Free Trade, Free Slaves

The United States owes its origin to the trade wars of early modern Europe but its success to the Industrial Revolution, which filled America with productive, largely self-sufficient people. The history of the United States is testimony that economic growth has not occurred uniformly around the world. Some nations and empires have risen, some have fallen; others have done both, while vet others have stagnated. Compare the Pacific Rim with sub-Saharan Africa, or the countries on either side of the Rio Grande. Not only the prosperity but the security and independence of communities have depended on their relationship to a turbulent economic world. This endless struggle is the subject of Pat Buchanan’s The Great Betrayal.

Buchanan’s fide refers to the irresponsible management of American policymakers who believe “free trade” will automatically allocate capital and other resources fairly and efficiently across the globe. Some commentators embrace this naive notion with a passion bordering on religious idolatry; others employ free trade rhetoric as a mask for their pursuit of power, while managing trade policy to their own benefit. Yet free trade has never been very persuasive on its merits. What Alexander Hamilton wrote over two centuries ago remains true today: “There are some who maintain that trade will regulate itself, [but] this is one of those speculative paradoxes . . . rejected by every man acquainted with commercial history.” Buchanan traces the effect of free trade not only on the United States but on Europe and Asia as well.

The “invisible hand” does not brandish the flag of any nation in particular; it is the responsibility of statesmen to devise economic policies that support national objectives against the ambitions of rivals. The abandonment of this duty by American policymakers, the switch from protectionism and internal improvement to “free trade” and interdependence, does not proceed solely from the New Deal and Franklin Roosevelt’s successors; its great impetus has come from the reorientation of finance and industrial capitalism. When corporations were national in character, they had a symbiotic relationship with government. Generally, whatever produced an increase in private wealth augmented national wealth as well. Firms used exports to supplement their dominance of the home market and directed foreign investment to secure raw materials and gain access to overseas markets, assuring that trade, indeed, followed the flag. Beginning in the 1970’s, however, this system was altered by the rise of the “global factory” directed by transnational firms spreading their operations across numerous countries: in the new economic era, maximizing a firm’s profits no longer means maximizing the wealth of any particular country. These transnational corporations are the power promoting the political shift from “protectionism” to “free trade”; they have even abandoned such words as “trade” and “exports” and speak instead of “integration,” implicitly rejecting the notion of separate national economies. Walter Wriston, former chairman of Citicorp Bank, has argued that since business no longer respects territory, sovereignty is of diminishing value. Buchanan quotes from Wriston’s book The Twilight of Sovereignty: “When a system of national economies linked by government-regulated trade is replaced . . . by an increasingly integrated global economy beyond the reach of national regulation, power changes hands.” Unfortunately, the new hands care nothing about America.

Production networks, joint ventures, and other business alliances no longer parallel geopolitical alliances as they once did. A century ago, the French government could support its national firms and investors in their development of Russia’s infrastructure within a system of alliances. Fifty years ago, the United States could do the same with the Marshall Plan and NATO. Today, American firms are lured to China, a strategic rival of the United States. Beijing then pressures American businesses to advocate appeasement policies to protect their investments, and so the flag is now expected to follow trade—even when that trade is manipulated by a foreign power.

Business today operates outside the bounds of the national community. Yet the duty of government remains what it has always been: to maximize the wealth, security, and well-being of its citizens. A permanent, reciprocal relationship between service and allegiance continues to exist. The nation-state has its roots in history, culture, and mutual security—interests far more comprehensive and essential than anything a private corporation can know or acknowledge. Indeed, while few things are as transient as a business deal or workplace loyalty, democracy strengthens national bonds by making the government directly responsible to citizens of the territorial state.

It does, that is, if democracy is allowed to work. Shutting Congress out of trade negotiations with executive agreements and “fast track” procedures has cleared the field for corporate domination. The transnational fill trade policy advisory committees. President Clinton’s first Undersecretary of Commerce for International Trade, Jeffrey Garten, acknowledges that “the executive branch depends almost entirely on business for technical information regarding trade negotiations.” A government having no independent capabilities will end up as the junior partner in any endeavors with transnationalists, who do have an agendum. No wonder talks are focused on broad regional or global pacts that give corporations maximum room to maneuver, rather than on bilateral negotiations to secure exclusive advantages for producers based in the United States.

