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Voltaire’s Independent Mind Revolutionized the Accepted Policies on How to Create a Harmonious Society

February 12, 2020/in Articles /by Mark Shupe

During the summer of 1987, a stockbroker in Kentucky told his colleague at a major Wall Street firm that one of his biggest clients was complaining. He had just hung up the phone with her; she had told him that “No one should have the kind of money I have.” His fellow agent offered condolences, “Well, at least she has the right broker!”

Black Monday came and went, problem solved, but the essential lesson is that markets bring people together for peaceful, and mutually beneficial exchange, regardless of political opinions, religious convictions, and ethnic origin. Over two hundred fifty years earlier, Poetic Justice Warrior François-Marie Arouet had written,

Go to the London Stock Exchange, you will see representatives of all nations gathered for the service of mankind. Jew, Mohammedan, and Christian deal with each other as if they were of the same religion, and give the name of infidel only to those who go bankrupt.

We know him as the French philosopher, writer, and historian Voltaire, who also poetically defended Freedom of Speech – “I disapprove of what you say, but I will defend to the death your right to say it,” Religious Freedom – “In my life, I have prayed but one prayer: Oh Lord, make my enemies ridiculous. And God granted it,” Limited Government – “To learn who rules over you, simply find out who you are not allowed to criticize,” and perhaps most self-aware of all, Reductio Ad Absurdum – “A witty saying proves nothing.”

Mr. Ralph’s Opus

Voltaire was not Arouet’s only pseudonym. His work was frequently censored and banned for its blasphemy and sedition, and his classic novella Candide is no exception. Published in 1759, Voltaire distanced himself from it for several years, attributing authorship to Mr. Ralph. The whimsical tale roasts the usual muckety-mucks such as priests, princes, generals, and philosophy professors.

Particularly, the German polymath Gottfried Leibnitz and the system of ideas he named Theodicy, no pun intended. It’s the rationalization of God’s perfection amid Man’s malevolence, and the justification of moral and physical evil for a greater good. In other words, Leibnitz’ Metaphysics of optimistic determinism, a philosophy barren of reason, purpose and pride,

I do not believe that a world without evil is possible; otherwise it would have been preferred. It is necessary to believe that the mixture of evil has produced the greatest possible good: otherwise the evil would not have been permitted.

Leibnitz is interpreting Aristotle’s Law of Causality – actions are caused by the nature of the actors, while denying the reality of its predicate, the Law of Identity – attributes define the unique nature of the actors. Candide describes Leibnitz’ brand of optimism as “the obstinacy of maintaining that everything is best when it is worst.”

A weary Candide finally asks, “If this is the best of possible worlds, what then are the others?” For Voltaire, this was a rhetorical question, and Candide provides the truly optimistic answer, the one rooted in purposeful action, and the Ethics of self-creation,

I have no more than twenty acres of ground,” he replied, “the whole of which I cultivate myself with the help of my children; and our labor keeps off from us the three great evils – boredom, vice, and want.

In Candide, Voltaire gave the world a great work of art, one whose philosophy is dedicated to the proposition that you can avoid reality, but you can’t avoid the consequences of avoiding reality.

Bastille Days

More than thirty years earlier, and already a well-know playwright and poet, Voltaire was imprisoned without due process for the second time. His first incarceration at the Bastille in 1717, for libelous poetry involving a government official, lasted eleven months. This time he had offended an aristocratic family after they arranged for his beating, and after a few days, Voltaire was able to negotiate his exile to England in 1726.

During the course of his nearly three-year visit to this strange land, Voltaire would discover a socioeconomic system that was much more liberal than in France. Upon his return in 1733, Voltaire’s Letters Concerning the English Nation were published, twenty four letters in all, first in English and then French, and was quickly quashed by French authorities.

While French snobbery dismissed England as a nation of shopkeepers, Upward Mobility was possible there, “You hear no talk in this country of high, middle, and low justice, nor of the hunting the property of a citizen who himself has not the liberty,” Religious Tolerance was more prevalent – “This is the country of sects. An Englishman, as a freeman, goes to Heaven by whatever road he pleases,” and the promise of Capitalism was respected, “The merchant justly proud compares himself not without some reason, to a Roman citizen.” Oddly enough, a Google search for Voltaire’s reviews of English cuisine is spartan.

