Wednesday, May 11, 2005

On CAFTA and Free Trade Idolatry

Real wages are falling at their fastest rate in 14 years. What do the free traders say? The evangelists of open markets, barking like Pentecostals with hands raised, shout “Pass CAFTA.”

Now I see that the Bushies have enlisted Condi “Mushroom Cloud” Rice and Donald “I didn’t do it, no one saw me do it, you can’t prove anything” Rumsfeld into the fray to make sure wavering members of Congress know that a vote against CAFTA is a vote for Bin Laden. John Murphy, mouthpiece for Latin American interests at the U.S. Chamber of Commerce, said, “If Congress defeats CAFTA that will be seen as a kick in the teeth to Latin America. And that will harm not just trade but anti-terrorist and anti-narcotic efforts."

Coupled with that sound strategic argument, Senator John “Dr. Strangelove” McCain mused that CAFTA was an important part of a long-term strategy to invigorate the economies of Latin America. "CAFTA is vital to the Central American economy, which is in trouble,'' said the senator and presidential wannabe. During the time McCain uttered this quotation, 9 illegal aliens entered his home state. However, the gentleman from the great state of Arizona appears more interested in denouncing the Minutemen and playing to Eastern Liberals than protecting the sovereignty of the nation from marauding invaders.

Unfortunately, free-trade myopia isn’t merely a Republican affliction. Former Clinton NSC flunky Robert Feinburg, former Secretary of State Warren Christopher, Bubba’s boyhood chum Thomas McLarty, and President Jimmy Carter's trade representative Robert Strauss also sent a letter to Congress on April 20 urging passage of CAFTA.

Attempting to make the case that CAFTA is actually good for the U.S., an idea that doesn’t even strike Senator McCain or Clintonian diplomats, the Chamber of Commerce went to bat for CAFTA predicting that American sales to the region could expand by more than $3 billion in the first year once CAFTA tariff limits take effect, and the American Farm Bureau estimates agriculture exports growing $1.5 billion a year.

Haven’t we heard this before?

Prior the passage of the North American Free Trade Agreement (NAFTA), Americans were assured that our trade deficits with Mexico would vanish, living conditions would improve south of the border, and that as a result, the mass influx of poor Mexicans into American cities would cease.

How are we doing so far? Pat Buchanan assesses the damage:

In 1993, the NAFTA debate gripped the country. Clinton had the backing of the political establishment, the Heritage Foundation, AEI, Brookings, National Review, New Republic, Wall Street Journal, Washington Post, Chamber of Commerce, Business Roundtable. Perot, Buchanan, Nader, and the AFL-CIO were opposed, as were the people. But that did not matter. Before the vote, the bazaar opened, and Congressmen began selling votes to Clinton for whatever they could get. NAFTA won.

Ten years later, returns are in. We were told our trade surplus with Mexico would grow, that NAFTA would create jobs here, that the rising wages in Mexico would end the invasion of illegal aliens.

But, the year after NAFTA passed, Mexico devalued the peso, and the United States began to run a string of trade deficits that has reached $40 billion a year. Drug cartels in South America shifted operations to Mexico. U.S. exports to Mexico are up, but it is not finished goods we send south but parts to be assembled—and factories and jobs as owners shutter plants north of the Rio Grande in search of wages that are 10 to 20 percent of what they have to pay in the United States.

By 2000, a million Mexicans were working in maquiladora plants south of the border at jobs once held by Americans. But now, the creative destruction of globalization has come to Mexico. Factories there are being shut down and moved to America’s new enterprise zone, China.

And the Mexican people? Half of the 100 million are still mired in poverty. Tens of millions are unemployed or underemployed. Real wages are below what they were in 1993. And the migration north continues as 1.5 million are caught each year breaking into the United States. Of those who make it, one-third head for California where their claims on welfare, Medicaid, schools, and prisons have tipped the state toward bankruptcy as the taxpayers have begun a great exodus to Nevada, Idaho, and Colorado.

NAFTA has helped to convert California into Mexifornia and the Golden State into a Third-World country. Ten years after its passage, Mexico’s leading export continues to be Mexicans.


