Gold-Plated Chávism

By Kevin D. Williamson

Sunday, July 24, 2016

On Friday, I listened to a brief lecture on the unhappy history of Detroit, told from the familiar anti-capitalist point of view: Because international trade is a merciless race to the bottom, the Detroit-based automobile industry could not compete with foreign rivals absent some degree of intervention from the U.S. government. Instead, the U.S. government pursued free-market policies, which resulted in the municipal ruination of Detroit and the impoverishment of its people.

That didn’t come from the ghost of Howard Zinn. It came from Sean Hannity.

It’s a goofy and illiterate critique, but one that has been popular on the left for decades. Now, the Right is taking up the anti-capitalist cause with at least equal fervor, in thrall to one of the dopiest iterations of nationalism since Venezuela nationalized the toilet-paper business.

We should start with the obvious. The usual argument for protecting U.S. industries from foreign competition — that they cannot be expected to compete with low-wage labor in awful Third World countries — does not do very much to explain the travails of U.S. carmakers, who were not challenged by sweatshop-made products from Pakistan and Haiti. Instead, they got their lunches eaten in the 1970s and 1980s by the same firms that trouble them today, which are based in relatively high-wage countries such as Germany, Japan, and, more recently, the Republic of Korea.

It’s true that Germany and Japan have slightly lower median household and equivalent adult incomes than does the United States, but not by an amount that gives overseas automakers an enormous competitive advantage. And this is complicated by the fact that German autoworkers are paid more than their U.S. equivalents, rather than less. (As always, the facts on the ground are complicated.) Japan does not use tariffs to keep U.S. goods out of its markets: It charges no duties at all on U.S. vehicles. The European Union and the United States have relatively modest import duties (typically 10 percent and 2.5 percent, respectively), and eliminating those is a key goal for supporters of a U.S.-EU free-trade pact. Trump — and now those who follow him — generally opposes such free-trade pacts, even though in this case such a deal would be a step toward the so-called level playing field that the anti-traders insist on.

The fact is that playing fields never are level. Germany is full of Germans, and the United States is not. Germany has a top corporate-income tax rate of just under 30 percent; the United States has a top rate of just under 40 percent. But the tax codes are very different and liabilities are calculated in different ways. Germany has very powerful automotive unions, but they are very different from their corrupt and ineffective U.S. equivalents. Germany has a very different education system, and it is the dominant economic power in the world’s second-largest free-trade association, second in size only to NAFTA. But, again, the facts are a little more complicated: The United States accounts for about 85 percent of NAFTA’s economy: Canada isn’t that big, and Mexico isn’t that rich. Germany accounts for only about 20 percent of the European Union economy, meaning that Germany’s free-trade zone gives it richer opportunities for trade than ours does us.

Those export opportunities have helped Germany grow wealthy, even taking into account the heavy costs imposed by the reabsorption of the former German Democratic (ho, ho!) Republic, which was immiserated by Communist rule. Funny thing about those Commies, though: They talked a good game about fairness and reducing inequality and giving workers a democratic voice in the management of industries, but in practice what such regimes practiced was exactly the same crude and stupid economic nationalism that Trump preaches and that has caught the imaginations of our talk-radio ranters and various rent-seeking corporate toadies and union bosses. From the old Soviet Union to its East German satellite to Fidel Castro’s Cuba and the so-called democratic socialists of Venezuela, the hallmark of such economic strategies is the centralization of political power and the subordination of economic activity to it. The enemy, always, is free trade. East Germany’s actual economic strategy, as contemporary research from the Library of Congress reported, “emphasized heavy industry and a trade-denial policy bordering on autarky.”

Trump’s personal and professional life may bring to mind Silvio Berlusconi, the Italian billionaire and politician who, like Donald Trump and his sex-offender pal Jeffrey Epstein, has a taste for women “on the younger side.” But Trump’s economic philosophy is closer to that of Hugo Chávez: putting private economic choices under political discipline in order to keep dirty foreigners from exploiting us poor, defenseless serfs, who have only our lords to protect us.

Trump, as it turns out, prefers European and British-made cars. One sympathizes with the horrible exploitation suffered by all those Mercedes-Benz drivers.

Germany has thrived by entering into a free-trade deal with many wealthy countries. The United States has thrived with NAFTA, too, but NAFTA provides us with free access only to one small wealthy country and one middle-income country. The sensible approach would be to pursue a free-trade arrangement with wealthy and up-and-coming Pacific powers, if only such a thing were on offer, to say nothing of a post-Brexit United Kingdom, the European Union, and, if we wanted to be truly forward-looking, India.

Instead, our so-called conservatives are rallying behind a gold-leafed Hugo Chávez. One suspects that they will come to regret this.