However, Oxford University professor Nicholas Cronk discovered letters written in English by Voltaire and reports,

He came to England as a relatively unknown poet. While here, he was exposed to ideas of English writers and later took empiricism back to the continent. They show how Voltaire’s close interaction with the English aristocracy exposed him to Enlightenment ideas.

As Libertarian historian Wendy McElroy explains, “This difference in attitude was a large factor in explaining the extraordinary rise of the English middle class, their wealth deriving from trade.”

The Letters and Laws of Poetic Justice

The quality of Voltaire’s writing made him one of the easiest to read among great writers, and his subjects included the greatest minds of the Enlightenment – John Locke, Lord Francis Bacon, and Sir Isaac Newton. As historian Jay Winik writes, “He hated bigotry, intolerance, and superstition, yet he was less concerned with personal liberty. Thus, he was an ardent admirer of enlightened rulers.”

The “common good” was Voltaire’s ideal, not the individual. To him, “Aristotle was unintelligible,” he denied Locke’s blank slate of innate ideas, and believed that all great inventions and discoveries were merely accidents. He was also a close acquaintance of the Prussian King Frederick the Great, and inspired the short-lived “Enlightened Despotism” of Russia’s Catherine the Great. Yet McElroy asserts that Voltaire’s insight on the economic way of the English (what would become known as Adam Smith‘s “we expect our dinner from their regard to their own interest.”)

Was nothing short of revolutionary. It reversed the accepted policies on how to create a harmonious society. Traditionally, nations enforce a system of values to ensure peace. Voltaire argued the opposite. Diversity and freedom created a thriving and peaceful society.

As Winik continues, “In the end, he reflected the temper of the times. Even in his final days, Voltaire relished civilization in every form. In 1778, one month prior to his death, Voltaire embraced Benjamin Franklin. Here were two of history’s great bons vivants, one of the Old World, one of the New, one a patriarch of Europe, one a republican from America. Franklin was then the most famous American in the world, Voltaire, who had spanned the age of classicism right up to the revolutionary era, was the most famous man of letters in all of Europe. America’s John Adams was there to witness the spectacle.”

The event was recorded by America’s Adams and France’s Condorcet as “Solon embraced Sophocles,” (two classical Greek philosophers, one of letters and one of laws). It was the passing of the torch of Poetic Justice from the 17th century’s Age of Reason to the 19th century’s Artistic, Scientific, and Economic explosion of human flourishing.

A Newly Independent Britain Should Follow The Singapore Model To Become Rich.

December 30, 2019/in Articles /by Hunter Hastings (Republished)

Imperial nostalgia leads Europeans to adopt the prejudice that the prosperity of a civilization depends on its ability to transform itself into a vast empire. Hence the anxious atmosphere that reigns over the United Kingdom, which has been trying for too many months to implement the exit from the European bloc decided in the referendum of June 23, 2016. Is the cult of political gigantism justified?

The history of Singapore proves the opposite.

At the end of the Second World War, Singapore was cornered as the British regained control of the island after losing it to the Japanese. Political circumstances led the British state to grant Singapore broad autonomy in 1958. The Popular Action Party (PAP) campaigned, however, to complete Singapore’s independence from the United Kingdom by joining Malaysia, reputed to be closer culturally. In 1959, the PAP won the election.

But the PAP’s victory panicked the business community. Its political elites were suspected of being too close to the socialists. Lee Kwan Yew’s rhetoric did not help matters, as it was imbued with anticapitalism. Singapore suffered a capital flight to Malaysia. This leak paradoxically reinforced the idea that a merger of the two countries would be in the interest of the former. After much political and social unrest, Singapore officially became a member of Malaysia on September 16, 1963.

However, the merger would not last long. Ethnic conflicts and politico-ideological differences (especially in terms of foreign trade) revealed a certain political incompatibility. Malaysia opted for the expulsion of Singapore, which took place on August 9, 1965.