Buchanan cites Wilhelm Röpke’s statement that “The market is not everything. It must find its place in a higher order of things. . . . It must be firmly contained within an all-embracing order of society.” Conservatives, who once revered Röpke, should also remember his fellow Austrian economic philosopher, Joseph Schumpeter, who warned that “the ledger and the cost calculation absorb and confine. . . . [The businessman] is ill equipped to face the problems, both domestic and international, that have normally to be faced by a country of any importance.” Even the largest corporations seem small by comparison with the greater American society and its economy. Yet their lobbies exert enormous power within the smaller society of the Washington Beltway: here is the Achilles’ heel of the American polity. That a few million dollars spread around between political campaigns, think tanks, and lobbyists can influence the leadership of a superpower with an eight trillion dollar economy should give pause to the most enthusiastic believer in representative government.

Buchanan’s policy prescriptions are meant to redirect economic activity from overseas to America. Given the magnitude of the task, they are actually quite modest. The core of his proposal is a 15 percent across-the-board revenue tariff on manufactured goods intended to give domestic producers a small advantage over foreign imports. This would be supplemented by a wage-equalization tariff imposed on products whose main competitive advantage comes from the use of cheap labor—an idea that goes back as far as Teddy Roosevelt. Though Buchanan’s program is being denounced by critics as “extreme,” the real problem is that it may not go far enough.

Robert Bartley of the Wall Street Journal attacks a straw man in asserting Buchanan’s tariffs to be “new taxes.” In fact, Buchanan plans to use the revenue gained from foreign imports to replace taxes levied on American wages and salaries. This strategy would provide a double incentive: with production overseas more heavily taxed than production in the United States, transnational firms would find encouragement to locate operations here. Buchanan wants to reverse the trend begun by Woodrow Wilson when he imposed the income tax while cutting tariffs. Indeed, every new trade agreement implemented by Congress requires higher domestic taxes to stay within the budget plan.

The new mobility of capital has nullified the argument that “protectionism” reduces competition. Companies can set up factories nearly anywhere. Buchanan’s program would not discriminate between competing firms: “Toyotas made here would compete with Fords made here, and Toyotas made in Mexico would compete with Fords made in Mexico.” Buchanan is in accord with Daniel Webster who said, “I am looking not for a law such as will benefit capitalists—they can take care of themselves—but for a law that shall induce capitalists to invest their capital in such a manner as to occupy and employ American labor.”

Foreign firms which develop a better product or process can still gain a competitive edge —thereby goading their American rivals to greater efforts of their own. Persuading foreign firms to locate in the United States will actually speed the dissemination of new technology faster than importing goods will—an insight other nations incorporated in their trade policies years ago. By contrast, competition based on cheap foreign labor may retard technological progress by discouraging necessary investment in research and development.

John O’Sullivan, former editor of National Review, has branded “post-nationalism” as “a religion of the New Class elites.” According to this creed, multiculturalism, transnational institutions, and the global economy have made nations and patriotism obsolete. “Republicans are tempted toward post-nationalism,” warns O’Sullivan, “because they feel dimly that it is implied by the logic of free trade.” O’Sullivan would like to break this tie, but “free trade,” embodying every flaw in the liberal doctrine, has been a central tenet of liberalism from the time of Voltaire and Kant to that of Wilson and Clinton. Buchanan addresses each of these flaws in turn and exposes them. His book is necessary reading for all those who want to conserve our sovereign United States.

        —William R. Hawkins

                                                      The Great Betrayal


“No site better captures yesterday’s America than Detroit, forge and furnace of the arsenal of democracy. Detroit is the burned-out case of American cities. The Empire of the Sun has its revenge. Japanese imports helped kill the city that built the weapons that destroyed the empire. Now grandsons of soldiers of the imperial army work at high-paying manufacturing jobs once held by the fathers of ten-dollar-an-hour retail clerks in Macomb County.

“But why blame the Japanese? We did it to ourselves. . . . It is not Japan’s fault, China’s fault, or Mexico’s fault that Middle America has been abandoned, that our manufacturing base has shriveled, that foreigners make the things Americans once made for themselves. It is our fault. Like rich and pampered children who never worked for their inheritance, we listened to cloistered academics peddling pet theories and squandered an estate that was the awe of mankind. As we noisily boast of America’s ‘leadership,’ tough-minded rivals laugh behind our backs and loot us blind on the road to the end of the American Century.” —Patrick J. Buchanan on the end of the American Century

Utopia Incorporated 

In The Great Betrayal, Pat Buchanan vividly recalls the genesis of his transformation from the Reaganite free-trader to prophet of protectionism. The scene is the James River Paper Mill in New Hampshire, in the depths of the 1991 recession: presidential candidate Buchanan, arriving to shake hands with the workers, learns that new layoffs have just been announced. “ As I walked the line, they said nothing. Then I extended my hand to a hard-looking worker about my own age who was staring at the plant floor. I grabbed his hand and told him who I was; he looked up, stared me in the eye, and said in an anguished voice: ‘Save our jobs!’” The incident haunted him for days, but “what could I do?” Then, like a ray of light through parted clouds, the answer came in the form of a news story in the Manchester Union Leader about plans being made by the U.S. Export-Import Bank to finance a new paper mill in Mexico. “What are we doing to our own people? I asked myself.”

A good question, but one having nothing to do with free trade versus protectionism. For the injustice is not that the paper mill owner is laying odd workers (one hopes that the author’s hostility to capitalism has not reached the point where he would dispute the owner’s right to hire and fire), but that American workers are being forced to subsidize their own competition. Buchanan’s anecdote points to one reason why the Ex-Im Bank should be abolished, without suggesting anything about the benefits of protectionism. Indeed, although his book ostensibly deals with economic issues, Buchanan admits that he is not concerned chiefly—or even primarily—with economics. “If there is a lesson central to this book,” he avers, “it is this: The economy is not the country, and the country comes first.” Forget about the accumulated insights of Bastiat, Mises, Hayek, and Rothbard; forget economic science, he bids us, and behold the Vision of the James River Paper Mill. Buchanan’s disdain for economics is one of the main themes of the book: “While an unfettered free market is the most efficient mechanism for distributing the good of a nation,” he writes, “there are higher values than efficiency.”

If the higher good Buchanan has in mind is the national well-being, it will not be served by building a tariff wall. The imposition of tariffs will not raise productivity or increase the general wealth, since trade barriers favor only certain producing interests and their employees at the expense of the rest of us. American Company X, selling computers at $2,000 apiece, must compete with Japanese Company Y, which sells computers of comparable quality for half that price. The lobbyist for Company X, threatening the loss of his workers’ jobs, demands a tariff. With the tariff passed, the owners of Company X are now part of a cartel enjoying monopoly prices, while its employees are also better off, for the time being at least: they are still employed, and at wage rates that compare favorably with the national average. Everyone else, however—buyers of computers in particular—is out of the $1,000 he might have saved had the tariff not been enacted. The effect of this $1,000 loss is dispersed and unseen, consisting of the purchases not made, the jobs not created, the resources not allocated to a particular economic area—these having been previously redistributed to owners and employees of Company X. If 10,000 jobs were “saved” by the tariff, then 10,000 jobs in other areas were lost. But the “saving” of Company X is a visible result, whereas the corresponding loss to other areas of the economy is invisible: thus the demagogic appeal of protectionism.

What of the “infant industries” argument, which holds that new industries cannot survive to maturity if left unprotected by a tariff wall? American consumers, forced to subsidize this privileged cartel, would still be out the difference between monopoly prices and free market rates. These young industries would survive, but at the price of diminished productivity and efficiency. Labor, land, and capital would be diverted away from their most efficacious uses to areas in which they are less efficient, producing in this way major structural distortions in the economy. In the end, even the owners and employees of Company X, caught up in the economic downturn, would lose out.

But this is just “theory,” Buchanan insists: experience tells a different story. Referring us to history, he claims that the greatest surges in American economic development occurred during the protectionist era, roughly 1865 to 1914. This period, however, was also a time untroubled by war, untouched by regulators, and unfamiliar with the social pathology characteristic of modern life. The coincidence of tariffs with general prosperity proves nothing.

While Buchanan advocates tariffs low enough as not to dry up revenue, one gets the distinct impression that he opposes international trade per se and would be happiest if it did not exist at all, preferring “self-sufficiency”—a goal which, in the end, seems more aesthetic than practical. Having quoted with approval Louis XIV’s finance minister, Jean Baptiste Colbert, who described trade as “a perpetual and peaceful war of wit and energy among the nations,” he opines: “in that war, free trade amounts to unilateral disarmament.” Yet trade is not combat but a voluntary contract in which values, not blows, are exchanged. It is the essence not of war but of peace; not mere theory, the giddy imaginings of “cloistered intellectuals,” but plain common sense. Consumers act in their own interest: this is axiomatic.

Consumer preferences must not be allowed to “shape the national destiny,” Buchanan declares. (Who, then, will shape that destiny: the workers at the James River Paper Mill—or its owners?) For him, consumption itself is morally questionable, a self-indulgence permissible only after a prolonged period of self-denial: “Before an athlete becomes a champion, he must exercise, train, discipline, and deny himself No athlete ever consumed his way to an Olympic medal.” And so the Buchananite program amounts to this: the American people must hunker down, pay monopoly prices to domestic producers, and adopt a stoic asceticism.

Buchanan claims free trade to be an “alien ideology,” protectionism being “America’s own invention.” Yet Alexander Hamilton—another of the author’s protectionist heroes—did not invent the so-called American System, which was not American at all but a European import. The system of state-protected industry reached its apogee in 17th-century France during the reign of Louis XIV, under the mercantilist dictatorship of Colbert. In the name of a policy that might be described as “France First,” Colbertisme lowered the standard of living of the French masses and retarded the development of French industry; under the pretext of preserving the linen, woolen, cloth, and silk industries, Colbert banned printed calicoes imported from India. To guard the privileges of the cartels and the guilds, he mobilized a centralized bureaucracy and sent it into the countryside to spy on consumers of this “alien” cotton textile. (In the next century, the development of innovative cotton textiles sparked the Industrial Revolution: Colbert’s trade blockade is one reason why England, not France, was the cradle of that revolution.)

“The classical liberal views economics from the standpoint of the individual,” writes Buchanan. “The Marxist sees things in terms of classes; the traditionalist has an organic view of society and subordinates economics to the nation.” But economics cannot be “subordinated.” The division of labor, the primacy of individuals as the sole economic actors, the necessity of trade (both foreign and domestic): these are not floating abstractions but economic facts rooted in natural law. To rebel against them is to be guilt)’ of that “utopianism” Buchanan supposes to be confined to the free trade camp.

Clearly, Pat Buchanan has reached a turning point. His early challenge to conservative orthodoxy in respect of the Gulf War and the “isolationist” implications of “America First” revised the modern conservative credo without abandoning it. This latest ideological excursion, however, takes him further afield and leaves him stranded and scrambling to discover a “nationalist Republican” heritage whose major gods are Hamilton, Lincoln, and Teddy Roosevelt—a pantheon not likely to appeal to his conservative followers. Longtime readers of this magazine have been treated to sympathetic accounts of regionalist and secessionist movements, from Italy’s Northern League to the League of the South in the United States. Both are disapprovingly singled out by Buchanan as symptoms of the “deconstruction” of the modern nation-state. On the evidence of this book, the most talented and dynamic leader of the American right is in transition. Where he will go from here is hard to say. Admirers, though—and I count myself among them—ought not to despair: his next book, reportedly on American foreign policy, may yet fulfill the author’s promise as the standard bearer of the Old Right in the new GOP.

        —Justin Raimondo

                                                      The Great Betrayal


Do we Americans believe in . . . a world of open borders and untrammeled trade, where nations fade away in the brilliant dawn of a new world order? Or do we hold to the grand old ideas of sovereignty and independence for which our Founding Fathers risked their lives, fortunes, and sacred honor? If s time to choose. Nor can the decision be put off much longer, or it will be made by default. Not to decide is to decide. . . . Unless we intervene to halt this momentum and recapture our country, America will wake up like Gulliver, tied down forever, our destiny no longer ours to decide.” —Patrick J. Buchanan on choosing our destiny.


[The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy, by Patrick J. Buchanan (New York: Little, Brown) 376 pp., $22.95]