Adam Smith Trump ain’t

Listen to Adam, Donald; the man knows what he’s talking about.

To the horror of my conservative friends (which is to say all my friends), I must admit I don’t like Donald Trump.

I find him brash, vulgar, egotistical, uncultivated, impulsive, uncultured, sartorially challenged and surprisingly ignorant for someone who went to all the top schools.

That, however, is neither here nor there because I do like most of his policies. While he wouldn’t be my choice of a dinner guest, he would be my choice of US president, especially considering the options available.

There’s no contradiction there whatsoever. Take the reverse of all the adjectives mentioned above, and I doubt you’d find a single politician in history to whom they’d apply.

For all those reverse qualities would probably prevent a man from seeking political office, and they’d certainly prevent him from gaining one. For such reverse qualities preclude powerlust, which is an absolute sine qua non for an aspiring politician.

So fine, I dislike Trump personally, but I like most of his policies. Most, however, doesn’t mean all, and those I don’t like spring from Trump’s hare-brained take on America First.

This slogan was inscribed on the banners of isolationists in the run-up to the Second World War. Much as I hate to say this, those good people were wrong and the awful FDR was right – on his own terms.

His own terms were set by the entire US policy of several preceding decades. That policy was aimed at achieving global domination, and it was not the isolationists but FDR who was in touch with it.

From the standpoint of that aspiration, Roosevelt was a spectacular success. He managed to push the Lend-Lease programme through Congress, using a spurious, demagogic simile of a ‘garden hose’.

If your neighbour’s house is on fire, wouldn’t you lend him your garden hose? he orated. You would, if not out of altruism then for fear that the fire could spread to your own house.

The Lend-Lease was tantamount to America entering the war six months before Pearl Harbour. After Pearl Harbour, largely provoked by Roosevelt’s policies in the Pacific, the US entered the war formally and started to churn out mountains of armaments both for export and for her own use.

As a result, the US emerged from the war richer than she had been at entry. While the other parties had bled white, the US achieved her imperial goal at a cost of merely 300,000 or so casualties. The British Empire had been killed; the US empire was born; FDR was vindicated.

The world began to be globalised, with the US successfully fighting off one challenge after another to her position at the top of the hill.

Now Trump is viscerally isolationist, but he’s also an American imperialist. Alas, he doesn’t seem to realise that the two desiderata are at odds.

As an isolationist, he has misgivings about Nato, to the point of even threatening to pull out if the other members don’t pay their fair share of military costs.

I agree unequivocally that Europe shouldn’t rely on America for her defence. Defence of the realm from every threat, foreign or domestic, is after all the most, not to say only, legitimate function of the state.

To fulfil this mandate, European countries should at least double their defence budgets. Otherwise they’ll be in default of their duties.

Yet few modern wars have ever been fought, and none won, by one country on her own. Some kind of alliance has always been formed, and I dare say Nato has proved its value more than other military alliances I can think of.

It’s thanks to Nato – and emphatically not to the EU, as particularly inane Eurocrats claim – that Russophones like me are still in the minority among British subjects.

That Europe contributes to Nato three times less than the US in terms of GDP per capita is unfair and, more important, potentially dangerous. But playing the world’s leader is a role that requires expenses, which all previous empires, including our own, can confirm.

Roosevelt realised that, but Trump doesn’t. Hence he must decide whether he wants America to stand on her own two legs or continue in her role of the world’s leader. He can’t have both, not in today’s world.

Trump’s isolationist instincts also push him towards protectionism. Now if his stance on Nato may be debatable to some extent, his slapping tariffs on steel and aluminium imports is downright ignorant – as is the promise Trump made to Macron, that he would not rest until the last Mercedes had disappeared from the streets of New York.

If you don’t want Mercs, Donald, make sure American cars can be made better and cheaper. That’s the only sensible way.

Here too Trump should take his cue (in terms of how not to run an economy) from FDR, specifically the way he tried to fight the Depression.

