larger than foreign direct investment; in Egypt, they are larger than the revenue from Suez Canal; and in Pakistan, they are larger than the country's international reserves." For this reason, the G20, the [...]

Rep. Thomas Massie: ‘We don't really have 218 conservatives here [who] meant what they said when they said they wanted to repeal Obamacare’

Wed, 29 Mar 2017 16:50:00 -0400

As referenced earlier today, last night The Fifth Column invited to its podcast-waves Rep. Thomas Massie (R-Ky.), one of the most libertarian members of Congress, and a man well-known to Reason readers (you can consume our previous interviews with congressman from June 2013, March 2016, and May 2016; watch him eat a hemp bar on The Independents, and read what he's written for us). With the Ryancare debacle (in which Massie was a firm "Hell no") still fresh in the memory tubes, and with the Trump administration collaborating with the existing GOP establishment to marginalize the crazies in the Massie-friendly House Freedom Caucus, the triumvirate of Kmele Foster, Michael C. Moynihan, and myself wanted to know how the Obamcare-reboot failure looked like from the inside ("this was a big game of chicken"), where Congress goes from here on swamp-draining, and whether there's any meaningful overlap between Trump/Steve Bannon economic nationalism and Tea Party-flavored libertarianism (in mutual opposition to the World Trade Organization, he suggested). Along the way Massie spelled out the virtues (and limitations) of his bill to abolish the Department of Education, ruminated on whether the HFC's intransigence has allowed libertarian-leaners to retake the lunatic lead from Donald Trump, and busted Moynihan's chops for being a diva. You can listen to the whole thing here; Massie in the first 37 minutes: src="" width="100%" height="315" frameborder="0"> After the jump a quickie edited transcript, thanks to Lindsay Marchello: Welch: Give us a bit of a snapshot of what it was like there in the final 24 hours in that push. Massie: Oh my gosh, this thing was like a rocket whose fins had fallen off. It started off in the wrong trajectory 18 days before…and there in the last few days it was traveling erratically, and I said on Thursday—obviously they pulled the bill on Friday from consideration—but on Thursday I said "This rocket has gone crazy. The best we can hope for is it lands in the ocean and sinks." Welch: Now I should just interject here that you are an MIT graduate, so you are only capable of speaking in rocket metaphors. Massie: I'm an electric engineer, I'm not a rocket scientist, but I like to pretend I'm one when I'm in Congress. You know, I did a lot of media last week; I probably went on TV more last week than I've been on TV in my life. And I was trying to get the message out there that this was a big game of chicken, and that reality…is going to come crashing down on Thursday. They were able to avoid reality for one day by postponing the vote, but then reality came crashing down. And I also predicted that they would claim they had the votes right up until they pulled the bill, which is also what happened. The speaker did Congress a great disservice by going on TV for literally the entire week leading up to the debacle of the bill being pulled and saying that they had the votes, so I felt compelled to go on TV and say they don't have the votes. And then, on I believe it was Thursday or Wednesday, Mick Mulvaney came—he's a former Freedom Caucus member who is now the OMB director—he came to our Republican conference, and he was carrying a message from Trump. He said "I've got a message from my boss. He's rather remarkable; he's not like most of us politicians, and he wants you to know that number one, he's done negotiating. There will be no changes to this bill. And number two, the vote is going to happen tomorrow, and he doesn't care if it passes or fails. We are going to have a vote and he's going to find out who is on his side and who's not." And then the third thing he said is, "If this fails, we are done with health care. You're don[...]

Snuggies Are Blankets, Not Clothes

Tue, 07 Mar 2017 12:00:00 -0500

(image) Last week I interviewed Pietra Rivoli — a Georgetown University international business and finance professor, as well as the author of The Travels of a T-Shirt in the Global Economy: An Ecomonist Examines the Markets, Power, and Politics of World Trade — about bipartisan job protectionism and hostility to free trade in the age of President Donald Trump. Rivoli's book uses a tourist t-shirt purchased in Florida to illustrate the inter-connectedness of the global economy, and how every trade agreement, tariff, or labor deal comes with international ramifications even for a seemingly minor item local a t-shirt.

The sleeved blanket/bathrobe hybrid known as the Snuggie is no different. Which is why a recent U.S. Court of International Trade decision rejecting the U.S. government's insistence that the Snuggie is an item of clothing — instead (as its manufacturer Allstar Marketing Group has insisted) ruling the item to be a blanket — matters.

Judge Mark Barnett based his decision in part on the company's marketing of the item as "the blanket with sleeves!" and the fact that it doesn't close in the back. The defendant in the case, the U.S. Department of Justice, argued the Snuggie was more akin to "priestly vestments or scholastic robes," according to Bloomberg BNA.

Ana Wanson explains in the Washington Post that the ruling was crucial for Allstar because the Snuggie is produced in China and is therefore subject to an import tariff. Blankets come with a tariff of 8.5 percent, but "pullover apparel" is pinched for 14.9 percent. That's a difference worth taking the government to court over. As Wanson notes:

The Snuggie case and others like it show how companies may go to great lengths to avoid the barriers governments impose on imported products. President Trump has argued for even stiffer tariffs on products from countries that refuse to negotiate better terms of trade with the United States, like Mexico and China. He has also backed away from free trade deals that would slash tariffs among many countries, and expressed a desire for negotiating deals with countries one-on-one.

