I recently heard Brian Kilmeade on Fox and Friends comment to Mike Rowe that these new trade deals (coming from Trump) bring manufacturing jobs back to the United States, and therefore benefit the middle class. Aside from being patently false (forcing manufacturing jobs back to the United States does not benefit the middle class), this is one of the most ridiculous things I’ve ever heard.
This was accompanied by the comment that if you are in the manufacturing sector, you are likely to lose your job to automation, and this is supposed to be an insidious disaster in the making.
Milton Friedman often spoke of the contrast between the visible and the invisible. Kilmeade, who is obviously ignorant of basic economic principles, only focuses on the visible, namely, people who work in manufacturing. Trade deals that force manufacturing jobs to come back to the United States only benefit those in the manufacturing industries. They are highly visible, and their numbers are small. This kind of misguided artificial economic manipulation is harmful to the American economy in general, is invisible, and gets precisely zero attention in the media.
Foreign competition in the steel industry, for example, benefits the entire US economy by lowering prices for steel, which helps everyone, except the domestic steel industry that fails to compete. If the US steel industry is upset because foreign steel companies are undercutting their prices, they should start being more efficient and more competitive. If they don’t, they will suffer economic disadvantage, and they will have to lay off a large segment of their workforce to avoid going out of business.
That’s the way economics works, my friends. There’s only one (honest) way for your business to survive in a free market economy: competition. You either compete, or you don’t. It is dishonest and unethical to stay in business through political leverage from the government, which is called “protectionism.” Protectionism protects the few but harms the many.
But protectionism makes politicians look good to the public. This is because the public, like Kilmeade, is only looking at what is visible, namely, the industry the government is protecting at any given moment. Every time this happens, the entire country’s economy suffers significantly. This is because protectionism always stifles competition, which raises prices, which in turn is harmful to our economy. Far more jobs will be lost in the American economy in general than will be preserved in one specific industry that is being protected by ignorant and misguided politicians coddled by the owners of those protected corporations. The failure to understand this principle is one of President Trump’s most significant flaws.
We would do well to learn a fundamental and important lesson: there is no reason under the sun the United States must be the world leader in every industry across the board. If Japan can excel in steel production, let them. The US economy as a whole benefits from their superior efficiency in steel production. How? By paying lower prices for steel, which stimulates our economy 25 different ways to Sunday. This is not good news for US steel manufacturers, but they deserve minimal sympathy if they are unwilling or unable to compete. There may be some industries that just aren’t very successful in this country, and part of growing up is learning to cope with that reality. We participate in a global economy, whether we like it or not. But we should like it because foreign competition and free trade benefit everyone.
This stands in sharp contrast to the silly “Made In America!” slogan we hear so often. It takes its place right beside a twisted understanding of “America First” when it comes to who we buy our products and services from. There has even been a push in my state to only buy from local retailers and service providers accompanied by a “Keep the money in Colorado!” battle cry. The only people who think this is a worthwhile agenda are the ones who know nothing about how economics works. I know people who will spend more money on a product from a retailer in our own community rather than save money by buying from a larger conglomerate. They think this is a superior strategy that supports local business and sticks it to the mega-retailers who compete “unfairly” because they can deal in larger volumes. But this too is as silly as it is counterproductive. All it does is encourage the local business to continue to be inefficient. This is not commerce; it’s charity. Charity is a wonderful thing, but it should be directed toward those in poverty. It would be better to buy from the more efficient retailer and give the money you save to the poor. That makes sense. The previous strategy doesn’t.
I once saw a sign in a local shipping store that said when you buy from a large corporation; you help the CEO of that corporation buy another expensive yacht. But when you buy from a small local retailer, you are helping a mother take her kids to soccer practice, provide for the dental work they need, feed them more healthy food, and so on. This is pure bull-hockey. When you buy from a large corporation you help the CEO hire more people who desperately need jobs, and you increase the chances that the employees of that corporation can get that raise they need to take their kids to soccer practice, provide for the dental work they need, feed them more healthy food, and so on. This artificial disparity between people who work for large corporations and those who work for small local retailers is a study in absurdity. CEOs are paid exactly what supply and demand dictate—no more and no less. Thomas Sowell once said he could be the greediest man on the planet, and that wouldn’t raise his income by a single penny. If a CEO with his or her business expertise can save a corporation 100 million dollars per year, paying them 10 million dollars per year is a bargain. Anyone who wouldn’t spend a dime to save a dollar should go back to school.
