More Trumpeterian Trade Follies

 | 

President Trump is nothing if not consistent on the matter of international trade. The Boss has had few fixed positions over the years. He’s been a Democrat — and a generous financial party donor, even giving money to Crooked Hillary — then a Republican when it suited him; pro-abortion then anti-abortion; pro-immigrant before becoming the king of nativism; religiously indifferent before his newfound flourishing of faith; and so on. But his opposition to global trade has never wavered.

When pressed, of course, he will feign support for free trade if it’s “fair” — “fair” being what philosophers call a “weasel-word.” It allows the speaker to shift meanings to suit the context. If we are talking about China, Trump says its trade is unfair because it steals intellectual property and forces our companies to share technology with Chinese companies — both practices that, all economists agree, violate the World Trade Organization rules — and because it has a large balance of trade surplus with the US — something that most economists view as usually not a problem, because any trade surplus is invariably balanced by an investment deficit.

Trump has had few fixed positions over the years. But his opposition to global trade has never wavered.

But Trump’s virulent attack upon NAFTA was merely based on the fact that Mexico posted a modest balance of payments deficit with us and Canada an even smaller one. Neither country, please note, has routinely (or even occasionally that I have heard reported) stolen our technology or forced transfers of it as the price of doing business in its markets. El Jefe, who apparently cannot grasp the concept of comparative advantage, has never understood that in any free trade deal with Mexico, a fair amount of low-level manufacturing would shift there, but a fair amount of agricultural production would move from there to the US. Both things happened, but most American critics of NAFTA never noticed the shift of agriculture to the US, just as Mexican critics of NAFTA never noticed the shift of manufacturing to their country.

I recall a business ethics class in which one of my students — a gabacho like me — waxed emotional about “Mexicans stealing our jobs”, while another student — una Mexicana — waxed equally emotional about how gringo farmers were stealing the jobs of campesinos. I suggested that this is what the law of comparative advantage would predict: in the case of a country blessed with a grotesque amount of deeply fecund land trading freely with a country blessed with a grotesque number of deeply hard-working but low-skilled laborers (and less fertile land), low-level manufacturing moves to the labor-heavy country, while agricultural production moves to the fertile-land-heavy country — to the obvious general benefit of both sides. At this, the clearly puzzled students fell silent.

Several recent stories bring to light the economic consequences of Trump’s economic incomprehension. The first is about the debate over the USMCA — the new agreement between the US, Mexico, and Canada that is intended to replace NAFTA. Our own International Trade Commission, a bipartisan body that is tasked with evaluating trade deals for Congress, has said that the effects of the new trade agreement would be limited, eventually raising the GDP of America by only 0.35%, while adding maybe 176,000 jobs. These are meager results compared to the benefits that the existing NAFTA has delivered. And the ITC found that (if the new agreement is ratified) the cost will be a considerable rise in prices for American-made cars — in great part because it requires Mexican companies to raise wages artificially to bring them closer to American unionized auto wages. Specifically, the agreement says that 75% of a car’s value must come from North America, 45% of the car must be made by workers earning $16 per hour or more, and more local aluminum and steel must be used.

He has never understood that in any free trade deal with Mexico, a fair amount of low-level manufacturing would shift there, but a fair amount of agricultural production would move from there to the US.

This is a great deal for Trump’s rentseeking union supporters, but a screw job for the American consumer. The ITC estimated that small American cars will rise 1.6% in price, leading to a 2.35% drop in sales — sales that are already shaky.

Worse yet, some economists predict that many auto industry companies will simply pay the tariffs rather than agree to the outrageous rules and regulations imposed by the unions’ catspaw Trump — ironically, a man who brags about eliminating regulations! This will again directly raise prices to consumers.

Another article reports on the aftermath of Trump’s reckless and thoughtless decision to pull out of the Trans-Pacific Partnership (TPP). He figured that he killed the agreement when he announced that the US would drop out of the deal (negotiated under the Obama administration); however, the remaining 11 countries went ahead, renamed it the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and ratified it in 2018. In its first year, it is already producing great results for the countries in it, though not of course for us.

For instance, the General Department of Vietnam Customs has reported that Vietnam’s exports to Japan are up by 11.2%, and those to Canada are up by 36.7%, in the first two months of this year compared with last year. Japan reported that last year its beef imports rose 25% from the same period. New Zealand has seen a rise of 133% in beef exports to Japan, and Canada a rise of 345% this year over last.

In its first year, the renamed Trans-Pacific Partnership is already producing great results for the countries in it, though not of course for us.

The rise in beef imports threatens to trigger a Japanese protection mechanism that will jack up tariffs on beef imports from an insane 38.5% to a truly absurd 50%. This will not affect CPTPP ranchers, but it will non-CPTPP ones. More generally, as the Asian region continues its rapid economic growth, the US will be at a distinct disadvantage in exports to the region, compared with the CPTPP ones.

As another article notes, Japan is willing to deal. It has indicated that to avoid tariffs on its cars, it will open up its agricultural market. If Trump simply can’t stomach joining the CPTTP, he can still do a bilateral deal. We can only hope that he does. And Our Oyabun seems to think that he can get better deals if they are bilateral rather than multilateral, apparently under the schoolyard-bully theory that he can use his personal power to force concessions out of the other side.

That’s the theory. So far it hasn’t worked out.

Two other articles point out the idiocy of Trump’s trade policy. The first reports the results of the steep tariff on imported washing machines he ordered a year ago. Faced with stiff competition from evil Asian competitors — you know, horrible people who work harder, for less money, and produce a superior product! — especially the companies LG and Samsung, domestic company Whirlpool got the president to impose a whopping 50% tariff on all imported washing machines. That was a year ago. A new research report written by economists at the Federal Reserve and the University of Chicago gives the results. Profits at Whirlpool have risen a stunning fourfold, to $471 million; but only a measly 1,800 jobs are owing to this high tariff. Samsung plans to open a plant here employing 1,000 people, LG one employing 600, and Whirlpool — the crony capitalist villain of this story — will add a risible 200 jobs.

American consumers were ripped off to the tune of $1.5 billion. That works out to $800,000 for each of the 1,800 jobs!

What is the cost of this “fair-trade” charade? Prices on imported washing machines went up $86 on average (that is, about 12%). Of course, Whirlpool did not keep its own prices low — it jacked them up 13% to 17%! Hence Whirlpool’s whopping half-billion-buck profit. The report estimates that American consumers were ripped off to the tune of $1.5 billion. That works out to $800,000 for each of the 1,800 jobs! That was your tax dollars at work.

Another article reminds us that while China’s trade with us has been flawed by its often dishonest trade practices, we ourselves don’t exactly have clean hands. Consider “anti-dumping duties.” In America, as in most other countries, domestic companies that can’t compete with foreign ones routinely claim that the foreigners are “dumping.” Dumping is the (alleged) practice of selling what is traded in the foreign market for less than what is charged to home customers, or below the cost of production. Most economists doubt that this routinely occurs — it would cost a company a lot of capital to sell below market in another country to get a monopoly, especially when you realize that such a monopoly would be impossible to sustain. When the “dumper” raised prices back up, domestic firms would just start making the product again.

Trump has systematically used dumping charges to protect chosen industries here. China has been the target of 40% of American dumping investigations, and the US imposes the heaviest duties on Chinese companies — duties that have been rising recently. These charges are often dubious. The US protects its own industries, often by comparing a foreign company’s prices here only with full prices in that company’s home market, disregarding discounted prices it charges at home. Moreover, price deductions for such things as overhead and salespersons’ salaries are capped for sales at home but not here. In other cases, where the home market prices are lower, our trade officials simply ignore them.

We keep pulling these stunts, even though the WTO has shot many of them down. Funny, President Trump never mentions how we stick it to other countries. No, he has demagogically persuaded a large part of the American public that we are pure victims in these trade games.

Trump’s tariffs will cost the average American family over $800 per year. The amount will rise dramatically if he applies those tariffs to all Chinese imports.

Two other articles put a nice cap on this discussion. No doubt to Trump’s amazement, the Chinese are playing hardball. Their tariffs on our agricultural goods have devastated many of our farmers. Brazil — which long ago negotiated a free trade agreement with China — has now replaced us as China’s major supplier of soy beans and other crops. In fact, Brazil is opening more of its lands to cultivation, in order to increase exports. In soybean production, US exports to China fell from $12.3 billion in 2017 to a pathetic $3.2 billion last year.

To counter the decision by the Chinese to buy more from Brazil, and to keep the support of farmers here, Our Great Protector just announced that he will give another $16 billion in aid to farmers (in addition to the $11 billion he gave them last year). This is the president at work: using billions of our tax dollars to keep the farm states on his side. It’s a great illustration of public choice theory, or venality in office.

While Trump makes the claim that the subsidies for farmers are coming from the tariffs the Chinese are paying, that claim is ludicrous on its face. Tariffs are taxes imposed on foreign goods — but paid by the American consumer. As noted by US News, Trump’s tariffs will cost the average American family over $800 per year. The amount will rise dramatically if he applies those tariffs to all Chinese imports, as he has threatened to do.

Yet another article informs us about another unseen group of Trump’s economic victims, namely, American farm equipment manufacturers. As the piece reports, companies that make combines, tractors, and other farm machinery are looking at a double-Trump-whammy.

Trump’s high tariffs for the steel and other metals that farm equipment manufacturers use will further hurt them.

First, they face a loss in demand as farmers under pressure from low prices for crops choose to defer buying new equipment. US agricultural exports to China in the first few months of this year are down 40% from the same period last year. And in 2018 we shipped to China less than half of what we shipped in 2017. So Deere will cut production 20% in the second half of its fiscal year. Lindsay Corp said its profits will drop by 31%, because sales have declined 16% in the last three months through February. CNH and AGCO also reported lower sales of their machinery in the first quarter of this year, compared to last year. Titan has reported a 35% drop in first-quarter profit in farm machinery sales.

Second, Trump’s high tariffs for the steel and other metals that farm equipment manufacturers use will further hurt the manufacturers. For example, Vermeer Corp., manufacturer of hay balers, said that it will lose $4 million in direct tariff costs in 2019. CNH expects tariffs to drive up its costs by $50 to $100 million, and Deere estimates the tariffs will cost it $75 million. Moreover, both Vermeer Corp. and Lindsay Corp. report paying more for costs because of the tariffs.