Figures 1 and 2 allow us to grasp the demographic and economic situation of Singapore and to compare it with that Malaysia and the former British colonial metropole a year after independence was formalized.

Figure 1: Demography of Singapore, Malaysia, and the United Kingdom in 1966

Figure 2: GDP per Capita of Singapore, Malaysia, and the United Kingdom in 1966

At the time, few commentators bet on Singapore’s success. Imperial passions led to opposition to the idea that a city like Singapore could prosper in a globalized world. After all, it is a small territory devoid of natural resources. But fifty years later, the verdict is clear: not only has Singapore widened its wealth gap with Malaysia, but its GDP per capita has become twice that of the United Kingdom. It seems that demographic weight, the size of a country, and the presence of “natural resources” are not decisive factors for prosperity.

Figure 3: Demography of Singapore, Malaysia, and the United Kingdom in 2016

Figure 4: GDP per Capita of Singapore, Malaysia, and the United Kingdom in 2016

The Singaporean success is easily explained. The city has bet on fiscal attractiveness to attract foreign capital. Its influence is not limited to its immediate vicinity.

In 1972, Jean Abshire tells us, the United States was the source of 46% of foreign investment. But Singapore’s commercial policy, based on a free port, has contributed to making the city an essential place for world trade. Today Singapore is said to be one of the most liberal foreign-trade regimes thanks to this unilateral openness.

Can the Singaporean model be applied to the British case? Technically, nothing prohibits it. The detractors of this model are mainly on the political field. Unilateral free trade is said to face public-opinion and protectionist pressures from multiple interest groups, we are told. The argument is strange. We admit the effectiveness of a policy, but we give up implementing it because of electoral considerations. Another simple argument could be made against this defeatism: it may be up to experts and commentators to persuade public opinion that opening up trade is desirable.

Finally, Singapore’s history shows that anticapitalist hostilities are by no means insurmountable. Singapore’s adherence to a liberal business model is not so much the result of a cultural revolution as an instinctive realization that a small island cannot afford the luxury of self-sufficiency. For the British to succeed outside of the European Union, they will have to be both humble and daring.

Ferghane Azihari is a freelance journalist and policy analyst based in Paris. This article was originally published in French by Institut de Recherches Économiques et Fiscales, and republished at mises.org

There Should Be No Such Thing As “Economic Policy”.

October 12, 2019/in Articles /by Hunter Hastings

In the last few years, the topic of trade and trade policy has returned to center stage in the United States, thanks to the protectionist policy and rhetoric of Donald Trump. The result has been a reopening of many debates and also an apparent shift in public opinion, toward stronger support for the free trade position. What this public argument has also done is to reveal some very basic assumptions about economics and public policy.

These foundational assumptions are particularly widespread among professional economists but are also found among social and political commentators more generally. They reflect the way that economics as a discipline has developed over the last 30 to 40 years. The assumptions are about public policy in general, not just trade, and from the individualist or classical liberal standpoint are dangerous and misleading — in fact their becoming explicit because of the current debate over trade highlights the need to clarify language in these discussions and through that thought.

In the current argument about trade, Donald Trump’s protectionism and the trade war he has started with China have led to a strong reassertion of the free trade position. Most of this has taken the form of arguments that the United States should follow a free trade policy.

Closer examination of these positions should leave one feeling very uneasy. The implication is that free trade is a policy of the government. In other words, the assumption is that free trade only exists or comes about as the result of an active government policy. Very often the explicit thesis is that free trade is something created by and dependent upon complex and elaborate intergovernmental trade agreements, such as NAFTA or the proposed Transatlantic Trade and Investment Partnership (TTIP) and Trans-Pacific Partnership (TPP).

If you actually think about it, this is a bizarre position. Free trade simply means the absence of government action, leaving people free to exchange goods and services across national borders. To have free trade, governments do not have to do anything; they simply have to stop doing things, such as imposing duties and tariffs or imposing regulatory barriers. This shows we should become aware of the misleading language used in much public discussion and commentary, particularly in the business and financial press and in academic journals.

