It goes – or rather ought to go – without saying that national governments should look after national interests. After all, that’s why they were instituted in the first place.
This generalising truism is the overarching absolute of politics, and it’s propped up by the proverbial platitude about charities and where they begin. Difficulties start, as they always do, when we move from the general to the concrete and then inevitably from the absolute to the relative.
Because the task of understanding what is and what isn’t in national interest is often difficult. There cracker barrel philosophy, these days fashionably called ‘common sense’, won’t suffice. Other philosophies, moral, political, utilitarian, have to come into play, along with such disciplines as history, sociology, psychology, economics, anthropology – and I’m sure I left a few out.
When that happens, objective and absolute will always be surrounded, often supplanted, with subjective and relative. And if doctrinaire absolutes fight back too hard, they can do more harm than good.
Almost 50 years ago I had a long conversation with Texas Rep. Ron Paul, then my local congressman. I still hadn’t found a way of relating my intuitive conservatism to specific philosophies and policies, and my friends from the Reagan campaign recommended Paul as a good source of knowledge.
A greenhorn though I was, I was still surprised at Paul’s commitment to no foreign aid under any circumstances. I asked several questions, such as ‘What if we must cultivate an ally in Africa or Asia?’ or ‘What if a country suffers a natural disaster and millions of lives are at risk?’ or ‘What if we must counter the Soviet influence in the region?’
All those questions received the same reply: “No foreign aid,” with an ascending emphasis on No. That answer lacked some elasticity for me even in my virginal political state and, though no longer a virgin, I still feel the same way.
The late economist Peter Bauer wittily defined foreign aid as a transfer of funds from poor people in rich countries to rich people in poor countries, which highlighted the vast potential of foreign aid for abuse and corruption at both ends.
However, if we look at foreign aid from the standpoint of national interest, another definition may also be valid: it may be a charitable way of achieving selfish purposes (which is to say the nation’s own).
Foreign aid is justified when a nation uses it to advance its strategic position in the world and can afford to dedicate funds to achieving that end. Millions of people dying because their own government can’t cope with a natural disaster is another reason for aid. After all, it doesn’t hurt to take the odd bow to our Christian heritage.
But that’s all: no other valid reasons for foreign aid exist. That’s why the UN’s rigid demand that every developed country spend 0.7 per cent of GNI on aid is asinine, and Britain’s succumbing to that demand in 2013 even more so.
It’s impossible to attach a precise number to the need for providing foreign aid. But the need has to be sound. At the moment His Majesty’s Government feels flush enough to spend millions on such urgent projects as promoting DEI in Serbia’s labour force, bankrolling a transgender opera in Columbia, and helping China to grow more rice.
Now, China can easily buy Britain several times over, and probably has already done so to a large extent. It’s the Chinese who should send aid to us, not the other way around. As to spending public funds to export perversion globally, I have no words to describe that, having promised Penelope never to use obscenities in print.
President Trump’s approach to foreign aid is close to Ron Paul’s in its rigidity, although I prefer that extreme to using aid as a tool of socialist internationalism. Isolationist rhetoric in general, including ‘no foreign aid’, plays well to the galleries, and this is an important consideration in democracies.
Hot damn, why should I give my hard-earned dollars to foreigners 10,000 miles away, Americans say, banging their fists down, and by and large they are right. But ‘by and large’ doesn’t mean ‘always’. The public can’t be expected to think with nuances, but it would be nice if their leaders could.
Trump’s views on tariffs have the same isolationist roots, but that matter is much more serious.
One can say a similar thing about tariffs as about foreign aid: inflexible commitment one way or the other is ill-advised. Tariffs too can serve political ends; they can act as a commercial way of achieving non-commercial aims.
Trump’s first acts prove that point: by threatening steep tariffs he coerced concessions from Columbia, Mexico and Canada. Those concessions were so slight and meaningless that one can’t quite shake the impression that the tariff bluff was simply grandstanding and a reminder of who is boss.
Aesthetics apart, there is nothing much wrong with that – what’s democracy without a touch of populism and tough rhetoric? Sometimes brinkmanship pays, and threatening war, shooting or trade, is a time-honoured tool of geopolitics.
But Trump insists on praising tariffs as a factor of prosperity, self-refutingly admitting at the same time that Americans will suffer “short-term pain” when his tariffs go into effect. “Short-term” sounds open-ended to me. What’s short-term? A year? Two? Ten?
High tariffs inflict pain on the country imposing them and on the country on the receiving – and retaliating – end. This is economic ABC and one of the few things economists of every political hue agree on. I’d recommend that Trump read Adam Smith, Milton Friedman and as many economists in between as his attention span can handle.
His argument that McKinley introduced 50 per cent tariffs on all imports and yet the US economy grew during his presidency is somewhat lacking in intellectual rigour. This is a rhetorical fallacy known as post hoc ergo propter hoc (after that, therefore because of it).
First, McKinley framed the tariff bill bearing his name when he was a congressman, not president. That Republican bill became law in October 1890, and a month later the Democrats won an electoral landslide.
Using McKinley’s example is ignoring the totally different nature of the economy at the peak of the Industrial Revolution and now. Then the economy was oriented mostly towards the producer, not the consumer.
A consumer economy hadn’t yet arrived, and most Americans worked either in agriculture or manufacturing – as opposed to only 18 per cent who are so employed today. Moreover, the volume of global trade was a fraction even in real terms of the over $30 trillion a year it is today.
Under those conditions, protecting American jobs in manufacturing and agriculture might have paid dividends, while the effect of tariffs on the standard of living was negligible.
The financial system then was also such a far cry from today’s that even its echoes don’t reach us now. McKinley was a champion of the gold standard, and in fact won the presidency in 1897 on that promise. Gold, not the dollar, was the world’s reserve currency, which gave the US no competitive fiscal advantage and didn’t encourage buying more than the economy was selling.
Also, McKinley sold his protectionist ideas by promising that tariffs would replace income tax. If the same promise were on offer today, I’m sure most Americans – most anyone – would be ecstatic. But it isn’t, and the purely economic arguments for tariffs are spurious.
The gold standard is now a distant memory, and even paper money is on the way out. America sits at the hub of the world’s financial system, and her sovereign debt is denominated in her own currency. That encourages rapacious spending on the part of both the state and the public.
Above all, since McKinley’s presidency, the whole US economy has done an about-face, turning away from producing and towards consuming. It’s not the steel manufacturer in Pittsburgh who is king, but a Mr Smith in Wichita who buys tools made of steel at his local hardware store.
And if those tools cost 15 per cent more due to the government’s urge to protect a couple of thousand jobs in the steel industry, Mr Smith will hurt. More important, he’ll have less money left over to buy products made by successful companies that don’t need protection, hurting them as well.
This is a crude way of communicating yet another truism: a trade war has no winners. Both countries involved lose, and it’s not a foregone conclusion which one will lose more. No sound economic argument in favour of tariffs exists, which doesn’t mean no argument, full stop.
A threat of extortionist tariffs can have the same effect as a threat of military invasion. If the other country takes the threat seriously, it may reconsider some practices the issuer of the threat finds objectionable. But I just wish Donald Trump didn’t take the public for fools with his specious references to McKinley. These just don’t work, Mr President.