Especially worrisome for the American agricultural industry is this question: once China and all the other countries we have hammered get robust supply chains set up with Argentina, Brazil, Canada, New Zealand, and elsewhere, will they resume buying from us when we cease our tariff wars?

There’s no reason to think that Trump is open to a cessation of tariffs, which he seems to love, as an exercise in power.

Now, to this last point, one might cleverly respond that if a cessation of dumping would cause a quick resumption of competition, why wouldn’t a cessation of tariffs cause a quick resumption of competition?

Of course, there’s no reason to think that Trump is open to a cessation of tariffs, which he seems to love, as an exercise in power. But speaking to the general principle: if a country were truly to start dumping with an eye to putting its competition out of business, it would lose massive amounts of profit until it succeeded. Upon cessation of this dumping, the prior competition could just quickly reopen its factories. But when you tariff your own goods, your domestic producers lose market share as other countries create or expand facilities to meet the demand of satisfying your prior customers. But if you stop your tariffs, those other countries would still have their newly created or expanded production lines still in place.

In other words, this feeble reply is a false analogy. Dumping — a phenomenon most economists doubt really exists — would only temporarily shut down some of the pre-existing competitors’ facilities. But tariffs lead to the permanent creation of new facilities of competitors.

Even after any imagined cessation of tariffs, there will be an irreversible loss of trust.

Does anyone really think that after tariffs disappear — if they disappear — that the newly developed farmland in Brazil will just be converted back into rainforest? If you believe that, I have a high-rise Trollop Tower in Manhattan to sell you.

Finally, even after any imagined cessation of tariffs, there will be an irreversible loss of trust. If America, a loud exponent of free markets, private property, and free trade, from the end of WWII until recently, is now willing to wage tariff war for the most trivial of reasons, who will trust such a Republic of Lies?

The even more worrisome question raised above is this: will the tariff war end at all? Perhaps the Chinese have taken the measure of Trump and have concluded that he is a flawed and doomed president, and that they can just outlast him. Moreover, he has just announced that he will reattack — Mexico! His loopy proposal is aimed at getting Mexico to seal its borders, so Central Americans won’t keep coming here. He will start the tariff at 5% on all of Mexico’s exports immediately, and raise it 5% per month until it hits 25%. What a massive misuse of the tariff powers of the president! Trump seems to now view tariffs to be the ultimate skeleton key to open the door for any policy he wishes to achieve.

America will be increasingly consigned to third-rate status in world trade and influence.

Oh, and this just in: Trump has informed Prime Minister Modi (a man he professes to admire) that India — whose alliance we may need to counter a rising China — will shortly lose its designation as a beneficiary developing country. It will be removed from the Generalized System of Preferences, aimed at helping developing countries. We will now start jacking up taxes on Indian trade — starting with washing machines! To this, India has promised jacking up tariffs on American goods. In fine, a new front on the widening trades war.

This all raises the question of whether our standing in the world will recover any time soon. Color me skeptical. Trump’s widespread and indiscriminate use of tariffs, his refusal to join TPP, his upending of NAFTA, his failure to produce any new free trade agreements, his other bullying trade tactics — indeed, his whole crony capitalist betrayal of free market economics — mean that America will be increasingly consigned to third-rate status in world trade and influence.

Trump has made America small again. Quick — somebody order a bunch of “MASA” caps!




Share This


Something There Is

 | 

“Something there is that doesn’t love a wall...”
                                                         —Robert Frost, “Mending Wall”

I’m far from convinced that a border wall is desirable. But the people who fulminate against it tend to be so insufferable that they push me into seeing the good side of it, if only out of sheer contrariness. I am sick of “progressives” lecturing me on bigotry. They’re the last people on the planet with any room to talk.

Supposedly, wanting a wall is racist. Though actually, it’s pretty racist to lump people who obey the law — including immigration laws — together with those who don’t, based on nothing but skin color. Do “progressives” think that for those south of the border, criminality is the norm? Most of those trying to reach this country hope to leave the criminals behind them; they don’t appear to be in favor of letting everyone in.

These United States have held together as long as they have not only because they permitted compatible people to live together, but because they let incompatible people live apart.

Walls don’t only divide. They also unite. Good neighbors on each side of them are usually glad they’re there. A wall lets you be you, and me be me. Forcing people to put up with one another does nothing to help them get along.

People don’t all want the same things out of life. These United States have held together as long as they have not only because they permitted compatible people to live together, but because they let incompatible people live apart. I am a Westerner, born and bred. There is little chance I’d ever move East of the Mississippi, and I would appreciate it if people from those parts stopped trying to turn Arizona into Massachusetts or New Jersey. People north of the Mexican border can be forgiven for not wanting the US to become Mexico, Guatemala, or Venezuela.

It is not racist to want to separate oneself from violent and lawless people, or even from those whose way of life vastly differs from one’s own. Nor is it racist to prefer the company of those who want to preserve our way of life and can be trusted to do us no harm. There should be ways to make sure that people stop before they enter the country — actually stop — so we can see whether they will affirm our way of life as other immigrants have done. Though I think the wall would be unnecessary and excessively expensive, I do understand the reasons why a fair number of Americans want one. To dismiss them all as racist is irrational and intellectually dishonest.

I have lived around Hispanic Americans all my life. On the whole, I like them. They are a part of the culture of my home state, and I wouldn’t want to live anywhere they weren’t welcome. I don’t associate those I know with human traffickers, drug smugglers, or murderers. People who make such a general association are racist, and no matter how much they may project their guilt onto others, the definition fits.

Though I think the wall would be unnecessary and excessively expensive, I do understand the reasons why a fair number of Americans want one.

But people who emigrate to the United States should be amenable to our culture. Not everyone who comes to our country respects it, or wishes to live a life compatible with our ideals. Education by state-run schools tends to indoctrinate the young into a reliance on the state to solve all social problems. I stand equidistant from those who want a border wall and those who want open borders.

Among those opposed to a wall, I strongly suspect there are many for whom that viewpoint’s primary attraction is that they want to be as different as possible from people who want one. Libertarians are divided on the issue, depending on whether they believe freer movement between countries is worth the risk of cultural decay. The problem is that as our culture decays, a commitment to liberty erodes along with it.

Libertarians have a tremendous stake in the promotion of what has traditionally been called American culture. We have no reason to assume that if we throw the gates open wide, all of those who stream in are going to respect liberty, individual responsibility, or what we hold to be basic human rights. We need to stand firmly for the values we hold dear.

I’ve been asked several times to run for office. I refuse to do that, because I’d run as a libertarian — which means that I would lose. The world doesn’t need any more politicians, but it needs every libertarian it can get.

Race and culture are frequently confused. Those who love liberty and individual responsibility are accused of racism — as if only people of white European ancestry can be assumed to care about such things. But it’s definitely racist to attribute particular ideas to certain races. A nonracist — and truly libertarian — policy would be to preserve and promote our culture, both in our immigration policies and in the education of our own citizens.

The world doesn’t need any more politicians, but it needs every libertarian it can get.

We don’t need a wall, but we do need something. Good fences do make good neighbors, but if I dislike the idea of Arizona becoming New Jersey, I hate even more the possibility that it might become East Germany. With or without an actual wall, a police state mentality is poisonous.

So, what is that “something?” What influence can we exert (“control” may be too strong a word) over who comes to the United States and why? And how can we do this if we don’t win elections and seize power?

We can refuse to call people racist when they express concern over what is happening to our culture. We can also take a greater interest in what is taught in our schools. We may not like the fact that most of them are taxpayer-funded, but as long as we are among those funding them, we have not only a right, but also a duty to insist that an appreciation for Western civilization is being inculcated. In the foreseeable future, most kids will continue to be educated in public schools.

If I dislike the idea of Arizona becoming New Jersey, I hate even more the possibility that it might become East Germany.

Liberty, societal stability, and the protection of natural rights answer common human yearnings. There are people in all cultures who do not have these yearnings, but there are also people who do. “Freedom has many difficulties,” noted President Kennedy, “and democracy is not perfect, but we have never had to put a wall up to keep our people in, to prevent them from leaving us.”

If we don’t continue to stand for freedom here at home, the time will come when those who oppose a wall to keep immigrants out will indeed need walls to keep us in. We owe it to Americans of every race and generation to make sure that those who come to our country to escape hell aren’t bringing it along with them.




Share This


How Less Becomes More

 | 

Roma is perhaps the most unusual and unexpected Oscar contender for Best Picture of 2018. It’s filmed in black and white, spoken in Spanish with English subtitles, and told with very little storyline, no musical soundtrack, and no well-known actors. It’s set in the 1970s but feels more like the 1940s or ’50s. And it moves as slowly as a sloth. The Cannes Film Festival rejected it because it was made for Netflix instead of theatrical release. Netflix! It was available for free on the Internet before it went into a few art theaters. Nevertheless, like Italy’s Life Is Beautiful (1997), it has been nominated for both Best Foreign Language Film and Best Picture.

Unlike Life Is Beautiful, Roma does not have a strong, charismatic protagonist or a compelling conflict. It simply presents a dreary year in the dreary life of a young Mexican working girl. It is the most personal film Mexican director Alfonso Cuarón (Gravity, 2013) has ever made, told as a series of vignettes that come directly from Cuarón’s childhood memories and filmed by Cuarón himself. It is dedicated to Libo, a servant in his childhood home on whom the film is based. Cuarón said of the film, “It’s an intimate portrait of the women who raised me in recognition of love as a mystery that transcends space, memory and time.”

Cuarón uses this subtle method to tell his audience, “Don’t you dare say, ‘I know how she feels.’”

The story centers on Cleo (Yalitza Aparicio), one of two full-time domestic servants working in the home of a middle-class family in Roma, a neighborhood in Mexico City. Cleo and Sofia (Marina de Tavira) share a small room where they also do the ironing after the regular workday is done. They chatter together congenially throughout the day, and the children in the family seem to genuinely love Cleo; one of the boys (perhaps representing Cuarón himself) holds her hand affectionately when she kneels on the floor beside the couch to watch TV with the family after dinner (until the mother absently sends her away to fulfill another duty.)

But while Cleo is the subject of the movie, she is not our POV — we don’t see the story through her eyes. Instead, Cuarón uses wide angles so that we observe her only in her interactions with other people. This technique objectifies her to a large degree. Since we don’t see what she is seeing, we also don’t see any eye contact from others looking at her. Consequently, we can feel sympathy toward her, but it’s difficult to feel empathy. Cuarón uses this subtle method to tell his audience, “Don’t you dare say, ‘I know how she feels.’” We don’t. At best we can observe what she experiences, and think of how we might feel ourselves.