So-called “free trade agreements,” such as the ones mentioned, are not about free trade properly understood. They are about managed and regulated trade. A trade policy centered around them is not about free trade; it is about extending the scope of regulations beyond national borders through a process of harmonization. To put it simply and bluntly, if you are an individualist liberal you do not want the government to have a “free trade policy”; you do not want it to have any kind of policy in that area. You want it to simply leave trade alone.

This principle has wider application, however. It is not simply a point about trade. A common argument about economics in general is that countries and governments should pursue a “free market economic policy.” Sometimes this simply means a transitional policy, but more often it means a continuing policy and set of government actions.

Again, the often-explicit assumption is that a free market economy is something that is produced and sustained by a suite of actions taken by governments. In this view, governments bring about a market economy by having the correct regulatory regime and by creating institutions. More significantly those making this kind of argument seem to think that the action has to be ongoing; in other words, absent continued action by government you will not have a functioning market economy.

As in the more specific question of trade, this is not the true individualist position or understanding. From that perspective, you want the government to have no economic policy at all. You want it in other words to simply leave people alone, to let them contract and exchange freely with each other. This is the true meaning of the expression laissez-faire (let do or let be). Laissez-faire is not a policy; it is the absence of an economic policy.

There is one obvious qualification. What governments do have to do is to provide an environment of law that protects rights. Arguably they should also provide things such as money and a means of registering title and ownership. The purpose of these institutions however is not to create a market economy — that will happen by itself. Rather it is to ensure that certain kinds of actions that are predatory and rights-violating are not allowed and are sanctioned, with redress for those harmed by things such as force and fraud.

The position though is that economic life should not be the concern of government and therefore of public policy in the way that law and foreign affairs are. It should be a private matter. From that perspective, a “free market policy” is a contradictory notion.

One way to understand this is to think of another area of human life. That is religion. Today, if you asked most people whether religious belief and observance should be a matter for politics and whether the government should have a religious policy and, if so, what it should be, they would look at you as though you had grown an extra head. Until relatively recently though, they would not have been surprised. In almost all societies, religion was seen as being perhaps the most quintessentially public matter and regulating and governing it was the central activity of the state along with warfare.

This was true in Imperial China, ancient Rome, and medieval and Renaissance Europe, to give just three examples. Upholding the true religion and making sure that rituals and public observance were carried out in the correct way were some of the most important things rulers did, not least in their own eyes. Sometimes there was a policy of toleration, with several faiths allowed to coexist. The key word here though is “allowed.” Religion and religious observance were still a matter of public policy, and toleration was simply one of the policy options.

Today religion is thought to be a purely private matter that does not come within the purview of politics. The practice is still subject to law; so a religion that practiced human sacrifice would not last long and beliefs and practices that lead to things such as denial of medical care to minors are overruled, but otherwise governments simply do not concern themselves with religious matters: there is no Department of Religious Affairs, and we do not have passionate op-ed debates over what the administration’s religious policy should be.

People who think there should be a “free market economic policy” are like those who, while accepting that government had a responsibility for and ultimate control over religion, advocated a policy of toleration. The point is that in both cases, the default position is that of a politically controlled and regulated aspect of life, with the option of relaxing the controls and giving the appearance (and in practical terms the reality) of greater liberty.

The underlying reality however remains that this area of life (economic life or religion) is something that government can and should be concerned with and can therefore act on to a greater or lesser degree as seems proper. So, government control remains the default position. This also means that the free exercise of religion and free economic exchange and production are both things that exist only by the grace of political power. Even more dramatically it means that power and its exercise, in the shape of a religious or economic policy, is needed to bring about a free economy or a state of religious liberty.

Why though are so many economists attracted to this way of thinking, including so many of those who see themselves as supporters of free markets? We no longer see the corresponding phenomenon of theologians who see themselves as advocates of a particular religious policy (there are a hardy few, but they are exceptions).

