Enjoyed this: "You can have an independent nation, or you can be reliant on another country (or countries) for the necessities of life."
Such a truism is particularly poignant when it comes to food security. It is rather distressing to see European governments go about destroying farming all over the continent for supposedly "Green" reasons only to be supporting deracinated EU Commissars in their deals to import food from South America instead. Absolutely deranged policies given how unstable and volatile the world is.
Absolutely. Particularly given how much food is required for modern populations. It’s insane seeing so many countries prioritize solar panels, etc. over actual farmland
"...different economic systems are appropriate depending upon a nation’s state of development, and ideologically committing to one or another is a recipe for disaster."
Right off the bat, the headline calls free trade a "suicide pact." Seems ideological to me.
"...it is often free trade rather than protection that is the death knell of a nation’s productive capability, and thus its sovereignty and political independence."
This is just flatly wrong: countries that embrace trade tend to prosper. Countries that reject trade and strive for self-reliance falter. We need look no further than North Korea, Cuba, or Ming Dynasty China for examples of how this worked historically.
"...if the free trade equation is one-sided, or one party is more industrialized than the other, free trade saps the strength of the weaker party."
And yet those opposed to free trade bemoan NAFTA for "taking jobs" from Americans and "sending them" to Mexico. Which party was more industrialized in that transaction?
"Under the so-called American System that Henry Clay did so much to develop and promote, the nascent American republic used high tariffs on non-luxury goods to develop American manufacturing capabilities to the point where we were an industrial power, and the revenue from those tariffs was invested in national infrastructure that made industry all the more profitable. By the end of the 20th century, America was an independent industrial power of the List mold, and at that one which greatly exceeded Britain in wealth and industrial capability."
I assume this is a typo and you meant the 19th century, not the 20th. This is the Gilded Age argument that ignores a troubling reality: sectors that were NOT tariff-protected grew the fastest.
"Then came the 20th century, in which East and South Asia, with the slight exception of Hong Kong, self-consciously followed List’s recommendations nearly to the letter and were hugely successful because of it. Most notably, China under Deng Xiaoping, South Korea, Lee Kuan Yew’s Singapore, post-WW2 Japan, and Taiwan all used the Listian combination of steep tariffs on industrial goods, near-zero tariffs on imported foodstuffs and raw materials, intentionally pro-industry policy, and infrastructure development. They also all became hugely successful in the 1980s and 90s when those policies kicked into high gear."
Now we are wholesale rewriting history. China began to develop in the 1980s only AFTER cutting tariffs and embracing trade. If protectionism worked, then China's boom should have begun in the 1950s or 60s. Similarly, Korea's took off as it CUT tariffs in the 1970s and 80s. Under the high-tariff regime of the 1950s, Korea was poorer than Sub-Saharan Africa. And Singapore!? Singapore was a free port: free trade was the default! Even after independence, tariffs were very low. This is not an example of the success of protectionism; it's an indictment of it.
Furthermore, List also wrote very plainly that small countries could NOT adopt protection: "A nation without extensive territory and of otherwise limited resources, which does not control the mouths of its rivers, or which has not suitable boundaries, cannot resort to the protective system, or at least cannot employ it with full success. It must be first enlarged by way of conquest or negotiation.”
So how do you square this with the supposed success of Singapore, Korea, or even Japan? All are small countries with few resources, which you claim protected their way to prosperity?
"Meanwhile, other nations reneged on their former commitment to Listian policies. England, as I have written about before, abandoned its empire-building Navigation Acts and prosperity-critical industrial tariffs for a policy of Adam Smith-style free trade. The result was disaster; by the time the Asian Tigers were rocketing upwards, it was essentially a non-entity because of decades of being hollowed out by free trade policies that saw its industries die, its farms run fallow, its infrastructure degrade, and its merchant marine whither away."
What a minute, didn't you just write that the Asian Tigers had "near-zero tariffs on imported foodstuffs and raw materials"? Now we are bemoaning Britain’s failure to protect its farms? Which is it?
"From a historical perspective, List’s work is convincing. Broadly, those countries that embraced recommendations of the sort he wrote about were economically successful and politically sovereign because of it."
It's not convincing. The poorest countries of the world embrace tariffs and protection; the rich countries do not.
"As List sees it, only one so provincial as a small shopkeeper would cite the (temporary) lower cost of foreign goods over domestically produced ones as anything close to a virtue. Anyone less myopic would see national independence, only obtainable through industry, as a positive and understand that foreign producers would raise prices as soon as domestic factories went out of business."