So why does this film merit ten Oscar nominations, and why does director Guillermo del Toro call it one of his top five favorite films of all time? The key is not in the two Best Picture nominations, but in the eight other categories. Most significant is the cinematography. Cuarón often uses award-winning Mexican cinematographer Emmanuel Lubezki to shoot his films, but this time he chose to handle the camera himself in order to keep the film as personal and true to his intent as possible. The result is often dreamy and reflective. Indeed, reflection is a recurring theme throughout the film. It begins with water washing repeatedly over a brick sidewalk, almost like waves, reflecting the sky, the trees, a building, and even an airplane flying across its reflected surface. Reflections are often seen in windows, cabinets, the table Cleo is polishing, the car fender as the man of the house parks in the narrow garage.

Avaricio is brilliant in her outward restraint and inner passion; the devastatingly authentic hospital scene may have earned her an Oscar by itself.

Nominations for sound editing and sound mixing are equally impressive, especially considering the lack of music. Instead, the sounds are entirely natural — the wash of water against the bricks, the bickering of birds in the trees, the sounds of dogs barking and people conversing in the distance. And the acting! So natural, and so introspective. With very little dialogue, Avaricio and de Tavira, nominated for Best Actress and Best Supporting Actress, portray the unspoken thoughts and desires of the two young servants. The hospital scene is devastatingly authentic; here Avaricio is brilliant in her outward restraint and inner passion. The moment was filmed in one take and may have earned her an Oscar by itself.

The lack of a traditional storyline and a traditional soundtrack makes the film seem slow, even plodding at first. We meet the servants, the family, the dog, but nothing much happens — until Cleo goes to the movies with a friend on her day off and ends up going off with a blind date instead — probably her first date ever. There we begin to see how her past, her class, and her future blend into a kind of inescapable destiny. The vignettes become compelling, and in the end, we can’t stop thinking about this young girl who has had so few choices in her life. We realize that she has had no control over the biggest factor determining her options — the circumstances of her birth — and thus no real control over any aspect of her life, beyond how dedicated she will be as a servant. It’s almost as though she were born dead — a metaphor that becomes significant at one point in the film.

Roma ends mostly as it begins, because Cleo’s life will end mostly as it began. Many important events have occurred during the year, politically and historically as well as within the family, but these events really haven’t affected Cleo personally. She is loved and appreciated by the family members, but she still lives in the small room above the garage that she shares with Sofia. She will never truly belong to this family she serves. But in making this film about his beloved nanny Libo, Cuarón gives her a place at last.


Editor's Note: Review of "Roma," directed by Alfonso Cuarón. Netflix, 2018, 135 minutes.



Share This


Los Pollos Coming Home to Roost

 | 

When President Trump — El Jefe, as he is known to his precious few Mexican devotees — started his jihad against the NAFTA treaty two years ago, some of us predicted trouble. NAFTA — conceived by President Reagan, negotiated by President Bush the Elder, and signed in 1994 by President Clinton, never was a “bad deal” for the US. It dramatically increased North American trade, and while we ran trade deficits with other North American countries, they were small in comparison to our major deficits (with Germany, Japan, and China — none with which we ever bothered to do free trade agreements), and were matched by counterflows of investment.

But the protectionist populist Trump believed his own propaganda that free trade “costs” Americans their jobs. He still maintains this, as our unemployment rate approaches a miniscule 3%. And his method of negotiation was as crude as it was thuggish. He repeatedly attacked Canada and Mexico, both their leaders and — in the case of Mexico — their citizens.

There were two results.

First, he was able to get a new deal. But it is worse than the original, at least from the view of the classical liberal. In exchange for a few tariff reductions, Trump’s new NAFTA forces regulations on Mexico to pay its autoworkers more — so they won’t be so competitive against US autoworkers. But while that satisfies Trump’s union supporters, it screws the rest of us, who will now have to pay more for cars.

NAFTA was never a “bad deal” for the United States.

In other words, the man who claims we need fewer regulations just jacked them up. Yes, the Boss is the Master of the Deal — the Raw Deal.

But the other effect of the Boss’s infantile bullying is to have driven anti-American sentiment through the roof in both Canada and Mexico. This sentiment helped elect the extreme leftist Andres Manuel Lopez Obrador — aka “AMLO” — to the presidency of Mexico. AMLO took office on December 1, and a few recent reports in the Wall Street Journal indicate that the chickens — los pollos! — are coming home to roost with their afterburners on.

One report is a sketch by the Journal’s Latin America expert — the estimable Mary Anastasia O’Grady — on just what this inaugural is inaugurating. For one thing, AMLO had as special guests Venezuela’s Marxist dictator Nicolas Maduro and Bolivia’s caudillo Evo Morales, both Fidel Castro wannabes.

For another thing, AMLO is reverting to his demagogic character (he was known for his fierce leftist philippics and for summoning forth his myrmidons to march in the streets). And he has already shown an inclination to disregard existing contracts and rule by diktat. For example, he opposes the new Mexico City International Airport, $6 billion in bonds for the construction of which have already been sold. He prefers to expand the existing location, which just by chance is located in the district where he has traditionally held power, thus funneling the funding to his supporters.

The new deal is worse than the original, at least from the view of the classical liberal.

As a consequence, bond investors appear to be getting ready to sue, in case of default. For this reason, three of the five worst performing quasi-sovereign bonds in the world this quarter are Mexican. These include bonds for the airport, the Mexican Federal Electricity Commission, and Pemex, the Mexican national oil company. The drop in Pemex bonds especially indicates a fear among investors that AMLO will undercut or even repeal the game-changing 2013 revision of the Mexican constitution that allows outside — read “gringo” — investment. AMLO’s energy advisors are all long-standing opponents of the reform; they are all Mexico-first protectionists. In other words, they are all Trumps-in-Pancho-Villa costumes.

Add to this two other AMLO policies, and investors have every right to revolt. First, he wants to spend money freely to “create” jobs — rather like Trump’s own advocacy of infrastructure spending. AMLO would start by spending nearly $20 billion on a new refinery (in his home state, of course), a new thousand-mile train in the Yucatan, and a jobs bill for the youth. Like Trump, AMLO has no fear of deficits.

Second, AMLO proposes to fight the high crime rate in his country by creating a new “National Guard” combining regular army soldiers, marines, and federal police to fight the cartels. Of course, this standing AMLO army would be a perfect SS, should he decide to go into full Hugo Chavez mode.

Lopez-Obrador's energy advisors are all long-standing opponents of free-market reform; they are all Mexico-first protectionists.

Just the thought of a toto-AMLO government has sent the Mexican IPC stock index and the peso itself down into the tank with the bonds.

The death of Bush the Elder came at an ironic time. Bush 41 was a masterful conciliator and international diplomat. He maintained our alliances while overseeing the peaceful dissolution of the Soviet Union. By contrast, Trump the Infantile has managed to alienate our former allies, and so antagonize the Mexican people that they elected a populist leftist radical.

The result is shaping up with astounding rapidity. Mexico has elected an extremist leftist, who will likely turn Mexico into a veritable Venezuela. The result of that will be a wave of Mexican immigration that will dwarf any prior waves. Consider this. So far, three million Venezuelans have fled their country to avoid the economic disaster. Mexico has four times the population of Venezuela, so if a like number flee Mexico we can expect about 12 million more immigrants. The irony is breathtaking: Trump’s policies creating a massive wave of his least favorite people moving in.

A further irony inheres in Trump’s attempt to protect American autoworkers.GM has just announced that it will be getting rid of 15% of its salaried workforce in North America, and will be shuttering five plants. The total loss will be almost 15,000 jobs. GM will focus on its more profitable cars, especially pickup trucks and SUVs.

Mexico has four times the population of Venezuela, so if a like number flee Mexico we can expect about 12 million more immigrants.

The news cheered investors but enraged Trump, who immediately blasted the company and threatened to remove GM’s continuing subsidies — which immediately lowered the value of GM’s share by 2.6%. The anger was shared by other politicians, who remember the nearly $50 billion the taxpayers gave the company to rescue it from bankruptcy less than a decade ago — not to mention the continuing tax credit of $7,500 for each of its electric vehicles sold. The bad publicity resulted in GM’s announcing, a few days later, that it will be adding about 2,700 jobs at some plants in other states, and that some laid-off employees could apply for those jobs. But it still means a major drop in high-paying jobs.

I am not merely saying that Trump’s protectionism didn’t help GM enough to stop its layoffs, though that’s bad enough. I am saying that his actions are going to make it harder to prevent future layoffs. To avoid them, GM would have to sell more cars, but there is a limit to how many expensive SUVs and pickups it can sell. So it would need to increase sales of lower-end cars. But given the high US labor costs, this would require moving more of the supply chain to lower-cost venues, such as Mexico. By blocking that, therefore, Trump won’t protect highly paid American workers making low-end cars, using components manufactured in low-cost Mexico) he will force the automakers simply to stop making low-end cars, thus eliminating jobs.

Clearly, we cannot say whether the Trump renegotiation of NAFTA played any role in GM’s recent decision. After all, we cannot read minds. But just as clearly, the USMCA will make it hard for American automakers to save on labor costs.

I am not merely saying that Trump’s protectionism didn’t help GM enough to stop its layoffs, though that’s bad enough. I am saying that his actions are going to make it harder to prevent future layoffs.

So there you have Trump’s magisterial strongman running of the economy. He bullies two of our closest allies to get only trivial benefits in tariff concessions, but at the cost of electing an anti-American in our southern neighbor. The main thing he got was a regulation placed on plants in another country to pay inflated prices with the intention of protecting highly paid American union jobs. But the result isn’t likely to be a gain in American jobs; it’s likely to be a loss, as the heavily regulated US automakers struggle to make a reliable profit. The only probable gain will be a massive new wave of immigration, as lower wage Mexicans get priced out of their jobs.

Why anyone would suppose that Trump or anyone else can run American industry by divine fiat is beyond me. But people crave the Strong Man who will guide the economy like a god. And that, dear readers, is in my view goddamned stupid.




Share This


More NAFTA Nonsense

 | 

President Trump’s irrational and infantile war on America’s NAFTA geopolitical allies and trading partners is heating up. Two recent articles illustrate this slow-motion train wreck.