The explanation lies in the way the profession of economics has come to see itself since the 1930s or even earlier (some would argue from the very start, but that is much more debatable). Many economists do not see themselves simply as scholars who study and try to understand how economic life and exchange work, in the way that natural scientists study and observe the physical world. Instead they see themselves as technocratic experts whose task and role is to advise the sovereign power as to the best and most efficient way of realizing its economic goals (such as greater prosperity, full employment, economic growth).

They are not alone in this; doctors and medical scientists also increasingly see themselves in this way. An interesting contrast is between sociologists, who would like to have the expert status of economists, and epidemiologists, who in general do not. As a result, epidemiologists do still focus mainly on their academic role, of understanding human social interaction.

What too many contemporary economists do not consider is the question of whether the sovereign should have goals (and hence policies) in the economic area of human life. To assume that it does, and that their job is to use their understanding of economic life to come up with diagnoses and prescriptions for the rulers, is to concede the fundamental point.

Instead, the real point that this is none of the rulers’ business and they should simply leave people alone to get on with things and focus on other matters. The classical liberal insight and position is that governments should not have positive goals (such as national greatness or social equality or greater wealth). They should simply do the negative task of protecting rights and leave human beings to do what they want within that framework. You do not want the government to have an economic policy, even a free market one: you should want it to let people be.

Dr Steven Davies, a Senior Fellow at AIER, is the Head of Education at the IEA.

Do We Fear That Innovation From China Will Hurt America? Heck No! Let’s Hope They Find The Cure For Cancer.

May 2, 2019/in Articles /by Hunter Hastings

In its March 25th edition, the New York Times estimated that more than 1.7 million people were given a cancer diagnosis last year. Think about that for a minute.

Think about the agony that fathers and mothers suffered in hearing the bad news, not to mention how excruciating it must have been for some who had to relay the bad news to worshipful children. All of this leaves out the brutality of being sick in the first place, the sleepless nights, the physical pain, the emotions, etc.

So let’s ask a simple question. What if Chinese scientists come up with a cure for cancer? Will Americans shun the cure for it somehow signaling “the fading of American pre-eminence on the world stage”? The previous question is rhetorical, but the words are real. They’re the musings of University of Pennsylvania academics Ezekiel Emanuel, Amy Gadsden and Scott Moore.

The Penn trio view “China” as a threat in consideration of the “research areas that will determine military and economic superiority in the coming decades.” That those who can predict the source of future economic growth are generally billionaires in the investment world doesn’t seem to concern these rather self-serious professor types, but that’s a digression. For now, their so-called solution so that the U.S. “can compete and win in the century ahead” is for the U.S. to “meet strength with strength, and the best way to do that is to renew a longstanding American advantage: innovation.” As readers can probably imagine, the financial fix for the alleged Chinese threat is more government spending on technology research. They believe $66.5 billion isn’t enough; that the feds need to increase the previous number by many multiples.

Actually, the federal budget for technology research is $66.5 billion too high, but that too is a digression. For now, let’s first consider this needless fear of “China” causing the U.S. to fade. It’s a laugh line.

Again, would anyone at death’s door due to cancer really care where the cure came from, and in particular with the U.S.’s future prominence in mind? Let’s be serious. To quote Deng Xiaoping, “it doesn’t matter whether the cat is black or white, so long as it catches mice.”

The simple truth is that the origin of an innovation doesn’t matter one bit. What matters is the advance, along with the profit motive that would precede an advance. No one developing that which will make us more productive (5G) or healthier (a dreamed for cancer cure) would limit its use. Nor could anyone. Particularly with products, there’s no accounting for their final destination. Assuming yet again a cancer cure developed in China, short of its creators literally hiding the advance from all would-be buyers, it would eventually reach desperate Americans. And save lives.

Would such a development cause the U.S. to fade? Certainly not. Humans are the drivers of progress, so imagine if cancer deaths kept more humans on this earth? And in a country like the United States where free minds so often prosper. With one global problem having been solved, the living Americans could focus their live minds on new problems to fix, or technologies to improve on. Chinese achievement won’t push the U.S. down as much as the U.S. isn’t nearly as prosperous as it should be precisely because the Chinese weren’t innovating for so long.

