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Pat Buchanan's history lesson about the trade deficits
Howard Richman, 9/9/2011

Pat Buchanan's Labor Day commentary (How Capital Crushed Labor) gives a history of the U.S. trade deficits. At first we built our industries behind tariff walls, running continuous trade surpluses that benefited our economy:

[S]ince the Revolution, America has had a standard of living that has been the envy of the world. From the Civil War through the 1920s, as we became the greatest manufacturing power the world had ever seen, our workers enjoyed pay and benefits that were unmatched anywhere.

Yet our exports in those decades were double our imports, and our trade surpluses annually added 4 percent to the gross national product. How did we do it?

We taxed the products of foreign factories and workers and used the revenue to finance the government. We imposed tariffs of up to 40 percent on foreign goods entering our market and used the tariff money to keep taxes low in the United States.

We made foreigners pay a price to get their products into our market and made them pay to help finance our government. We put our own country and people first.

Then we went globalist:

By 1976 ... The new idea was to replicate America on a global scale, to throw open the borders of all nations as the borders of the 50 states were open, to abolish all tariffs and trade barriers, and to welcome the free flow of goods and people across all frontiers, thereby creating the One World that statesmen such as Woodrow Wilson and Wendell Willkie had envisioned.

By three decades ago, this globalist ideology had captured both national parties, a product of universities dominated by New Dealers.

But why did corporate America, with its privileged access to the greatest market on earth, go along with sharing that market with its manufacturing rivals from all over the world?

The answer lies in the trade-off corporate America got.

Already established in the U.S. market, corporate America could risk sharing that market if, in return, it could shift its own production out of the United States to countries where the wages were low and regulations were light.

Buchanan has an important part of the story, but not the whole story. The rest of the story was that U.S. came to stand for Uncle Sucker. We let our trading partners practice mercantilism to steal our industries. It began with Germany and Japan. They were soon joined by almost every country in Asia. Now almost every developing country in the world uses mercantilism to steal our industries. Even Mexico, with whom we have a "free trade agreement", puts tariffs upon our products while manipulating the dollar-peso exhange rate in order to perpetuate trade surpluses with us. They all use currency manipulations, tariffs, and a host of other trade manipulations to steal our industries. And we let them.

We don't have to turn our backs on trade, and we don't have to let our trading partners run trade surpluses with us. There is a third alternative which lets global trade benefit all, so that countries grow along with their trading partners. It's called balanced trade and it can be achieved through the WTO-legal scaled tariff.

Buchanan concludes that America is in a state of terminal industrial decline:

America is in a terminal industrial decline because the interests of corporate America now clash directly with the interests of working America — and, indeed, with the national interest of the United States.

And both parties are either oblivious to or indifferent of what is happening to their country.

The only ray of hope that I see is that Sarah Palin is a potential candidate for President, and she advocates balanced trade. She has demonstrated in Alaska and elsewhere that she is not afraid to take on the corporate interests and the Republican Party establishment. Perhaps she will win the presidency and change this narrative.

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    Wikipedia:

  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]