First is a report on how vulnerable our agricultural sector is to Mexican tariff retaliation. The report is about how frightened American farmers are these days. Besides losing sales to China — what with its recent retaliatory tariffs on our export crops (especially soybeans) — the farmers are facing a major hit from South of the Border.

An economic fool — such as Trump — notices the grossly visible part of the economic picture, but overlooks other vital parts.

Looking at the percentages of crop products shipped abroad, the article notes that Mexico buys 7.0% of our soybean products, 14.4% of our beef exports, 27.2% of our fresh fruit exports, 27.9% of our corn exports, 36.3% of our pork exports; and a whopping 45.6% of our milk powder exports. Mexico has just started its round of retaliatory tariffs, hitting US exported cheese and pork. Iowa farmers, who account for a lot of America’s pork production, are already seeing prices decline as the foreign demand falls. In Missouri, ranchers are beginning to cut back the size of these herds, in anticipation of price drops.

Last year, America exported $138 billion in agricultural products abroad, and we had a $21 billion trade surplus. All of this brings up Frédéric Bastiat’s point about the seen and the unseen. An economic fool — such as Trump — notices the grossly visible part of the economic picture, but overlooks other vital parts. He sees the number of steelworker jobs decline, so he enacts tariffs that destroy jobs in other parts of the economy, of which he is stupidly oblivious — currently, in such companies as Archer Daniels Midland, Cargill, Pilgrims’ Pride, Sanderson Farms, and Tyson Foods. He also doesn’t see job losses in the American manufacturing companies that use steel, such as our automakers and industrial pipe makers.

Trump is not uniquely ignorant of economics. After all, Obama waged trade wars early on (and stopped when he saw the results). Even George Bush — generally quite solid on free trade — stupidly put a tariff on steel imports. But Trump is more of a protectionist than Obama and Bush combined — by far. And as another article notes, he has a narcissistic hair-trigger temper that leads him to freely insult allies, often by means of infantile tweets.

Trump’s asinine behavior has done something Trudeau’s incompetence has hitherto failed to do: unite all the Canadian people behind the man.

The article reports that after Canada’s PM Trudeau’s comments at the end of the recent G-7 meeting that Canada would not be pushed around by the US, Trump tweeted that Trudeau is “very dishonest and weak,” and was lying. Now, let’s stipulate that Trudeau is simply a putz. But the point is, he is a putz who is the freely elected head of the government of one of our closest allies, one whose territory forms a security shield for us, is our biggest trading partner, and has fought alongside us in all our modern wars. In short, he may be a putz, but he is our putz!

Trump’s asinine behavior has done something Trudeau’s incompetence has hitherto failed to do: unite all political parties and the Canadian people behind the man. Yes, it turns out that even the legendarily polite Canadians have had just about enough of Trump’s arrogance. And they have come to despise not only Trump but also such truculent advisors as Larry Kudlow (who whined that Trudeau “stabbed us in the back”) and Peter Navarro (who said “there’s a special place in hell” for the Putz Minister).

Actually, if Navarro had any intellectual honesty — a trait he conspicuously lacks — he would have said that there is a special place in hell for the unprincipled Kudlow. Kudlow, to his credit, spent many years advocating free markets, the benefits of widespread immigration, and (especially) the need for free trade. But the chance of working with the populist potentate Trump turned him into Trump’s trick — Stormy Kudlow, so to say — and now he publicly bashes free trade and immigration. A preacher I once heard told his parish that the Devil needs no new temptations to corrupt men; money, sex, and power still work demonically well. Like the so-styled Reverend Billy Graham, who was seduced by the power of the corrupt Nixon, Kudlow the self-styled reborn Christian has fallen for the power of the corrupt Trump. The world hasn’t seen such a tragedy since Dr. Faustus.

The most recent Pew survey shows that Canadian sentiment toward the U.S. has hit a 30-year low — only around two in five Canadians still respect us. Precisely who has stabbed whom in the back, Dr. Kudlow?




Share This


The Perils of Mexico-Bashing

 | 

As I have noted before, in a number of ways President Trump resembles President Obama. Both hate free trade, oppose immigration (Obama covertly, Trump ostentatiously), favor unions over consumers, and so on. Trump’s mania against free trade is on display in its most virulent form in his war on NAFTA.

NAFTA was a truly bipartisan accomplishment. Conceived and promulgated by President Reagan, the free trade agreement (FTA) between Canada, Mexico, and the United States was negotiated under Bush the Elder, approved by a large, bipartisan vote in the Senate, and ratified by Bill Clinton. And it has seen trade blossom: as of last year, US trade exports to Mexico and Canada were four times what our trade exports are to China.

But even in the primaries, Trump singled out this one FTA for a torrent of abuse, accusing both Canada and Mexico of cheating, because we have a balance of trade deficit with each. Along the way, Trump’s heavy-handed and accusatory style has helped drive Canadian and Mexican opinion of him — and the rest of us, since we elected the bird — to new lows.

NAFTA has seen trade blossom: as of last year, US trade exports to Mexico and Canada were four times what our trade exports are to China.

The renegotiations have dragged on, mainly because America keeps trying to impose onerous restrictions on its neighbors. This is another trait shared by Obama and Trump: disdain for our own allies. Love Russia, hate Canada and Mexico — how daffy can you get?

A recent Wall Street Journal article reports the latest on the NAFTA fight. The chief American negotiator, Robert Lighthizer, is introducing new absurd demands. He now wants to require that at least 40% of the content of all cars crossing the American border must come from workers earning at least $16 per hour. This is at least double the existing wages of auto-assembly workers, and four times that of Mexican auto-parts workers! Cars that don’t meet that criterion will be heavily tariffed at the border.

Trump’s intention is crystal clear: pay off his union supporters by forcing Mexico to surrender its comparative advantage (lower cost labor). This is his populist-autarkist idea of “fair trade”: make the other party do things as stupidly as you do, rather than doing things smarter yourself. Add to this his demands for a periodic renewal vote on staying in the agreement, and you have a one in-your-face-F-off-and-die populist ultimatum.

Trump’s intention is crystal clear: pay off his union supporters by forcing Mexico to surrender its comparative advantage.

This ultra-protectionist ploy is arousing opposition, both here and (more ominously) in Mexico. Free-trade Republicans — what pathetically few of them are left — are not amused. In a piece he wrote for the WSJ, Sen. Pat Toomey (R-PA) expressed annoyance with the Trumpian tactics. Trump has told the Senate — in true bossman style — which had lawfully ratified the NAFTA agreement during Clinton’s term in office — either to ratify a new, eviscerated NAFTA or see him unilaterally withdraw the US from it. Toomey says that if this ultimatum is put to him, he will vote against it and oppose in federal court the cancelation of the treaty.

Recently, Trump withdrew the US from the Iran deal negotiated by the feckless Obama. That’s constitutional, because that deal was explicitly not put forward as a treaty. But NAFTA was, and as Toomey rightly observes, the Constitution delegates the framing of trade policy expressly to Congress. The rare prior cases of a president unilaterally withdrawing from a ratified treaty never concerned a commercial treaty. I would observe that the Declaration of Independence should be consulted. I refer to the parts in which the king is accused of “cutting off our trade with all parts of the world,” not to mention “obstructing the laws for the naturalization of foreigners” and “refusing to pass others to encourage their migrations hither.”

Trump and his foolish followers clearly want to stick it to the Mexicans, and have done so since his first campaign appearances.

Holding out an olive branch, the estimable Toomey suggests that Trump focus on correcting obvious problems, such as ending Canada’s tariffs on cheese, and solidifying Mexico’s recent moves to open up its energy sector to US fracking investment. Add to that correcting a (relatively minor) sin, the current Mexican practice of putting low caps on duty-free sales of American stuff, and you pretty much have perfected the agreement; and have done so quickly, without arousing countervailing populist rage.

But Trump and his foolish followers clearly want to stick it to the Mexicans, and have done so since his first campaign appearances. The countervailing rage is rising in Mexico, where the frontrunner for the next presidential election is a populist leftist — one Andres Manuel López Obrador (AMLO), close friend of Britain’s leftist Jeremy Corbyn.

Mexico is clearly being driven to its own populist extreme — AMLO now leads by 18%, much better than he has registered before. A radicalized Mexico could easily allow Russia to set up naval bases in its waters, and allow Chinese troops to move in to help “train” Mexican troops. The Russians have shown every desire to extend their world influence, and Mexico would be an even better vehicle for that than Cuba. As to the Chinese, their recent building of bases in the South China sea, their behavior on the Indian border, their rush to build a blue-water navy, and their clearly strategically planned moves to increase their influence in Latin America all indicate a long-term game plan that is anything but tame.

A lot of good a wall would do then.




Share This


Día de los Vivos

 | 

Looking for a new holiday film and you’ve had it with watching scripted Hollywood families bicker around the dining table? Pixar’s Coco is one of the best films of the season. Never mind that it’s animated. Grab yourself a niece or a nephew (or just rustle up the courage to go to a “kid movie” without a kid) and enjoy. This film has it all: gorgeous animation, witty characters, wonderful music, rich cultural heritage, and a profound story about life, loss, family, and forgiveness.

The story centers on 12-year-old Miguel (voiced by Anthony Gonzalez) who lives with his parents, his overbearing Abuelita (Renee Victor), and his sweet doddering great-grandmother Mama Coco (Ana Ofelia Murguia). Miguel is a typical Mexican boy in a not-so-typical Mexican family where music has been banned from the home and the mere sight of a guitar engenders shrieks of anger. But Miguel loves music. He has been surreptitiously learning to play the guitar by watching videos of Ernesto de la Cruz (Benjamin Bratt), “the greatest musician of all time,” whose statue stands in the town plaza. Miguel wants to enter the town talent contest, but Abuelita forbids it. When Miguel shouts that he hates his family and wishes he weren’t part of them, it sets off a chain of events that will teach him the importance of family, tradition, and remembering the dead.

This film has it all: gorgeous animation, witty characters, wonderful music, rich cultural heritage, and a profound story about life, loss, family, and forgiveness.

