A new year has begun and we are five days removed from the inauguration of a new American President, who has promised a paradigm shift in economic logic. I know, I know, my mind is not there either, but if not now, when? The change in the economic foundational ideology was already remarkable during the first Trump administration, although it never became a topic of wide spread public debate. This is, because it differs so basic from the free market fundamentalism that has been the dominating ideology in the last fifty years. But President Trump has made it clear he means to start changing that logic from the start of his office. Yesterday he announced the brand new institution of the External Revenue Service (as opposed to the Inland Revenue Service). Trump means to run his administration, not solely on taxes payable by the people, but also in large part by tariffs, payable by foreign exporters wishing to sell their goods in the enormous market that is the USA.
John Gardner: "You Should Have To Pay To Have Access To The World's Greatest Market".
John Gardner has written a book on the issue. We know as yet little about its contents, but is will be remarkable, that's for sure.
The import of cheap goods from primarily China under the Chinese Communist Party rule seemed like a good, liberal idea at first. Until you start looking at the downsides, which are not immediately apparent.
It starts with the fact that goods produced by slave labor abroad will result in the loss of manufacturing capacity at home.
And consumers become dependent on foreign supply chains, which can become a matter of national security, as is the case with medicines from China. Which, despite the known risks, is still going on today.
It is not just the loss of jobs and businesses that are involved. What very few people appreciate is the loss of skills in individual man power and know-how in manufacturing. This downside is very much under estimated.
Free market globalists are quick to paper over this issue with their advice, "go learn how to code!" Moving on to other sectors is one thing, but the generational loss of essential skills -- possibly forever -- is not a matter that should be taken lightly.
Many people seem to have forgotten this, but well into the 20th century new nation states, like the US, ran their entire government on tariffs.
Taxes as we know them today are a fairly recent invention and a feature of the 'mixed economies' of Europe, the so-called Rheinland model that socialist democrats are so keen on.
The mixed economy combines free market capitalism with socialism, and is characterized by big government, extensive social services and high taxes. But this was not always the norm.
Not every country is the same. It is evident that the US economy is many times larger than, say Greece. I am old enough to remember the good old days, before Greece became a member of the precursor of what is now the European Union.
Modern Greece was one of those newly minted nation states that came about as the result of a revolutionary war of independence, much like the US and not very much later.
Historically Greece had high tariffs and low (or no) taxes like the US. But lacked many basic goods which we now think of as staples no modern man can live without, especially in climates like Greece with hot summers and cold winters.
A prerequisite for a tariff based country is an economic climate in which starting a production business can be done fast and easy, so that essential goods and commodities are cheaply and easily accessible to consumers.
A second condition is a consumer market that is attractive for foreign producers to want to export to. Hurdle number one there is a small market, which can't be helped, except making more babies which is necessary anyways as the nation is becoming extinct.
For reasons we have seen widespread all over the Western world, the import of foreign labor is hardly a solution. Let alone the social and cultural problems that ensue from this globalist racket, we have seen lately that one of the main problems is the depressing effect this has on the wages and the labor market (
link).
Now, I am not an economist. But let me point out that the very idea that governments can spend like drunken sailors without this having any affects on the economy, like debt and inflation, has been thought up by postmodern economists.
One in particular: the French super PomO, Thomas Piketty. As I said, I am not an economist, but with Margaret Thatcher I would say, as a house wife, I advice against it. But when Piketty said, jump, they all jumped.
Opportunistic liberal politicians of various hue took their chances with the new found wisdom offered by Piiketty and have been printing money on unimaginable scales in the last few years. Debt is going through the roof and inflation is rampant.
It is still to be seen if Scott Bessent, President Trump's Treasury Secretary of choice, will be able to bring Joe Biden's and Janet Yellen's economy back under control. Bessent is facing huge problems.
Bessent is up for his Senate confirmation hearing, some time tomorrow.
As you might expect, economists depending on where they stand, are at odds with each other, who is ultimately paying tariffs. Free market globalists are convinced that tariffs add to the consumer price, simply adding to the cost.
No, this is a fallacy, say tariff advocates. Now I can't find the video anymore in which this was explained. And this stuff is fairly technical. So let's leave those details aside for some other time.
Well, these are important things to ponder while we are preparing for the paradigm shift that is coming in the next few years. If the new (or old) approach becomes successful, we are about to enter an exciting new phase in economic development that will put paid to rampant, free market globalism.
Watch out for the buzz word, 'protectionism'. This is how the opponents of tariffs will characterize President Trump's economic philosophy. But actually protectionism is closing borders to all foreign made goods and that is not what we are talking about here.
Comments
Post a Comment