No. Protectionism often breeds dependence by making domestic supply chains weak. As I wrote: In 2022, for example, the US faced an extreme shortage of baby formula. The immediate cause was a suspected bacterial contamination at a major producer, which forced a temporary plant closure. The true cause, however, was a protected supply chain; imported baby formula faced high tariffs and red tape, which allowed the US formula market to be controlled by just three suppliers. When panic buying set in, the domestic supply chain couldn’t adapt, and store shelves emptied. The shortages were only resolved by importing formula en masse from Europe aboard military cargo jets.
To witness firsthand the effects of protectionism, we could look at the state of two industries that are perhaps the most protected under the guise of “national security” in the US: steel and shipbuilding. For decades, the government peppered these sectors with protective tariffs, subsidies, “buy American” requirements, etc. As a consequence, however, their inefficiency has become so severe that the United States now fears that it cannot produce the wares it needs in the event of a war. So, it is looking to outsource shipbuilding and steel-making to Korean and Japanese companies instead. In other words, efforts to ensure supply-chain independence have bred a desperate dependence on allies instead.
"Never mind that America is currently reliant on China for rare earth minerals..."
But you explicitly wrote above that we should not tariff raw materials. So, which is it?
"Our chance, under Trump, to re-embrace Listian economics in the form of tariffs and domestic investment is our chance to escape that path to perdition and instead remain on the path less taken, one of temporary discomfort for long-term gain, one that leads us back to independence."
I'm fuzzy on this; is this the same Trump administration that imposed taxes on inputs like steel, copper, and aluminum, which have only raised prices for American manufacturers....driving downstream producers out of business? Is this the same Trump administration that also taxed foodstuffs like coffee, bananas, and tomatoes, against List's advice? Is it the same administration that is now considering taxing flutes and trombones, because they are a "national security threat", but also begging Congress to allow Korean shipyards to build Naval ships because the long-coddled American shipbuilding industry can no longer lay a keel?
Excellent article.
Thanks! I appreciate it
Thank you for this summary.
Thanks for reading!
Enjoyed this: "You can have an independent nation, or you can be reliant on another country (or countries) for the necessities of life."
Such a truism is particularly poignant when it comes to food security. It is rather distressing to see European governments go about destroying farming all over the continent for supposedly "Green" reasons only to be supporting deracinated EU Commissars in their deals to import food from South America instead. Absolutely deranged policies given how unstable and volatile the world is.
I briefly delve into this situation here: https://www.thomasfazi.com/p/what-irelands-great-famine-can-teach
Absolutely. Particularly given how much food is required for modern populations. It’s insane seeing so many countries prioritize solar panels, etc. over actual farmland
👍
Thanks, Suzie!
Oh boy. A lot to unpack and unravel on this one.
"...different economic systems are appropriate depending upon a nation’s state of development, and ideologically committing to one or another is a recipe for disaster."
Right off the bat, the headline calls free trade a "suicide pact." Seems ideological to me.
"...it is often free trade rather than protection that is the death knell of a nation’s productive capability, and thus its sovereignty and political independence."
This is just flatly wrong: countries that embrace trade tend to prosper. Countries that reject trade and strive for self-reliance falter. We need look no further than North Korea, Cuba, or Ming Dynasty China for examples of how this worked historically.
"...if the free trade equation is one-sided, or one party is more industrialized than the other, free trade saps the strength of the weaker party."
And yet those opposed to free trade bemoan NAFTA for "taking jobs" from Americans and "sending them" to Mexico. Which party was more industrialized in that transaction?
"Under the so-called American System that Henry Clay did so much to develop and promote, the nascent American republic used high tariffs on non-luxury goods to develop American manufacturing capabilities to the point where we were an industrial power, and the revenue from those tariffs was invested in national infrastructure that made industry all the more profitable. By the end of the 20th century, America was an independent industrial power of the List mold, and at that one which greatly exceeded Britain in wealth and industrial capability."
I assume this is a typo and you meant the 19th century, not the 20th. This is the Gilded Age argument that ignores a troubling reality: sectors that were NOT tariff-protected grew the fastest.