Tulsi Gabbard, a Democrat presidential hopeful, blames the rising cost of education on the obscene salaries given to the administrators of our colleges and universities. This is another widespread myth based on ignorance. The reason education is so expensive is because the government subsidizes it. When the universities know their students will get financial aid from the government, what are they going to do? Raise the cost of tuition, of course. Why? Because they know they will get away with it. They see the government as a limitless fountain of cash. Government subsidies cause inflation, and it is no different in education. The same is true, by the way, of health care. Government subsidies and third-party payments are the cause of escalating health care costs. Government subsidies increase demand by artificially lowering costs to the consumer. Remember your basic supply-and-demand principles? When you lower consumer prices for a given good or service, more people will buy it because more people can afford it. If the cause of the lower price is efficiency and competition, you have a healthy economy. If the cause of the lower price is artificial due to government subsidies, you have inflation, not competition. The institutions of higher learning have no reason to be competitive as long as the government is subsidizing tuition, so tuition skyrockets and Democrats blame the wrong actors.
It should be noted, however, that government subsidies only produce their intended effect for a while. In other words, they may make college or health care affordable only temporarily. But the government has to increase tax rates to pay for the ever-increasing demand and cost, which in turn cripples the consumer’s ability to pay their part. Before long, what was designed to relieve the consumer’s responsibility in paying for the products and services the government is subsidizing is the very reason the consumer can no longer afford it because now they are paying more in taxes to feed the subsidies. And the prices for those subsidized products will still increase, despite the agenda to offset them through subsidies. Subsidies always cause inflation; there are no exceptions. This is because the companies that offer those products no longer have to resort to lowering their prices to stay in business since the government is artificially keeping them in business because it thinks they deserve it. In other words, these businesses don’t have to compete because the government is giving them the benefits they would otherwise have to garner from competition. Their costs will increase, due to minimum wage increases among other things, they will raise their prices anyway, which cancels out the benefits the government thinks it’s providing through the subsidies. As soon as their costs go up, their prices will too. Suddenly the subsidies are no longer effective. What happens? The clueless politicians will increase the subsidies to compensate, and the cycle starts all over again. One of my friends once wisely said that the government doesn’t have any money. The money it spends is taken from you and me. The cycle never ends, and the costs keep spiraling out of control, to the point where people out of desperation will start listening to the sophistry of the Democrats who are promising to fix what the government screwed up by making everything “free.”
One of the striking features of the intellectually vacuous Democrat debates has been their criticism of the “greedy” corporations, and how they supposedly oppress and rip off the average American consumer. Marxist “philosophy” has been vomiting out this kind of nonsense for time immemorial. This is not to say that there is no corruption on the American corporate landscape. But the reason this corruption exists is not corporate greed, but government regulation. In other words, it is these very politicians who criticize corporations for their corruption who are responsible for that corruption by providing opportunities through regulation for corporations to exploit for their advantage. Yet these clueless Democrat politicians are calling for regulatory expansion, not a reduction. They are their own worst enemy, and they are America’s worst enemy if only Americans would realize it. Yank the government out of the economy, and you weed out corruption to a significant degree. But do the cognitively dysfunctional Democrat politicians understand this? Of course not. A blind lust for power will obfuscate the most obvious socio-economic principles. The naked fatuity that a socialist dictatorship is the answer to our economic pathologies (most of which are created by the government itself) is as laughable as it is pernicious.
We also need to dispel the common myth that automation increases unemployment. On the contrary, increased automation increases employment and decreases unemployment overall. People simply get different kinds of jobs when automation occurs. For example, automation means software and hardware production that expands opportunities in the software industry. This is the way it has always been, and this is the way it always will be. Some people may not like the fact that they have to learn a new trade, but no one said life is easy.