Friday, March 09, 2018

Tariffs Much Bigger Than the Economy

All the focus on tariffs is on the economic argument.

Little focus is on the national security implications.

There is only one aluminum plant left in the USA that makes metal for fighter jets, a Century Aluminum (CENX) plant in Kentucky. This plant says it will hire invest with Trump's tariffs in place.

It goes well beyond the need for critical materials though. The mainstream economist/free trade ideology says GDP today is the be all and end all. They do not care about sovereignty, borders, culture, customs, tradition, rights, liberty, religion, or even long-term GDP. How to maximize GDP in the year 2100? I doubt it includes flooding a country with Third World immigrants today. Many economists who hate Trump and populism also treat the victory of populists as an independent event and not a consequence of the secondary and tertiary effects of free trade policy. They are focused solely on GDP and consider the entire globe as one economy. Globalists dominate economic debates.

The template for a nationalist economic policy is the Cold War. The Soviet Union traded with communist countries and some neutral, almost entirely Third World, countries. The United States and Western Europe traded with the capitalist nations. We probably would have avoided a war or two if we fully understood how the communist system was doomed without Western capital and expertise.

China was opened up as part of a strategy to defeat the Soviets. It worked, but now China is the greater threat. The West transferred expertise and capital to China, turning it into a modern economy. There are parts of China that are first-world and those parts have populations as large as some European countries. Even though some parts of China are wealthy, it is still a centrally planned economy. The main goal of the government is to maintain power. The communist party prints money, funnels it through communist party banks and into communist parties companies. Central planning is difficult in many industries, but easier in industries such as steel. China produces a lot of steel and dumps it on the world market. It also builds a lot of homes and offices because concrete buildings are a concrete form of GDP. Cities are built with no residents because throwing up a skyscraper uses a lot of cement, steel, copper and construction labor.

We don't know how China will behave in response to a new Cold War, but a reasonable assumption is that if China didn't open up the economy in response to a trade war, the economy would slowly bleed capital and efficiency over time. As it is, their current strategy for growth (One Belt One Road) looks much more like the old Soviet strategy than the Marshall Plan it is sometimes compared to. As in the Cold War, China is betting its future on Third World nations, with the assumption that it will be selling into Western economies. If the West isn't there to buy, China is stuck developing Third World shitholes with no future.

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