Coco is set on Día de los Muertos — the Day of the Dead — when Mexicans honor their departed ancestors with a three-day fiesta of reminiscing, singing, feasting, and decorating graves. Families build small altars with photographs of their ancestors and offer incense, fruits, nuts, and candies, plus toys for relatives who died as children and tequila for the adults. Traditions include eating muertos (the bread of the dead) and sugar-candy skulls, hanging cardboard skeletons and colorful tissue paper decorations, and planting yellow marigolds. It is thought that the pungent fragrance of marigolds will attract the souls of the dead.

These Mexican traditions are presented in a surfeit of rich colors and sounds as Miguel is mystically transported across the marigold bridge between the land of the living and the land of the dead. On the other side he discovers a land not unlike his own — the same town plaza, the same town heroes, the same kinds of holiday preparations being made by families who just happen to be dead. There’s even a very funny scene with TSA agents deciding who can and can’t cross the bridge, and a skeletonized Frida Kahlo (Natalia Cordova-Buckley) who is in charge of the art design for the big Sunrise Concert that coincides with the town fiesta on the living side of the bridge. Miguel is befriended by Hector (Gael García Bernal), a delightfully comical skeleton, who helps Miguel in his search for his hero, Ernesto de la Cruz, who seems to hold the key to Miguel’s return home.

All of this serves to make death seem like a transition to something familiar, so it isn’t scary at all, even for the young children who accompanied me. In fact, it makes death somehow comforting and even joyful when one considers the family reunions that await on the other side of the bridge. “Coco,” in fact, is the diminutive form of the common name “Socorro,” which means “to succor, aid, or comfort,” and this film offers much comfort about dying. It even suggests what happens to our pets when they die.

There’s even a skeletonized Frida Kahlo, who is in charge of the art design for the big Sunrise Concert that coincides with the town fiesta on the living side of the bridge.

Moreover, many of the characters in Coco need comfort and aid. Miguel is far from home and at odds with his family on both sides of the bridge. Abuelita needs to face the true source of her pain and let go of her bitterness toward music. Her grandmother, Miguel’s departed Mama Imelda (Alana Ubach), must also overcome her bitterness toward her late husband — a bitterness that has followed her into the next life. Miguel’s new friend Hector is in danger of “fading away” because almost no one remembers him. Miguel learns to succor them all.

The marigold bridge becomes a powerful symbol of family connection, as Miguel learns to bridge the gap not only with his dead ancestors, but with his living family members as well.

It might be a little risky amid today’s rampant accusations of cultural appropriation for a company directed mostly by white males to release a movie set in Mexico focusing on intimate Mexican traditions and beliefs. The humor, accents, costumes, and traditions could have gone awry, veering into the realm of stereotype. But there is an authenticity in Coco that transcends political correctness and simply feels right. The characters are voiced almost entirely by Chicano actors, and background conversations and idiomatic phrases are presented in Spanish without subtitles, contributing to the cultural authenticity. The musical score is presented as a natural part of the story when Miguel, Ernesto, Frida and others sing and perform in public, so the story isn’t superimposed on a European or American musical genre. The vivid colors and family dynamic are simply the flavor of Mexico, without caricature or disrespect. It’s just about perfect.

All of this serves to make death seem like a transition to something familiar, so it isn’t scary at all, even for young children.

One thing that is definitely not perfect is the 21-minute animated short that accompanies most screenings of Coco. Based on the characters in Disney’s 2013 megahit, Frozen, “Olaf’s Frozen Adventure” tells the story of the orphaned Princesses Elsa (Idina Menzel) and Anna (Kristen Bell) searching for Christmas traditions they can adopt, now that they are living together again in the castle. The characters are flat, the situations are corny, and the premise — that you can somehow create instant traditions by copying others — completely misses the point of what a tradition is. At 21 minutes it’s three times too long, and its production values are so weak that you might be tempted to go home before the feature film actually begins. I recommend a trip to the snack bar after you find your seats.

Families are the oldest and simplest of social communities, yet they can often be the most complex to navigate. They are a topic that Disney has explored in numerous animated classics, from the competitive and vengeful stepmothers in Snow White, Cinderella, and Tangled to the trauma of maternal separation in Dumbo and Bambi to the teenage rebellion in The Little Mermaid and The Lion King to the complete redefinition of family in Jungle Book and Tarzan. The ability to address serious issues within the framework of kid-friendly animated films has been Disney’s forte for nearly a century, and it’s the reason Disney films continue to attract generation after generation of viewers, especially through its new partnership with Pixar.

Coco is among the best of these films, for so many reasons. I expect that many families will pull it out to view again when a beloved great-grandmother crosses over the marigold bridge — or even when a pet passes on, no matter what their literal beliefs about the afterlife. As Howard Canaan writes in Tales of Magic from Around the World: “Myths express not historical or factual truth, but inner or spiritual truth.” And the truth is, we will be happier if we give up our grudges, embrace the beauty in our lives, remember those who came before us, and recognize the individuality in each human being. Coco makes this point magically.


Editor's Note: Review of "Coco," directed by Lee Unkrich and Adrian Molina. Pixar, 2017, 109 minutes.



Share This


Imitating Obama?

 | 

I confess that I am no fan of Trump. Actually, that dramatically understates it. I regard him as a dangerous populist ignoramus whose crudity of character makes him unfit for office. When he won the nomination, I sent the Republican National Committee a letter of resignation from the party to which I had belonged for four decades, and re-registered Libertarian. (I did this despite my impression that Gary Johnson was either a hopeless dope or congenitally loopy.)

It was for me, in short, a completely miserable election.

My only hope was that Trump, once in office, would at least pretend to be presidential, and would drop his nativist and protectionist stances, having decisively won the populist vote. And I admit I was cheered when he appointed a good judge to the Supreme Court, talked about repealing and replacing Obamacare, and also talked about lowering at least corporate taxes. He has so far been unable to deliver.

Nativists fear even legal immigrants, not seeing how beneficial they are to the economy.

But unfortunately he has pursued his nativist and protectionist agendas. On the nativist agenda, he killed DACA — setting up the deportation of upwards of a million young people brought here involuntarily, and raised with scant knowledge of the countries of their births. Not only did he refuse to increase the H-1B visa and other programs that legally allow in college-trained STEM and medical professionals, but he has actually proposed cutting all legal immigration by half. He continues demanding that a wall be built on the border with Mexico, even though illegal immigration from Mexico has been steadily dropping for a decade — indeed, for the last few years, more Mexican immigrants have returned home than have come north. (That’s because Mexico has a good growth rate, and is now in the top ten manufacturing countries on earth). Nativists fear even legal immigrants, not seeing how beneficial they are to the economy. For example, immigrants and immigrants alone are the reason we don’t face the same demographic implosion that the European countries and Japan face, and immigrants are disproportionately likely to open new businesses.

On Trump’s protectionist agenda, after killing the Trans-Pacific Partnership Agreement, Trump has set his sights on killing NAFTA. Several recent Wall Street Journal articles report on the administration’s attempt to renegotiate this deal, signed back in 1994. Trump’s curious hatred of Mexico and Canada is as bizarre as his love of Russia. In this he imitates Obama, who bashed NAFTA in his primary fight with America’s Sweetheart Hillary Clinton. At the time, most commentators assumed that this was just “Bubba bait” — that is, demagogic talk aimed at arousing nativism and protectionism by telling the economically illiterate that Evil Foreigners have “stolen” American jobs, jobs that usually have been automated away.

But to many people’s amazement, Obama — Trump’s match in protectionism — started trade wars with both Mexico and Canada shortly after assuming office. He stopped only when those countries fought back and kicked our economic behinds. For example, Obama violated NAFTA to “save” 200 trucking jobs (at the behest of one of his supporters, the Teamsters Union), but when Mexico retaliated with stiff tariffs against our farmers, 25,000 American jobs disappeared, whereupon Obama cancelled his policy with limited publicity.

After killing the Trans-Pacific Partnership Agreement, Trump has set his sights on killing NAFTA.

To his credit — and as readers of this estimable journal know, I was a consistent critic of Obama’s regime — Obama slowly but surely came to understand why more than 90% of economists favor free trade. Obama eventually approved of the three free-trade agreements left to him by George Bush, and late in his second term negotiated the TPP. Who knows, perhaps Obama finally read that Econ 101 text that he was too negligent to read as an undergrad.

But Trump is even more of a populist fool. He immediately killed the TPP, and has now targeted NAFTA. He is apparently surprised that both Mexico and Canada are fighting back. A bully is always amazed when the smaller boy he chooses to pick on hauls off and smacks him.

The Wall Street Journal reports just how close to a collapse of the NAFTA talks we are. We have seen record highs in the stock market, but this would almost surely change quickly should the talks collapse. One economic consulting firm, the Colorado-based ImpactECON, has put the net job losses at 125,000 for Canada, 256,000 for the US, and a whopping 961,000 for Mexico over the next three to five years.

Trump is apparently surprised that both Mexico and Canada are fighting back.

For those populists who will cheer the disproportionate job losses to Mexico, well, they may want to ask themselves whether their protectionism trumps their nativism here. That is, if we move to destroy nearly a million Mexican jobs, where oh where will all those newly unemployed Mexicans go to avoid starvation? Trump had better be prepared to build his wall quickly.

If NAFTA does get repealed, tariffs would undoubtedly result. At a minimum, the three member states would revert to their average tariffs rates: 3.5% for the US; 4.2% for Canada; and 7.5% for Mexico. But there is good reason to think that the tariffs will be much higher. Both Canada and Mexico will be furious at seeing the US dump the deal and will likely raise tariffs enormously. Moreover, the collapse of NAFTA and the Mexican job market will be the result. The American Automobile Policy Council estimates that the rise of the price of domestic auto parts from the tariffs will cost 50,000 US jobs. Another economic thinktank, Boston Consulting Group, gives the same estimate.

The ImpactECON study says the small gains in US employment in production of machinery and chemical industries will be swamped by losses in the agricultural, auto, and apparel industries.

Mexico could simply embargo products from the US — it just ordered its first shipment of wheat from Argentina, no doubt in anticipation of the looming trade war.

This last is a nice point — a point that Frédéric Bastiat would have underscored. What average Americans — including Trump — expect to see after NAFTA is some US manufacturing jobs disappearing while trade flourishes between us and our natural neighbors. They assume the trade will cause the job losses, which is debatable. But worse, they don’t see the gain in jobs in farming and other industries.