Interesting here is that billionaire Patrick Soon-Shiong became a billionaire largely due to his development of a drug (Abraxane) that gives those suffering from Pancreatic cancer a fighting chance. Soon-Shiong is an American citizen based in Los Angeles, he was born in South Africa, but he’s the son of Chinese parents. Are we Americans shrunken because someone of Chinese origin developed Abraxane? Would the American users of it cease doing so if it had been created in Shanghai?

Implicit in the economically illiterate notion that location of innovation matters is that we’re somehow weakened when it doesn’t happen near us. But when trade is free, it’s as though all giant leaps take place next door, regardless of where they’re conceived. Most of us don’t live in Seattle or Cupertino, but we benefit from the genius of Amazon and Apple as though we do. Why would progress made in China make any difference?

As for the call for more federal spending by Ezekiel, Gadsden and Moore on “innovation,” can they really be so naïve? Missed by them is that there’s no such thing as federal investment. Figure that the wealth which enables federal largess was first created in the private sector (if anyone doubts this, just consider why Haiti’s national budget is so small relative to the U.S.’s $4.7 trillion annual outlays), and all researchers in federal employ (or reliant on federal funds) who seek answers used to not be in government.

The crucial difference between “federal” or “public” investment and private investment is that market signals govern the latter, and don’t the former. Basically bad ideas on the federal level can sometimes last forever in the figurative sense, while in the private sector bad ideas are quickly realized as profit-motivated investors cut off funds. Good. Failure that’s realized doesn’t suffocate progress as much as it’s a necessary ingredient of it.

Failure brings answers without which there can be no innovation. And what’s apparent is that the best and brightest of American companies are spending with abandon on tomorrow’s ideas despite being aware that many ideas will be expensive duds. As Andy Kessler recently put it in the same newspaper (Wall Street Journal) in which Emanuel, Gadsden and Moore placed their own monument to trite thinking, companies like Apple “spend more than $10 billion a year on research and development.”

The difference with Apple, along with relentless experimenters like Amazon, Facebook, Alphabet and Microsoft, is that they’re not so foolish as to presume to know what the future looks like. They’re not certain about the “research areas that will determine military and economic superiority in the coming decades,” and that’s why they’re spending tens of billions each year on new concepts. They experiment, and they learn from countless mistakes. Logic says to trust them, rather than academics eager to siphon precious resources out of the market-disciplined private sector, and into a public sector that isn’t required to abide the market truths so essential for progress.

So while history very much suggests that Ezekiel, Gadsden and Moore are naively parroting the same things said about “Japan” 20-30 years ago, that’s really not the point. The bigger one is that they’re not calling for innovation with their plea for more federal spending; rather they’re unwittingly seeking to hamstring it through waste of the resources without which there can be no innovation.

John Tamny is editor of RealClearMarkets, and Director of the Center for Economic Freedom at FreedomWorks.

The US Government Is Mugging Huawei Without Any Understanding Of The Simplest Principles Of Economics.

March 15, 2019/in Articles /by Hunter Hastings

Last December, American authorities asked Canadian officials to arrest Huawei CFO Meng Wanzhou. The Canadians complied, and that on its own should have readers a bit terrified. Now she will be extradited to the US for trial. At the time of arrest, Financial commentator Zachary Karabell observed that the arrest was “somewhat like the Chinese arresting the daughter of Steve Jobs if she had helped run Apple.”

So while officials in the Trump administration claim President Trump was unaware of the pending arrest when he had dinner recently with Chinese President Xi Jinping, let’s be serious. Of course Trump knew, or was soon to know. He would have had to know simply because the arrest itself was so outlandish, and so outside any reasonable norms.

And since the arrest was more than outre, it’s useful to state emphatically that Trump and the Administration he leads is playing with serious fire. Markets reflect this previous truth. Protectionism on its own is boneheaded, and runs counter to the interests of American workers and companies alike. Protectionism combined with the arrest of prominent business leaders in other countries is truly dangerous.

Channeling Karabell, imagine the arrest of a prominent U.S. business personage in China (think Apple’s Tim Cook, as an example), particularly given the present occupant of the White House. The Trump administration has crossed a serious line, and yes, the Trump administration should be blamed here. Something like this would never have happened without approval from the highest of the high.