The depression only began to bite after Roosevelt’s protectionist measures went into effect. And that makes sense.

As von Mises, Hayek and every Chicago economist worth his salt have shown, the success of a reasonably free economy is determined by the consumer, which is to say by a strong, voracious demand.

And what boosts the demand is free competition among suppliers, regardless of which country they come from. In such conditions they are forced to offer better products, lower prices and more efficient services.

It’s demand that decides the issue. You can only help the economy by helping the consumers, says the conventional wisdom. You can’t do so by hurting them.

This can only mean that protectionism can’t help the economy. It almost certainly will cause untold damage, by mollycoddling domestic production behind a protective wall of near-monopoly. That anyone should deem this necessary can only mean that domestic production was ineffective to begin with.

Yet when its incompetence is artificially protected, it’ll have little incentive to get its act together. Quality will go down, prices will head in the opposite direction, funds will be channelled into the least – and away from the most – productive areas, and consumers will bear the consequences.

There is now, or was at the time of the Great Depression, nothing new about any of this. Bright economists from Smith, Turgot and Ricardo onwards had known it and written about it.

Thus, for example, Smith: “To give the monopoly of the home-market to the produce of domestic industry… must, in almost all cases, be either a useless or a hurtful regulation. If the produce of domestic can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful.”

Slapping, as Trump has done, protectionist tariffs of 25 per cent on steel and 10 per cent on aluminium means that everything made out of those metals will cost US consumers more.

This may protect jobs in the industries that produce steel and aluminium, but many more jobs will be lost in other sectors, whose products consumers may no longer be able to afford. And that’s before the countries on the receiving end begin to retaliate, making US exporters less competitive in global markets.

‘Liberal’ is a dirty modifier when attached to almost everything, but liberalised trade is one exception. It’s a factor of prosperity, and it’s regrettable that Trump is ready to sacrifice it for the narrow political goal of confirming his populist credentials.

6 thoughts on “Adam Smith Trump ain’t”

  1. “surprisingly ignorant for someone who went to all the top schools.”

    Most persons that graduate from the top schools are surprisingly ignorant?

    1. Don is using the tariffs only to encourage new trade treaties being negotiated. And quite rightly new trade treaties needed every twenty years or so?

    2. Merely Don wants NATO members to keep their agreement they agreed they had agreed to. 2 % spent on defense and NOW.

  2. It’s a bit expensive to try solving a trade argument by starting a fight. As for Nato, Europe’s main contribution to a war with Russia has always been envisioned as a self-sacrificial buffer zone and killing ground. What price do you put on that?

    Time was when the Bundeswehr made up nearly half of the ground troops in Nato, but their cost would still have been spent at home until the trouble started. Bringing those troops back (they would need mobility scooters at their age) would hardly benefit the US – but if the Germans spent 2% of GDP on US weapons as the UK does, they would still be self-sacrificial pawns as indeed we are.

  3. There’s an interesting article in the National Review ‘The Post-War Order is Over’ by Victor Davis Hanson.

    A telling paragraph on US – German relations:

    As far as the U.S., Germany has redefined its post-war relationship with the America on something like the following three assumptions: 1) Germany’ right to renege on its promise to spend 2 percent of its GDP on defense in order to meet its NATO promises is not negotiable; 2) its annual $65 billion surplus with the U.S. is not negotiable; 3) its world-record-busting account surplus of $280 billion is not negotiable.

    I think Trump, the businessman (not Trump the economist and statesman) took a look at the balance sheet and said: ‘Nah!’

  4. Smith stated there were two exceptions to the concept of free trade.

    1. A nation must be self sufficient with regard to war making munitions.

    2. ?

    What is number two? I cannot find the answer anywhere. Some bright lad who is a grad of the LSE and reads Alexander can respond?

  5. Like I explain to my liberal friends: Trump is like my electrician – wouldn’t have a beer with the man but his work is excellent.

    The average person who vaulted Obama to godlike status didn’t have a clue what his policies were. The fact that he instilled “hope” was enough.

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