Under NAFTA, our agricultural exports to Mexico and Canada have risen fourfold, hitting $38 billion last year. If NAFTA is junked, the Mexicans could revert to their pre-NAFTA tariff levels of 75% on US chicken and corn syrup, 45% on turkey, potatoes, and dairy products, and 15% on wheat. You see, protectionism works both ways: Mexico pre-NAFTA was trying to protect its farmers from competition from American farmers. In fact, Mexico could simply embargo these products from the US — it just ordered its first shipment of wheat from Argentina (30,000 tons), no doubt in anticipation of the looming trade war.

The Mexicans, by the way, are especially angry. All major candidates for the upcoming presidential election there are opposed to what Trump is doing, but the one who is poised to make the most gains is the ultra-leftist Lopez Obrador. If Mexicans, in their righteous indignation, elect him, we could have a Cuba right on our border. For instance, Mexico could retaliate by cutting a free trade agreement with China, and allowing the Chinese to set up naval and army bases on its soil — which it is completely free to do under international law.

Talk about a “game-changer”: for the first time in US history, we would face a military threat from one of its long borders.

Even the author of the 2011 report by the leftist thinktank Economic Policy Institute, Robert Scott, has changed his mind. The report purported to show that NAFTA cost 700,000 US jobs, and was widely cited by protectionists of all political stripes. Scott now says that if NAFTA is abandoned, manufacturers will just “move” jobs to Asia.

The real “culprit” behind manufacturing job loss is not international trade; it is automation and creative destruction.

The NAFTA talks are approaching crisis phase, because the US is making unreasonable demands. For example, the US negotiator Robert Lighthizer wants a “sunset clause” requiring the agreement to be renewed every five years, and a watering down of the provision for arbitrating disputes.

Of course, the joke in all this is that the US was losing manufacturing jobs long before NAFTA. As early as 1974 sociologist Daniel Bell discussed the shift from industrial work to high-tech and service sectors in his book The Coming of Post-Industrial Economy, and the term “rust belt” was coined in 1982, more than a decade before NAFTA came into being. In fact, over the last decade all of the top ten manufacturing countries in the world lost manufacturing jobs. The real “culprit” is not international trade; it is automation and creative destruction. We don’t hand-bolt wheels on cars anymore, not because the Mexicans do it, but because robotic arms do. And we don’t make buggy whips anymore, not because the Chinese make them cheaper, but because we don’t have buggies.

The failure of many American workers to adjust to the shift from low-knowledge to high-tech factories results primarily from the pathetically poor average education they receive. I mean, you can’t read the instructions manual for the new computer-aided machinery if you can’t read to begin with. While other countries are reacting to the evolution of the industrial economy by building new colleges and trade schools, cranking out engineers, doctors, scientists and skilled workers, we struggle with risible high school and college dropout rates, a proliferation of humanities and social science majors, and vanishing trade schools.

We don’t make buggy whips anymore, not because the Chinese make them cheaper, but because we don’t have buggies.

All of this could be cured if we did what supposedly socialist Sweden did over a quarter century ago: immediately adopt a universal voucher program — that is, require all public schools in America to adopt perfectly pro-rata voucher systems within one year. But this would arouse the teachers’ unions like nothing else. They will protect the cushy jobs of mediocre and even positively bad teachers, forcing parents to keep their kids in failing schools.

Rising protectionism and fear of trade don’t just run the risk of depression and trade wars — which in turn run the risk of military war. They also distract us from the real cause of long-term blue-collar unemployment: a horribly broken educational system.




Share This


The More Things Change . . .

 | 

I will confess that I found this past presidential campaign sheer hell. I detested both Clinton and Trump, and voted for neither. I hoped that both would lose, and my only consolation was that they both did lose: Trump was defeated decisively in the popular vote, while Clinton was defeated decisively in the Electoral College contest. My view was and is that Trump will transform the Republican Party into a populist one, pushing nativism, protectionism, corporatism, and isolationism. It saddened me to see writers I had previously admired — such as Larry Kudlow and Steve Moore — who have long argued against the populist siren call to the Republican Party, succumb to it at last, in the form of Trump — The Boss. They, along with a large group of other soi-disant free market commentators, have been seduced by populism. This group I call “the Herd.”

Now, when those of us who are classical liberals — i.e., believers in the free movement of products, of physical capital, and of human capital — expressed alarm at Trump’s explicitly expressed nativism, animus toward Mexicans and Chinese, sexism of the crudest sort, and obvious protectionist aversion to free trade, the Kudlow-Moore Herd mooed, “Oh, he’s just saying that to get the workers’ votes. Don’t worry — he isn’t serious — it’s just bait for the bubbas.” The Herd never asked why the rest of us would ever be attracted by the pitch “Vote for The Boss — he would never do what he says he will!”

Well, even before assuming office, The Boss has started making major decisions as if he were already in charge. It’s as if he couldn’t wait. And it seems he was serious in his campaign.

One highly touted decision The Boss made recently was to coerce Carrier, a division of United Technologies that makes HVAC units, to keep roughly half the workers who were slated to lose jobs when the plant was moved to Mexico. Under pressure, Carrier agreed to keep about 800 of the jobs here. (The Boss’ propaganda ministry said it was 1,150 jobs, but it turns out that included 350 support jobs that were slated to stay anyway.) Gregory Hayes, United Technologies’ CEO, gave in to The Boss, and The Boss and his myrmidons hailed this as a triumph. Indiana, veep-elect Mike Pence’s state, sweetened the deal by giving the company $7 million in tax incentives (read: taxpayer subsidies), but clearly Hayes was most concerned with the continuing bad publicity driven by The Boss and his Herd, and the threat of a 35% tariff on Carrier gas furnaces made in Mexico.

The Herd never asked why the rest of us would ever be attracted by the pitch “Vote for The Boss — he would never do what he says he will!”

The reactions to The Boss’ gambit have been fascinating, to put it mildly. Richly ironic was Sarah Palin’s denunciation of the deal as “crony capitalism.” She wrote ruefully, “When government steps in arbitrarily with individual subsidies, favoring one business over others, it sets inconsistent, unfair, illogical precedent. . . . Republicans oppose this, remember? Instead, we support competition on a level playing field, remember? Because we know special interest crony capitalism is one big fail.” This is rich, considering Palin was one of the Republican Party elite who came out in support of Trump. And she may come to rue her small speck of intellectual honesty, since she has been rumored to be under consideration for government positions and The Boss has shown he tends to appoint his supporters to administrative posts.

Moving now from the ironic to the surreal, the arch-free-market opponent Bernie Sanders also criticized the deal. Yes, socialist Sanders was angry that The Boss didn’t “save” all the jobs by immediately imposing a massive import tax on the products of any company that dares to offshore its operations. Sanders thinks that “United Technologies took Trump hostage and won,” by getting tax breaks in exchange for only half the jobs. In fact, Sanders holds that The Boss has endangered the jobs of countless American workers, because “he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives. Even corporations that weren’t thinking of offshoring jobs will most probably be reevaluating their stance [now].”

Surreal indeed! The loopy old Stalinist tool can’t imagine any other reason why businesses would legitimately want to move operations abroad than to get tax breaks. Certainly not to escape our punitive corporate income taxes, currently the highest in the industrialized world, and about triple the rate of Ireland. Certainly not because of our dysfunctional common law system, the only one without the “loser-pay” (or “British”) rule that limits frivolous lawsuits. Certainly not to escape Obamacare, a law that saddles companies with the obligation to provide costly health insurance to their full-time employees whenever they have more than 49 of them. And certainly not because of the metastasizing cancer of regulation, which under Obama has simply exploded. Here the senile socialist Sanders complains that United Technologies made a profit last year of $7.6 billion, and its top execs received $50 million each. (Imagine that! Top execs being paid less than one tenth of one percent of the billions in profits they helped produce! Outrageously generous!)

The loopy old Stalinist tool can’t imagine any other reason why businesses would legitimately want to move operations abroad than to get tax breaks.

In a revealing interview with CNBC’s Jim Cramer, United Technologies’ CEO Hayes explained his thinking. Nobody listening to the interview could doubt that Hayes is a decent and patriotic man, but also a man committed to running his company profitably and for the long term. He signaled that he caved to The Boss’ demands because he feared government retaliation against the other three United Technologies divisions — Pratt Whitney engines, Otis Elevator, and the aerospace division — no less than against Carrier. As he put it, “I was born at night, but not last night. I also know that about 10% of our revenue comes from the US government.”

Hayes outlined the reasons why his company had moved Carrier’s — but no other divisions’ — operations down to Mexico. While the skills of the employees at the other divisions are extraordinarily high, the skills at the assembly line for HVAC units are much lower. Moreover, Hayes noted, not only are labor costs lower in Mexico (80% lower) but the company’s existing Mexican plants, the absentee rate was only 1% and the turnover rate only 2%. These figures are much lower than those for the American plant.

Here Hayes touched upon two points I have to work to explain to my business ethics students — who, despite their choice of major, often incline to the Clinton-Sanders-Obama view of capitalism. First, besides intellectual virtues, employers have to consider moral virtues as well. And employees are often not “perfect substitutes” here: some are more inclined to show up for work reliably and work enthusiastically and conscientiously, because for them work is a moral prerequisite for being a virtuous person. Unfortunately, this attitude is more prevalent abroad than in heavily unionized American factories. (I attribute this to the unionization, not the Americanization, of the workers.) Second, what makes employees more valuable is their productivity, not their relatively low salaries. The top paid quarterback in the NFL is a lucky fellow named Luck, who earns $26.4 million a year from the Colts organization. Suppose I called the Colts management and offered my services for a mere 1% of that cost. Would the Colts jump at the chance to “snap up” an old, out-of-shape, overweight, nearsighted, clumsy, uncoordinated philosopher who has never played football in his ludicrous life? Hardly. But if the Colts management could find a man with the skill set of Mr. Luck for significantly less, then they might consider it.

What makes employees more valuable is their productivity, not their relatively low salaries.

Hayes explored this latter point when he noted that United Technologies sent 45,000 employees through their “employee scholar” program, with 38,000 receiving degrees. United Technologies spent $1.2 billion over the last two decades on increasing the skills — the intellectual virtue — of its workforce. And Cramer — an intellectually honest progressive liberal, which is as rare as a sympathetic fascist — pointed out for his CNBC audience (to wit, progressives who make money off capitalism even as they despise it) that United Technologies had early moved a plant from Nogales, Mexico to Florence, South Carolina — at a cost of $60 million in the first year. Notice that neither The Boss’ propaganda machine nor the Herd of establishment Republican apologists even mentioned the onshoring of the bigger Otis plant at great expense, nor the huge amount of money the company has put into improving the skills of tens of thousands of American workers. They mentioned only the 800 inefficient assembly-line jobs.

