#^d 2018-03-25 #^h Weekend Roundup

With Rex Tillerson and H.R. McMaster recently purged, Mike Pompeo promoted to Secretary of State, torture diva Gina Haspel taking over the CIA, and veteran blowhard John Bolton given the laughable title of National Security Adviser, the closest the administration can come to a moderating voice of sanity in foreign affairs is the guy nicknamed "Mad Dog." Trump continues to replace his first team of "yes men" with even more sycophantic wannabes, doubling down on his search for the least critical, least competent hacks in American politics. On the other hand, it's not as if delegating policy to the Republican Party apparatchiki was doing anything to accomplish his vision of "making America great again." Over the last few weeks he's not only made major strides at cleaning house, he's pushed out several of his signature trade initiatives. He seems determined to double down until he blows himself up -- and surely you realize by now the last thing he cares about is how that affects anyone else.

I don't say much about trade below, although I've probably read a dozen pieces complaining either about how ineffective his tariffs will be or how they'll lead to trade wars and other mischief that will make us poorer. The first thing to understand about trade is that business has already adjusted to whatever the status quo is, so anything that changes it is going to upset their apple cart, much faster than it's going to help anyone else out. So all restrictions on trade seem bad to someone prepared to shout out about it. On the other hand, business is eager to promote expansions to trade that offer short-term benefits, especially before anyone who's going to be hurt can get organized. So I take most of what I read with a grain of salt: not just because the dialogue is polluted by interested bodies but because it's kind of a sideshow. The question that matters is not whether there's more trade or less, but what is the power balance between capital and labor (and consumers, sure, but they're often touted by capitalists as the real beneficiaries of lower-priced imports, something capitalists wouldn't bother us with if they didn't stand to be bigger winners). The problem with TPP wasn't that it reduced trade barriers. It was that it reduced the power of people to regulate corporations, and that it sought to increase corporate rents through "intellectual property" claims.

Aside from raising tax revenues, the purpose of tariffs is to protect investment by organizing a captive, non-competitive market. However, in a world where there is already more steelmaking capacity than there is market, American steel companies won't make the investments to increase steel production. Rather, they'll reap excess profits while the tariffs last -- which probably won't be for long. Of course, that's not even what Trump's thinking. He thinks he's penalizing foreign misbehavior (like subsidizing investment then dumping overproduction). Maybe the real problem is that Americans aren't doing the same things? But there's a reason for that: we do all our business through private corporations, which workers and citizens have no stake in, so we don't even have the concept of directing investment where it might yield broad benefits.

On the other hand, note that if China decides to impose tariffs on American goods, they're likely to back those up with strategic investments to build competitive industries, temporarily protected behind those tariffs. For an example of the kind of piece I've been ignoring (but spurred some of my thinking above), see Eduardo Porter/Guilbert Gates: How Trump's Protectionism Could Backfire. Somewhat more amusing is Paul Krugman: Trump and Trade and Zombies. Also see Paul Krugman Explains Trade and Tariffs.


Some scattered links this week: