With all the debate about tariffs lately, people are digging into ideological foxholes. Perhaps no one digs an ideological foxhole better than Reason Magazine, but even other free marketeers like Sen. Rand Paul are jumping on the bandwagon to lambast tariffs. The general argument of the “no tariffs” crowd goes like this:
After WWII, the USA began reducing tariffs to really low levels.
After WWII, economic progress has improved faster than trend.
Therefore, free trade works (it led to economic progress better than trend).
While premise #1 is true, premise #2 is false, although if you buy into statist manipulation of language, you can believe it is true. An example of statist manipulation is to call an economy where government allocates one third of all resources and has over 180,000 pages of regulations a “free market.”
The USA once had a free market, but not at any time during the current millennium (not at any time after the year 2000). This means that you cannot rely on the premise that “We’re doing great lately!” as an argument for cutting tariffs.
That’s because we are not doing great lately. Not like we were before.
If you want to see great, then go back to the late 1800s, when output per person grew multiple percentage points per year. If you want to see great, then look before 1971, when there were 55 years without any electricity price inflation. The affordability of living standards grew and, every year, more Americans could live the American Dream.
A “rosy economics” tells you that everything is fine, that we still have a free market, and that most everyone is doing well. But it is a lie. We have been victims of a propaganda campaign. Here is what has really been going on during this latest millennium.
Blue squares are 40 years of good progress, even if it not as fast as the 1800s:
The personal consumption expenditures on durable goods was put into constant prices using the Social Security Average National Wage as an index of inflation — a measure that is closer to the true inflation rate than the official Consumer Price Index. After 2005, things went to hell for middle-income Americans.
Let’s not sugar coat it. Let’s take off the rose-colored glasses that statists gave us. After the Black Plague several hundred years ago, so many people died that the real wages went up. A reduced labor force meant more competition to hire people, so “employers” had to learn to economize more and pay more to their workers.
Skilled labor back then made so much “bank” that if you worked 7 days a week, you could literally buy 39 pounds of wheat every day from the wages of skilled labor and no days off. That was an impossible standard to beat back then. Only kings and barons did better than skilled labor. But what about now?
Do American workers — skilled and unskilled and also those not employed (all lumped together) and working 5 days a week instead of 7 days a week — beat that “bread wages” standard from hundreds of years ago?
39-lbs of wheat per day of labor?
If you divided up the total of all private sector wages earned to every single non-institutionalized US civilian, then we only barely beat that standard of daily wages worth 39-lbs of wheat per day, for every American (whether employed or not). Importantly, there is no improvement at all in this current millennium.
So let’s drop the facade that things have gone really well this millennium (after 2000). It plays into the hands of the Great-Reset’ers who intend to make us progressively more poor in a Malthusian end-game of haves vs. have-nots-but-we-will-be-happy. The sad truth is that current policies have not been working for most of America.
When debating abstract ideas like deadweight loss from imposing trade barriers on supposedly-rational utility maximizers, let’s take a step back and agree that current policies (policies which have included low tariffs) have not, as a whole, been working. This is likely a time when the perfect (an abstract ideal) is the enemy of the good.