Hayes noted that United Technologies will now invest $16 million in the existing Carrier plant, to automate it as much as possible, to make it “cost competitive.” So the jobs “saved” by The Boss are not destined to last long. Yeah, the Mexicans won’t “steal them,” but the robots will. In short, don’t blame Juan — blame R2D2!

Hayes made one other point that one wishes The Boss could grasp: “The genie of globalization is not going back into the bottle. . . . Free trade is still essential to the growth of this country. This country was founded on two principles: immigration and free trade.” Boss, let me introduce you to Thomas Jefferson!

But the Herd was mightily pleased with what The Boss did to United Technologies. Larry Kudlow and Neil Cavuto, who should know better than to tout protectionism and cronyism, approved on air, with Cavuto adding the deft ad misericordiam touch that these jobs were saved just in time for Christmas — which rather makes The Boss the Savior.

The jobs “saved” by Trump are not destined to last long. The Mexicans won’t “steal them,” but the robots will.

One of the founding members of the Herd — Glenn Reynolds — chimed in his support for The Boss’ crony capitalism. Reynolds wrote an amazing — really, psychedelic — piece favorably comparing The Boss and his tweets with FDR and his radio “fireside chats.” Like, far out, man, America is in the Great Depression redivivus, and the Boss is here to save us!

Of course, as Reynolds himself concedes, FDR probably extended the Depression by seven years, but he certainly made economically illiterate Americans feel like he cared. And I guess it’s better to feel the pain you cause in others than to be oblivious to it, although I am more inclined to say you shouldn’t cause the freaking pain to begin with.

But Reynolds’ point is that The Boss, in “saving” these pathetically few jobs, showed more “compassion” than Obama, because when Obama was asked about saving jobs at this Carrier plant, the Prez said that the answer was improved job (re)training. That caused Reynolds to wax sanctimonious, saying that when a factory closes (from outsourcing, free trade, automation, or just plain producing a product the public doesn’t want), the people laid off and the local economy suffer. And the existing job retraining programs — including the Trade Adjustment Assistance program (TAA) — don’t work well. Here Reynolds quotes a study done by the Heritage Foundation that says the TAA doesn’t work — though considering the infamous hit-report the Heritage Foundation did some years back on the cost of immigrants to the nation, which cemented the organization’s turn from conservativism to populism, I no longer put any credence in its reports.

Now, readers of this journal over the last eight years will, I believe, not accuse me of being a blind Obama supporter — far from it. But in this case, Obama is correct and Reynolds, the Heritage Gang, and the rest of the Herd is wrong. We all learned from Joseph Schumpeter that economic progress is driven by “gales of creative destruction,” when old, less efficient ways of doing business are eliminated by newer, more efficient ones. Cathode ray tube TVs died rapidly when flat screens came out; VHS tapes died rapidly when DVDs became available. And human-piloted cars, trucks, and buses may soon be replaced by autopiloted ones. And we all know what Schumpeter pointed out, that this process is often a hardship on some workers as they undergo retraining for more productive jobs. No doubt, if truck, delivery van, and bus drivers, as well as cab and Uber drivers are all put out of work by self-driving cars, some people will find it hard to find other, more productive jobs over a relatively short period of time. But most will find other, more productive work, easily.

FDR probably extended the Depression by seven years, but he certainly made economically illiterate Americans feel like he cared.

For those workers who can’t make the shift easily, the answer is precisely to retrain them. What other options are there? To let them languish on food stamps? Or (as the lumpenprotectionists, Luddites, and nativists would urge) simply outlaw progress? Let’s face it: progress is a bitch!

Let’s consider this for a moment. No doubt many truck and cab drivers will oppose self-piloting vehicles. But we as a country lose roughly 38,000 people a year in auto accidents, more than we lost in the Korean War. Does Mr. Reynolds — so much more compassionate than we unpatriotic, cosmopolitan, hard-hearted, elitist, and egoistic globalists — really want to see those deaths occur forever, lest some cabbie in Queens can’t find work?

As to why the TAA and the other few dozen other government retraining programs don’t work well, they don’t work well for the same reason public schools don’t work well: when the government runs a monopoly, it fails just all other monopolies do. The answer (in both cases) is to separate the government funding from the service by voucherizing it.

Specifically, we should kill all the retraining programs, along with (say) the Department of Energy, and use all that money for vouchers for long-term unemployed so that they can go to a public or private community colleges to get retrained (or get the high-school diploma they should have gotten when they were young). I would allow trade unions and private industries to use these vouchers to expand their apprenticeship and training programs they already have, and to open full-fledged trade schools as well. For example, the United Electrical, Radio and Machine Workers of America could run a chain of trade schools where people could come to learn the trades, paying the union with vouchers and perhaps by agreeing to be dues-payers for some period of time (say, ten years). Oh, and end the Obama Administration’s war on for-profit colleges, a war that killed so many hundreds of decent trade schools for no reason other than a desire to please the teacher’s unions. (The fall of the ITT college chain alone eliminated 130 campuses.)

There are several reasons why The Boss’ “victory for American jobs” is in fact disastrously bad.

First, it forces Carrier to keep paying high wages to its employees, thus ensuring that it will be unable to compete with foreign-produced products in the long term. This is the kind of “good deal” the US autoworkers received: ludicrously sweet contracts that drove two of the major American automakers into bankruptcy.

Government retraining programs don’t work well for the same reason public schools don’t: when the government runs a monopoly, it fails just all other monopolies do.

Second, it punishes American consumers, who will be forced not just to pay continuing high prices for Carrier’s products but also to pay higher taxes to provide the subsidies. The Boss’ “big-hearted” concern for the workers obviously did not extend to the consumers or taxpayers.

Third, as Bastiat would note, while the populace — with the Herd leading the cheers — hails the Boss for the 800 jobs saved, it will not see the many of thousands of jobs that will be lost. Any company, foreign or domestic, that is thinking of building new plants here knows that if any of those facilities turn out to be unprofitable — say, because the workers form a union as unreasonable as the UAW — and the company moves to close the plant, The Boss will punish it with whatever sort of sanctions he can dream up. As the French have discovered, the harder you make it to fire workers, the more reluctant companies will be to hire them in the first place, so you wind up with chronic high unemployment.

This is where the Herd may be miscalculating. Kudlow, Moore, Laffer, Cavuto, Reynolds, et.al. assume that with lower corporate taxes and fewer regulations, the economy will boom and job growth explode as companies repatriate foreign profits and open new plants here. But in the face of The Boss’ demagogic, autocratic governance, the companies may instead use the money to buy back stock in their own outfits or invest the money abroad. The good effects of The Boss’ more classically liberal policies may be trumped by the bad effects of his populist ones.

The harder you make it to fire workers, the more reluctant companies will be to hire them in the first place, so you wind up with chronic high unemployment.

In fact, the Herd’s admiring lowing in response to his bullying of Carrier may be confirming to The Boss that his protectionism is working. He moved on rapidly to attack another company — Rexnord Corporation — for daring to move a plant to Mexico and “viciously fire” 300 existing employees. So far the company hasn’t caved, leading The Boss to renew his threat to hit Mexican imports with a 35% tariff. Ford, which he threatened earlier, still appears to be moving forward with plans to build small cars in Mexico. So The Boss may well be forced to carry through with his threat.

This is all reminiscent of Obama’s first year, in which he started trade wars with Mexico and Canada, while engaging in crony capitalism with environmentalist companies. As the cynical but insightful French put it, the more things change, the more they stay the same.




Share This


The Birth of a Nation

 | 

On a clear and cool November morning, while accompanying my dog on our daily circuit of his considerable territory in this southern California suburb, I passed a house that had a flag hung above the garage door. It was at an angle, so I couldn’t see it very well, but then I got it: the Bear Flag, the official flag of California, which features a golden grizzly bear walking toward the left and, below the bear, the words “California Republic.” While it’s not unusual in this neighborhood to see the occasional American flag on display, this was the first time I’d seen the state flag being flown from a private residence, and it seemed odd.

What, I thought, is up with that?

* * *

Nestled snugly in the heart of Europe is 999 square miles of tidy, prosperous greenery called the Grand Duchy of Luxembourg. Surrounded by France, Belgium, and Germany, Luxembourg is a member of the European Parliament, where it enjoys the benefits of what mathematicians call degressive proportionality.

When considering the prospect of joining the EU, Luxembourgers had to face the possibility that their happy little land might just be swallowed whole.

In practical terms, this means that Luxembourg’s 540,000 or so people get six seats in the European Parliament, while the 80,000,000 or so Germans get 96. To be clear, that is roughly one seat for every 90,000 Luxembourgers and one for every 830,000 Germans. That’s right, each Luxembourger counts as more than nine Germans.

Why do the Germans put up with this? The unsurprising answer is self-interest.

When considering the prospect of joining the European Union, Luxembourgers had to face the possibility that their happy little land might just be swallowed whole. After all, any country that joins the EU, no matter how large, surrenders a hefty portion of its sovereignty and, given the Union’s immigration policies, invites substantial changes to its national culture and identity. For a small country like Luxembourg, joining up could mean disappearing down the maw of a supra-national leviathan forever, to put it colorfully.

If there were a strictly proportional European Parliament of 1,000 members, Luxembourg would get only one voice in the massive hall. This nightmarish scenario is probably what prompted the Duchy to ask for a few extra seats before they joined.

Although being in the EU is not without its costs, on balance, Germany benefits. It enjoys a tariff-free, nearly frictionless market of more than half a billion souls eager to buy German goods, a leading role in an effective collective counterweight to the power wielded by Russia, China, and the United States, and, after centuries of war and strife, relative peace and interdependent prosperity for an entire continent. A little degressive proportionality in the allotment of seats in the European Parliament must have seemed a trifle to pay for these considerable benefits.

And so, the compromise was made. Today, with something like 0.1% of the European Union population, Luxembourg gets 0.8% of the members of the European Parliament. It’s a pretty good deal, for Germans and Luxembourgers alike.

This nightmarish scenario is probably what prompted the Duchy to ask for a few extra seats before they joined.

Had the large countries not agreed to the compromise, the smaller countries probably would have stayed out, and the European Union as we know it would never have even been born.