Almost as bad as what the Trump administration plainly called for has been the reaction among Republicans who should know better. Normally reliable Nebraska Senator Ben Sasse told the New York Times that “Americans are grateful that our Canadian partners have arrested the chief financial officer of a giant Chinese telecom company for breaking U.S. sanctions against Iran.” So up in arms was Florida Senator Marco Rubio that he promised legislation meant to ban Chinese telecom companies in the U.S. More on Rubio’s desire to vandalize basic economics in a minute.

For now, it’s more than worthwhile to focus on Huawei’s alleged flouting of American law through its sale of telecom equipment (equipment that includes American-made components) to countries including Cuba, Iran, Sudan and Syria. This is what has some in the U.S. political class riled up, and it’s a loud reminder of just how microscopic is that same class’s understanding of economics.

To put is as plainly as possible, U.S. companies trade all the time with “Cuba, Iran, Sudan and Syria.” They just do so through intermediaries. To understand this simple truth, we need only return to the 1970s and the toothless Arab oil embargo “imposed” on the United States. History books tell us that Arab countries stopped selling us oil, but they did no such thing. “Arab oil” continued to flow into the United States; albeit via producers in countries not embargoed.

The above is how so-called U.S. trade controls should be understood. They’re utterly meaningless. So long as American companies are productive, and so long as there is demand from inside countries known to be enemies of the U.S., then U.S. companies will be trading with the enemy. They may not be breaking the law “directly,” but production itself is a signal of trade with everyone simply because there’s no accounting for the final destination of any good. In sports terms, while the San Antonio Spurs made a point to not trade all-world forward Kawhi Leonard to a Western Conference foe, they ultimately can’t block the Toronto Raptors from trading Leonard to one of their Western Conference rivals.

Looked at through the prism of Huawei, it’s presently the world’s #2 maker of smartphones, and is the global leader when it comes to telecom equipment. What this tells us is that persecution of the corporation for sales to enemies of the U.S. is for federal officials to make a distinction without a difference. Short of Huawei hoarding all of its production, its smartphones and telecom equipment will ultimately reach Iran et al for the prosaic reason that Huawei sells so much in the way of smartphones and telecom equipment. It can’t be repeated enough that there’s no accounting for the final destination of any good. Translating what is completely mindless, the federal government is ultimately persecuting Huawei for being successful.

Which brings us back to Rubio’s proposed legislation. On its own Washington’s blockage of Huawei is notable when we remember how U.S./China trade is framed stateside. Supposedly they block all of our companies from selling there, while we’re fully open to them. Not so with Huawei. One doesn’t find its phones at AT&T stores not because they’re not high quality, but because they’re illegal. The why behind the latter is really and truly suspect.

Huawei, a wildly highly successful telecom company can’t place its goods on U.S. shelves because it is viewed as a national security threat. The laughable argument offered up by members of the political class to defend the indefensible is that Huawei’s close ties to the Chinese government mean that American use of its phones and equipment imperil us because we could be spied upon. Oh dear….

The real threat here is U.S. telecoms that are close enough to our federal government such that they can convince federal officials to pursue always damaging protectionism. Luckily for U.S. smartphone makers (Apple sells 20% of its iPhones in China), the rules against our best and brightest in China aren’t so stringent.

But the main thing is that national security types are wrapping themselves in a false argument that the Chinese will spy on us through our phones. Ok, but what will they do? As President Trump’s endless Tweets about China remind us, we’re a huge market for Chinese companies. So, we’re supposed to believe the Chinese government will spy on us in order to war against the biggest market for companies close to that same Chinese government?

The whole Huawei story is a ridiculous one. And a protectionist one. And one rooted in flamboyant confusion about economics within the U.S. political class. But the worst thing about this story is how dangerous it is. When protectionism leads to arrests, it’s not unreasonable to assume that shooting could be next.

The above in mind, we’ve heard since Trump entered the White House that he’s surrounded himself with people who understand diplomacy and the importance of trade to world peace. It’s time for those people to stand up in the Administration, and to show a willingness to depart same unless sanity prevails. Because make no mistake about it, the arrest of Meng Wanzhou was truly insane. The pending trial more so.

