I remember the anti-WTO protests and the peripheral movements that sprung out of that like No Logo, and the sneering directed at the anti-globalism protesters from people like Paul Krugman, who swore that the Great Depression was caused by Smoot Hawley and insisted there would be massive gains from trade.
Later, he fessed up and said that was another Noble Lie. There has been a lot of lying in the history of the economics profession, unfortunately, all for the greater good, I'm sure.
When these tariffs hit, I also expected broad price increases as well as a recession, when this didn't happen, I began to reassess some things.
In retrospect, I think that the massive expansion of investor rights in the late 1990s and early 2000s, culminating in the Clinton era agreements, was not really about trade at all, but about power -- e.g. getting the rest of the world to adopt legislation and reforms that would enable foreign investment/outsourcing.
I don't think the American consumer benefitted a whole lot, nor the American worker, from this movement.
I also don't think the rest of the world benefitted, apart from East Asia, but the East Asian countries famously industrialized not by pursuing unfettered trade, but by pursuing an export-led growth model with limit controls on capital inflows. E.g. they restricted trade by restricting foreign investment, the exact opposite of the WTO consensus.
Part of the reason I don't think trade was all that important, and what is important to the western consensus is investor rights and subordination of national policies is that the US has no problem levying sanctions on a large part of the world, and when these sanctions are levied, you hear barely a peep coming from the press or from economists about these sanctions.
Likewise, the EU just imposed massive sanctions on Russia, generally with the broad support of their think tanks and economic experts.
So I think trade in general is just a lot less important than we have been told. The real prize were the investor rights agreements and agreeing with western geopolitical goals.
I mentioned this to a friend who was bemoaning the terrible human rights situation in Iran, and I pointed out the human rights situation in Saudi Arabia, and said the moment KSA directly challenges western power in the same way Iran has, you will start hearing all sorts of complaints about human rights in Saudi Arabia.
It's not about human rights either. Just like it's not about trade.
I think these types of situations are a real test of character for the experts. It should be an eye opening moment for a lot of people.
To me, the latter is an outcome of the former. So the ultimate goal is to integrate the nation in a subordinate role into the western system, and a range of pressures levied against nations that refuse that. Investor rights is a key part of that because it means foreign capital floods into the country, buying up assets, funding political parties and local NGOs. The result of that is that western satellite offices offer the best jobs for local elites. It completely changes the local society and aligns the interest of local elites with western interests.
Once a nation is integrated into that system, the US can, for example, disrupt their economy by freezing assets or imposing sanctions because now the elites will lose their jobs, and this is often enough to change the government policy. In this way, we exert enormous control over the domestic politics of other countries. We do not care so much about deindustrialization in the US or the foreign nation losing key industries. This is basically how the US pulled Armenia into its orbit, but not only Armenia, many other countries have been subordinated to US interests in this way.
It's similar to how, in the European financial crisis, the European Central Bank was threatening to destroy the banking systems of Ireland or Spain if they didn't adopt certain political policies that Brussels wanted. They caved. The ECB would not have the power to do this if these nations refused to adopt the Euro or to be integrated into that system. The same thing was done to Greece. First a rush of foreign investment into Greece, then a debt crisis, and now the EU is dictating domestic political outcomes in Greece. Remember that foreign investment is just another way of saying foreigners hold your debt and own your assets.
This is why China has strict limits on foreign capital inflows. It does not want to be integrated as a subordinate role into the Western system. Russia also has adopted this role. I am not saying this as an enemy of China or Russia, nor am I an an apologist for them. What I'm saying is that their policy is rational, just as the east asian nation's mercantilist development model was also rational. It worked! This despite the classical economic critique. That tells me we don't really know the full story when it comes to trade and development.
I'm also not saying that classical economic welfare arguments for trade are entirely wrong. A trade restriction should have an effect of raising prices and reducing output. But clearly a 15% rate is not particularly noteworthy, given that 70% of our economy is services. The freakout about the tariffs was primarily political, because the tariffs were levied against allies not enemies, and they were levied with the aim of encouraging domestic production, not overthrowing geopolitical rivals. This is why the Europeans, in particular, were so offended by the tariffs. It was certainly not love of free trade, given the rising number of sanctions enthusiastically adopted by Brussels.
Later, he fessed up and said that was another Noble Lie. There has been a lot of lying in the history of the economics profession, unfortunately, all for the greater good, I'm sure.
When these tariffs hit, I also expected broad price increases as well as a recession, when this didn't happen, I began to reassess some things.
In retrospect, I think that the massive expansion of investor rights in the late 1990s and early 2000s, culminating in the Clinton era agreements, was not really about trade at all, but about power -- e.g. getting the rest of the world to adopt legislation and reforms that would enable foreign investment/outsourcing.
I don't think the American consumer benefitted a whole lot, nor the American worker, from this movement.
I also don't think the rest of the world benefitted, apart from East Asia, but the East Asian countries famously industrialized not by pursuing unfettered trade, but by pursuing an export-led growth model with limit controls on capital inflows. E.g. they restricted trade by restricting foreign investment, the exact opposite of the WTO consensus.
Part of the reason I don't think trade was all that important, and what is important to the western consensus is investor rights and subordination of national policies is that the US has no problem levying sanctions on a large part of the world, and when these sanctions are levied, you hear barely a peep coming from the press or from economists about these sanctions.
Likewise, the EU just imposed massive sanctions on Russia, generally with the broad support of their think tanks and economic experts.
So I think trade in general is just a lot less important than we have been told. The real prize were the investor rights agreements and agreeing with western geopolitical goals.
I mentioned this to a friend who was bemoaning the terrible human rights situation in Iran, and I pointed out the human rights situation in Saudi Arabia, and said the moment KSA directly challenges western power in the same way Iran has, you will start hearing all sorts of complaints about human rights in Saudi Arabia.
It's not about human rights either. Just like it's not about trade.
I think these types of situations are a real test of character for the experts. It should be an eye opening moment for a lot of people.