So the results are in. Since NAFTA was signed, exports have increased a little while manufacturing jobs have disappeared to the tune of nearly 3 million jobs and the trade deficit has multiplied by a factor of 10. Meanwhile, both legal and illegal immigration have skyrocketed.

In a previous lifetime, I hoped to become an economist, and was particularly influenced by the Misesian wing of the Austrian School. Consequently, there was a time when I was an ideological free trader.

At the end of the day, however, I concluded that the radical individualism at the heart of classical liberalism and contemporary libertarianism was incompatible with Christianity. I am neither a methodological individualist nor a Randian subjectivist, but a Christian covenentalist. Ultimately, free trade is the economic component of the liberal ideology. At the heart of free-trade doctrine is the notion that all things work together for the good of those who eliminate tariffs. Seriously, the apoplexy with which libertarians greeted Pat Buchanan's call for relatively minor tariffs is reason to question their rationality.

During the debate over NAFTA, Jack Kemp debated Buchanan on the merits of the pending trade deal. At one point, Kemp asked Buchanan whether he would be willing to reciprocate if the Japanese offered to drop all existing tariffs. Buchanan said, quite logically, that one would have to consider all the ramifications to vital American industries before taking such a dramatic step. Kemp was outraged. Apparently, Jack doesn’t believe prudence is a conservative virtue.

I would also say that in terms of tax policy, tariffs (taxes on the consumption of foreign goods) are infinitely preferable to taxes on income, property, or inheritance. If I'm a businessman, why should I pony up taxes to pay for roads to transport my goods, a legal system to enforce my contracts, etc., when a foreign firm can import goods to compete against me and be freed from similar costs? In effect, such policies discriminate against domestic producers.

For too long, we've been bamboozled by ivory tower intellectuals, academics, and walking calculators. Economists can provide very useful analytical tools, but their toolbox is limited. They are blind to how the world works, and to history, which they studiously ignore in favor of quoting the likes of Adam Smith and David Ricardo, as though such two products of the Enlightnment were guided by the Holy Ghost and speaking with the authority of Holy Writ.

3 Comments:

Anonymous Anonymous said...

Hello Darrell,

"At the end of the day, however, I concluded that the radical individualism at the heart of classical liberalism and contemporary libertarianism was incompatible with Christianity. I am neither a methodological individualist nor a Randian subjectivist, but a Christian covenentalist."

It's many other virtues notwithstanding, this fine article attains its most profound with this passage. For the Christian faith, mere ideologies can never satisfy. While they become quasi-religions to many - libertarianism is particularly vulnerable to this characterization - they are never sufficiently comprehensive to attract the knowledgeable Christian and can only seduce. With its vision of an entirely this-worldly redemption, it was understandable that Judaism might find a certain comity with socialist ideology in the last two centuries, and Jewish intellectuals played no small part in the development of Marxist thought. But for the Christian whose hope can never be rooted in history, this kind of closeness is quite impossible. In the wake of the very powerful economic forces unleashed by this "free trade idolatry", the Christian notes the effects - the unemployment and its social consequences, the destruction of whole towns and communities and the impact on families - and finds there the face of the crucified Jesus.

John Lowell

1:19 AM  
Blogger Darrell said...

Russell Kirk remarked that ideology is the inversion of religion. I think that your remarks about Judaism ("its vision of an entirely this-worldly redemption, it was understandable that Judaism might find a certain comity with socialist ideology in the last two centuries, and Jewish intellectuals played no small part in the development of Marxist thought") can alao be applied to libertarianism, where Jewish intellectuals have been, and remain, a prominent force.

8:51 PM  
Blogger Darrell said...

Russell Kirk remarked that ideology is the inversion of religion. I think that your remarks about Judaism ("its vision of an entirely this-worldly redemption, it was understandable that Judaism might find a certain comity with socialist ideology in the last two centuries, and Jewish intellectuals played no small part in the development of Marxist thought") can alao be applied to libertarianism, where Jewish intellectuals have been, and remain, a prominent force.

8:51 PM  

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