John Tamny

John Tamny is editor of RealClearMarkets. His forthcoming book on current ideological trends will be published by the American Institute for Economic Research in 2019.

Trump’s Tariffs: A Practical Attempt To Alleviate A Pestilence Of Politics.

March 6, 2018/in Articles /by Hunter Hastings

There is a lot of ideological purity being bandied about recently in favor of “free trade”. It is spouted in righteous indignation on the subject of the Trump Administration’s recently announced intent to impose import tariffs on steel and aluminum imports. All of a sudden, the left-wing professoriate has discovered the virtues of free market economics. Or at least, they find an opportunity in virtue-signaling their opposition to Trump.

A Fine Theory.

Free trade is a theory. Historically, it was advanced by classical economists like David Ricardo and Adam Smith, who pointed out that schemes of tariffs and taxation and statutory import and export limitation were always aimed at furthering government aims and not at the betterment of the people who wanted to trade with their counterparts in foreign countries. In the never-ending battle between the entrepreneurs aiming to improve the quality of life of all economic citizens, and the government aiming to control the population and make sure no-one succeeded more than the government was prepared to allow, free trade became a loser.

Non-existent In Practice.

Today, there is no free trade. Zero. There is not a single trade that is not governed by legislation, bureaucratic rule making, taxes, tariffs or subsidies or political adjustments of some kind. No boat can sale, no plane can fly, no truck can deliver without political permission. Giant global bureaucracies like WTO, and regional ones like TPP and Nafta and the EU make sure that not a single transaction can be made without a specific permission within their rule making.

All of this political bureaucracy imposes costs of money and time delays. Entrepreneurs who want to import and export must research tariff and tax tables, employ their own compliance staff, file forms, undergo inspections, and submit reports about their activities, in addition to incorporating the actual taxes and tariffs into their costs, often acting as collectors for the government.

A Bureaucratic Tangle.

Why so much bureaucracy and cost? Not because of economics. From Ricardo and Smith, we know the economic benefits of free trade. The systemic strangulation of free exchange between countries is entirely driven by politicians. Politicians desire only two things: control over the free, imaginative and entrepreneurial activities of people, and a revenue stream that they can confiscate from the productive activities of others.

The result is a distorted and sclerotic tangle of unfree economic exchange, an unfathomable explosion of rules and regulations, a hampered global economy of constrained buyers and over-regulated sellers. The bureaucrats are happy because there are manifold opportunities for their enemies, the productive economic actors, to make mistakes, yielding unending opportunities for fines, penalties, “clarifications” (a bureaucratic favorite) and more rules.

A Small Bomb.

Along comes Trump and rolls a bomb into this building. A bomb is a vehicle for disruption. This particular bomb is a small one with limited explosive capacity. It could blow open a door, with the opportunity for some evil to exit or some good to enter. If a wall collapses, it opens up the chance of new and perhaps more open construction. If a beam falls, there might be the opportunity to eliminate entire stories of the twisted edifice.

Thinking Ahead.

Moreover, it is likely that Trump is better at systems thinking than the politicians and bureaucrats, for whom short termism is the dominant style. After he rolls in this bomb, will the EU or Canada or China retaliate? If so, that further exposes the façade of international co-operation and clearly underlines the bias of the system towards antagonism and confrontation. Such retaliation will open new pathways for Trump to renegotiate, expanding his options. What if the result is to start a meaningful discussion about how China illegally confiscates American companies’ intellectual property? Or about how Germany illegally favors BMW automobiles and Miele household appliances in its system of state-supported industries?

Tear Down This Trade Agreement.

Free trade is a perfectly viable theory, and it is nice to read about it in historical economics texts. We can all benefit from understanding the concept, because it helps us see how the politicians have permanently destroyed one of the purest mechanisms for collaborative human betterment. But don’t let’s tolerate screeching hypocritical distress over the use of a small explosive device to collapse the edifice of managed trade. It deserves to collapse.