* * *

The United States had arrived at a similar end by different means. By 1786, it was generally agreed that the Articles of Confederation, which gave equal weight to each state regardless of population, were not working well, so a federal convention was called to consider changes. The opening gavel came down in 1787 and the meeting soon morphed into the Constitutional Convention. The single most divisive issue was how to apportion power among the states. Things got a little heated.

On June 30, 1787, Gunning Bedford Jr., representing Delaware, made it clear that the less populous states were not going to be bullied into accepting strictly proportional representation in the central government, saying,

Will it be said that an inequality of power will not result from an inequality of votes. Give the opportunity, and ambition will not fail to abuse it. The whole History of mankind proves it . . . The Large States dare not dissolve the Confederation. If they do the small ones will find some foreign ally of more honor and good faith, who will take them by the hand and do them justice.

When things cooled down a bit, Mr. Bedford clarified that he was not making a threat. In this context, the threat that he was not making might have been something like inviting, say, the redcoats to help Delaware defend itself against, say, Pennsylvania. The notes of the Convention for that day are here.

Mr. Bedford’s speech marked a turning point in the deliberations. The large states gave up the demand for strict proportionality and moved in the direction of a series of compromises that incorporated the views of the less populous states in the draft of the Constitution that was presented to the states for ratification.

* * *

Let us imagine two friends, John, from Delaware, and Paul, from Massachusetts, discussing these compromises in 1787.

John: I fear that Delaware’s interests would be brushed aside by the more populous States if it were to join this Union.

When things cooled down a bit, Mr. Gunning Bedford Jr. clarified that he was not making a threat.

Paul: There are provisions in the proposed Constitution that prevent the interests of the small States from being ignored or their powers from being unjustly encroached upon.

John: Such as?

Paul: To begin with, the legislature has been divided into two chambers: the House of Representatives, in which the States are allotted seats in proportion to their populations, and the Senate, in which each State is allotted two seats, regardless of population. Any law must be passed by a majority vote of both bodies, or, if the President refuses to sign, by a two-thirds vote of both bodies.

John: Are the two equal in other respects?

Paul: Not quite. Any proposal dealing with taxation and expenditures must originate in the House, though the Senate must still concur for it to become law. The Senate alone, however, votes to confirm the appointments that the President makes to the Supreme Court and, while the President may negotiate a treaty, two-thirds of the Senators must agree with it before it can be ratified.

John: These provisions certainly give the small States more say than their numbers alone would warrant, not only in the legislative branch, but also in the judicial branch, and in foreign affairs as well. The role of the President, however, seems crucial in this Constitution. Is the President to be elected by popular vote?

In all likelihood, if the large states had not agreed to these compromises, the small states would not have ratified the Constitution.

Paul: No. Each state is to choose Electors, equal in number to that of its Representatives and Senators combined. Those Electors will then meet in their respective States and vote for a President. The candidate who wins the majority of the Electors’ votes becomes the President.

John: So, because each state will be granted an Elector for each Senator, the less populous states will have a disproportionate say in who becomes the President?

Paul: Exactly.

John: All these provisions are reassuring, but what is to prevent the more populous States from simply changing the rules once this new government is formed?

Paul: The rules for amending the Constitution are a part of the document itself. There are two methods. Under the first, two-thirds of both the House and the Senate must agree to any proposed amendment; then, three-quarters of all the State legislatures must agree, by a majority vote in each, to that proposed amendment. Under the second method, Congress must call for an amending convention when asked to do so by two-thirds of the State legislatures. Then conventions in three-quarters of the States would have to agree to the proposed amendment for it to take effect. .

John: So, a significant number of the representatives of the less populous States would have to vote twice, using either method, to change the very rules that gave them a disproportionate say in the affairs of the country in the first place?

Paul: Just so.

John: Could the Supreme Court change these provisions and impose proportional representation?

Paul: Should Justices of the Supreme Court attempt such a direct misinterpretation of the proposed Constitution, they would certainly be impeached. The proposed Constitution stipulates that, in the event that a simple majority of the House votes for impeachment, the Senate can, with a two-thirds majority vote, remove a Supreme Court Justice from the bench. Besides, the Justices are to be appointed by the President and confirmed by the Senate, both of which would be selected under these very provisions. The likelihood that a majority of the justices so selected would share such a fundamental disagreement with these provisions is remote.

Each Wyomingite counts as more than three Californians, not only in the Congress, but in presidential elections as well.

John: I am persuaded. I shall support ratification. But I must ask: why would you want to ratify a Constitution that grants less power to Massachusetts than its relatively large population would otherwise seem to warrant?

Paul: Oh, I don’t know — to establish justice, I guess. To insure domestic tranquility and provide for the common defense, something like that. And being united would really promote the general welfare, don’t you think? And maybe even secure the blessings of liberty, that kind of thing.

John: All of which would benefit Delaware as well.

Paul: Indeed.

In all likelihood, if the large states had not agreed to these compromises, the small states would not have ratified the Constitution and the United States of America as we know it today would never have been born.

* * *

If you want to understand the modern consequences of the American version of degressive proportionality that Paul and John discussed, Wyoming is a good place to start. This large, landlocked rectangle perched on the arid high plains and mountains of the American West is sometimes called the Cowboy State. Its official sport is the rodeo.

Wyoming’s roughly 600,000 people have three members of Congress, one in the House and two in the Senate, while the 39,000,000 or so Californians have 55 members of Congress, 53 in the House and two in the Senate. So there is one member of Congress for every 200,000 Wyomingites, while there is one for every 700,000 Californians. Yes, each Wyomingite counts as more than three Californians, not only in the Congress, but in presidential elections as well. Remember those Electors?

Why do the Californians put up with this? Well, they may not.

* * *

It is often pointed out that in the presidential election of 2016, Hillary Clinton won the popular vote, while Donald Trump merely won the electoral vote and the presidency. While the results in overrepresented states such as Wyoming account for Trump’s electoral victory, to understand Clinton’s popular vote triumph you need only look at one state: California.

On December 8, the California Secretary of State reported that state’s votes as Clinton, 8,753,788, and Trump, 4,483,810, giving Clinton 4,269,978 more votes than Trump in California alone. Let me repeat that: alone.

If you leave California’s votes out of the tally, Trump won 1,436,758 more votes nationally than Clinton.

On December 16, 2016, CNN reported the national popular vote totals as Clinton, 65,788,583, and Trump, 62, 955,363, giving Clinton 2,833,220 more votes than Trump nationally.

According to these figures, Clinton won the popular vote in California by 1,436,758 more votes than those by which she won in the country as a whole. To put this in another way, if you leave California’s votes out of the tally, Trump won 1,436,758 more votes nationally than Clinton.

Yes, you read that right.

It may have been at the exact moment when these results were released that degressive proportionality became something up with which some Californians would no longer, to paraphrase Churchill, put. They realized for the first time that they did not really care for this Electoral College at all.

Which brings us back to the flag.

* * *

On June 14, 1846, a scruffy band of what might be called illegal American immigrants in Sonoma, California, then part of Mexico, frustrated by what they saw as unjust treatment at the hands California Governor José Castro, seized the commandante of the town, retired Mexican General Mariano Vallejo, and declared that California would henceforth be an independent country.

One of the rebels fashioned a primitive flag featuring a leftward walking bear, below which, in bold Roman letters, he wrote the name CALIFORNIA REPUBLIC. The banner was raised over the barracks in Sonoma, the makeshift headquarters of the Republic. And thus was brought forth upon this continent a new nation.

Yes California has expedited its efforts to make California independent again because the election of Mr. Trump has generated such enthusiasm for secession.

Less than a month later, the 150 or so men in the new country’s army were absorbed into the US Army, the Bear Flag was lowered, the Stars and Stripes were raised, and with that, the Bear Flag Revolt was over. Unbeknownst to the rebels, the United States had been at war with Mexico since May. At the war’s end, Mexico ceded California to the United States. A few years later, in 1850, without ever becoming a territory, California became a state.

* * *

On November 11, 2016, Marcus Evans, Vice President of the Yes California Independence Campaign, delivered a letter to the Office of the Attorney General of the State of California. The LA Times article about this is here. The letter asked that the appropriate preparations be made for an initiative that, if successful, would put before the voters a measure that, if successful, would begin the formal process of the secession of California from the United States of America. As the article makes clear, Yes California has expedited its efforts to make California independent again because the election of Mr. Trump has generated such enthusiasm for the project, which some are calling “Calexit,” after “Brexit.”

My flag-hoisting neighbor shares this enthusiasm.

If you’d like to help the Yes California Independence Campaign gather signatures to put their measure on the ballot, you can contact them here. Just remember that the last time there was a serious dispute over the prenuptial agreement called the constitution, it was South Carolina that began the divorce proceedings. It was settled out of court.

* * *

A parting thought. If we accept that our goal is not only to ensure that the “one person, one vote” rule is enforced but also to ensure that each vote is given equal weight, then we must also accept that there are more egregious violators of this rule than the European Union or the United States. Both those unions look like models of proportionality compared to the United Nations, where India is a back-bencher and France has the power to veto.

What to do?

First, propose to the General Assembly that the UN Charter be amended to ensure that representation in the UN is strictly proportional to population.

If the number is set at 10 million then Sweden, Austria, Switzerland, and Norway, among others, would have to do without a seat.

There are about 7.5 billion of us now, so 750 representatives in the hall would mean one for every 10 million or so citizens. So far, so good. Let’s see: China would get 138 seats; India, 132; the US, 32; Russia, 14; Germany, 8; the UK, 7; France, 6; Canada, 4; Australia, 2; Belgium, 1; Portugal, 1; and Sweden, 0.

Wait. If the number is set at 10 million then Sweden, Austria, Switzerland, and Norway, among others, would have to do without a seat. Just mill around at the back, I guess.

So, second, when the first proposal is rejected, the US Ambassador to the United Nations should submit a letter to the Secretary General of the United Nations asking him to make the necessary preparations for the United States of America to leave the United Nations, in the name of equity.

Can’t call it “Amexit” — sounds too much like a TV commercial. Mmmm. How about “Usexit?” No? What, then?




Share This
Syndicate content

© Copyright 2019 Liberty Foundation. All rights reserved.



Opinions expressed in Liberty are those of the authors and not necessarily those of the Liberty Foundation.

All letters to the editor are assumed to be for publication unless otherwise indicated.