Read my interview with Rivoli, who says "companies and entrepreneurs often find creative ways to deal with all kinds of barriers," here.

Capitalism and Neoliberalism Have Made the World Better

Fri, 03 Mar 2017 15:10:00 -0500

"People think the world is in chaos. People think that the world is on fire right now for all the wrong reasons," says author and Cato Institute senior fellow Johan Norberg. "There is a segment of politicians who try to scare us to death, because then we clamber for safety we need the strong man in a way."

But despite the political situation in Europe and America, Norberg remains optimistic. His new book, Progress: Ten Reasons to Look Forward to the Future, shows what humans are capable of when given freedom and the ability to exchange new ideas. "In the 25 years that have been considered neo-liberalism and capitalism run amok what has happened? Well, we've reduced chronic undernourishment around the world by 40 percent, child mortality and illiteracy by half, and extreme poverty from 37 to 10 percent," explains Norberg

Reason's Nick Gillespie sat down with Norberg during the International Students for Liberty Conference to talk about his book, the current political climate in the West, and how technology is creating a younger generation that will look past politics for answers to societal problems.

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Edited by Alex Manning. Cameras by Mark McDaniel and Todd Krainin.

Why Trade Can Still Thrive Under a Protectionist Like Donald Trump

Fri, 03 Mar 2017 12:30:00 -0500

Hostility to free trade is now a bipartisan feature of American politics. Donald Trump won last year's election in part by promising to pull out of trade agreements, impose trade tariffs, and preserve jobs in dying industries at all costs. On the left, Bernie Sanders campaigned on protectionism and portrayed the sometimes trade-friendly Hillary Clinton as a tool of big business who had no real sympathy for the plight of blue collar workers. But free trade antagonists like Trump and Sanders tend to paint overly simplistic pictures of how trade actually works, and the ways in which our economy increasingly depends on, and benefits from, a complex web of national and international production. That's what makes Pietra Rivoli's 2005 book The Travels of a T-Shirt in the Global Economy: An Ecomonist Examines the Markets, Power, and Politics of World Trade so valuable. In the book, Rivoli, a Georgetown University international business and finance professor, writes of buying a tourist t-shirt in Fort Lauderdale, Florida, and then meticulously investigates the the economic and political factors of every stage of its production and ultimate sale to the author for $5.99. Rivoli's t-shirt odyssey led her to travel all over the United States and the world—speaking with, among others, cotton farmers in Texas, factory workers in China, and used clothing entrepreneurs in Africa—examining the production and trade of each of the shirt's many components, the political factors that determined the location of each stage of production, and even the economic ramifications of discarded clothing that often ends up in the Third World. The book is a valuable primer on how political considerations affect everything we buy and sell, and how even with both major political parties lurching towards increased hostility to trade, there are always opportunities for innovation. Reason spoke with Rivoli over the phone earler this week. Reason: Your book does a great job of explaining the mechanics of trade, the human costs and benefits, and the political factors that inform every aspect of production. Now that we have a president who is focused on building physical barriers as well as economic barriers, what do you think will be the results say one year, or even five years down the road as a result of President Trump's trade policies? Rivoli: There's a theory in economics called the "mercantilistic approach," which basically said that exports are good and imports are bad. President Trump has talked about our trading relationships with different countries essentially as you might look at a perfect income statement, saying we are losing when we have a trade deficit with country X or country Y. Losing is bad, so we want to try to make trade relations more balanced. But you don't want to look at a trading relationship as an income statement. A trade deficit is not equivalent to a business loss and we don't measure the health or progress of economy using that metric. There are better and more standard metrics, such as job creation or economic growth or standards of living. What crosses borders today are not final goods, what's dominating is trade in tasks, and certain things done in certain places. If you look at a t-shirt, you have all kinds of trade embedded in this t-shirt that does not show up when you just look at the final product. In the case I wrote about [in the book], you have a trade flow when the t-shirt enters the United States and that's what you see in the trade data and statistics when you look at the tag in the back of the shirt. But actually behind that trade flow is lots of other trade that is represented in the global value chain (GVC)—the cotton might have started out in the United State[...]

Trump’s Over-Praised State of the Union: The New Fifth Column

Thu, 02 Mar 2017 11:18:00 -0500

(image) After an unseemly hiatus, The Fifth Column, your usually-weekly podcast threesome of Kmele Foster, Michael C. Moynihan, and moi, has come back with a nearly two-hour episode that begins with a lengthy reaction to President Donald Trump's speech to Congress Tuesday night. Sub-themes include:

* His Obama-like, laughably unrealistic grandiosity.

* His economic illiteracy and budget-busting.

* His excellent approach toward the Food and Drug Administration, and potentially other aspects of regulatory reform.

* His insanely bad idea that a border wall will end illegal drug use.

* His cynical and fact-challenged ideas about illegal-immigrant criminality.

* His military re-bloating.

* His Berniesque trade populism.

* And his ballyhooed yet still factually dubious section on Yemen.

Along the way there are analyses of Sweden's refugee/immigration issues, Trump's stupidly controversial photo-up with representatives of historically black colleges, and, of course, Moynihan's Jesse Jackcent. Whole episode here:

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