"Then came the 20th century, in which East and South Asia, with the slight exception of Hong Kong, self-consciously followed List’s recommendations nearly to the letter and were hugely successful because of it. Most notably, China under Deng Xiaoping, South Korea, Lee Kuan Yew’s Singapore, post-WW2 Japan, and Taiwan all used the Listian combination of steep tariffs on industrial goods, near-zero tariffs on imported foodstuffs and raw materials, intentionally pro-industry policy, and infrastructure development. They also all became hugely successful in the 1980s and 90s when those policies kicked into high gear."
Now we are wholesale rewriting history. China began to develop in the 1980s only AFTER cutting tariffs and embracing trade. If protectionism worked, then China's boom should have begun in the 1950s or 60s. Similarly, Korea's took off as it CUT tariffs in the 1970s and 80s. Under the high-tariff regime of the 1950s, Korea was poorer than Sub-Saharan Africa. And Singapore!? Singapore was a free port: free trade was the default! Even after independence, tariffs were very low. This is not an example of the success of protectionism; it's an indictment of it.
Furthermore, List also wrote very plainly that small countries could NOT adopt protection: "A nation without extensive territory and of otherwise limited resources, which does not control the mouths of its rivers, or which has not suitable boundaries, cannot resort to the protective system, or at least cannot employ it with full success. It must be first enlarged by way of conquest or negotiation.”
So how do you square this with the supposed success of Singapore, Korea, or even Japan? All are small countries with few resources, which you claim protected their way to prosperity?
"Meanwhile, other nations reneged on their former commitment to Listian policies. England, as I have written about before, abandoned its empire-building Navigation Acts and prosperity-critical industrial tariffs for a policy of Adam Smith-style free trade. The result was disaster; by the time the Asian Tigers were rocketing upwards, it was essentially a non-entity because of decades of being hollowed out by free trade policies that saw its industries die, its farms run fallow, its infrastructure degrade, and its merchant marine whither away."
What a minute, didn't you just write that the Asian Tigers had "near-zero tariffs on imported foodstuffs and raw materials"? Now we are bemoaning Britain’s failure to protect its farms? Which is it?
"From a historical perspective, List’s work is convincing. Broadly, those countries that embraced recommendations of the sort he wrote about were economically successful and politically sovereign because of it."
It's not convincing. The poorest countries of the world embrace tariffs and protection; the rich countries do not.
"As List sees it, only one so provincial as a small shopkeeper would cite the (temporary) lower cost of foreign goods over domestically produced ones as anything close to a virtue. Anyone less myopic would see national independence, only obtainable through industry, as a positive and understand that foreign producers would raise prices as soon as domestic factories went out of business."
No. Protectionism often breeds dependence by making domestic supply chains weak. As I wrote: In 2022, for example, the US faced an extreme shortage of baby formula. The immediate cause was a suspected bacterial contamination at a major producer, which forced a temporary plant closure. The true cause, however, was a protected supply chain; imported baby formula faced high tariffs and red tape, which allowed the US formula market to be controlled by just three suppliers. When panic buying set in, the domestic supply chain couldn’t adapt, and store shelves emptied. The shortages were only resolved by importing formula en masse from Europe aboard military cargo jets.
To witness firsthand the effects of protectionism, we could look at the state of two industries that are perhaps the most protected under the guise of “national security” in the US: steel and shipbuilding. For decades, the government peppered these sectors with protective tariffs, subsidies, “buy American” requirements, etc. As a consequence, however, their inefficiency has become so severe that the United States now fears that it cannot produce the wares it needs in the event of a war. So, it is looking to outsource shipbuilding and steel-making to Korean and Japanese companies instead. In other words, efforts to ensure supply-chain independence have bred a desperate dependence on allies instead.
"Never mind that America is currently reliant on China for rare earth minerals..."
But you explicitly wrote above that we should not tariff raw materials. So, which is it?
"Our chance, under Trump, to re-embrace Listian economics in the form of tariffs and domestic investment is our chance to escape that path to perdition and instead remain on the path less taken, one of temporary discomfort for long-term gain, one that leads us back to independence."
I'm fuzzy on this; is this the same Trump administration that imposed taxes on inputs like steel, copper, and aluminum, which have only raised prices for American manufacturers....driving downstream producers out of business? Is this the same Trump administration that also taxed foodstuffs like coffee, bananas, and tomatoes, against List's advice? Is it the same administration that is now considering taxing flutes and trombones, because they are a "national security threat", but also begging Congress to allow Korean shipyards to build Naval ships because the long-coddled American shipbuilding industry can no longer lay a keel?