“[Americans’] patriotism would certainly prefer its [tariffs’] continuance and application to the great purposes of the public education, roads, rivers, canals, and such other objects of public improvement as it may be thought proper to add to the constitutional enumeration of federal powers.” —President Thomas Jefferson, 1806 State of the Union message to Congress
How could Democrats guarantee a second Trump term? Come out in favor of so-called “free trade.”
When Walter Mondale was nominated by the Democratic Party to take on Ronald Reagan in 1984, he uttered, in his acceptance speech, a single line that did more than anything else that year to lose him the election.
He said, “Mr. Reagan will raise taxes and so will I. He won’t tell you. I just did.”
The Republicans turned it into a campaign ad, and it played over and again, dragging Mondale so far down that he lost every state in the country except his home state of Minnesota.
What Mondale said was true, and Reagan did raise taxes on working people—eleven times—but that was still the moment when Mondale signed his own political death warrant. Americans had been bitten badly in the previous decade by inflation and the Reagan Recession, and were in no mood to give more of their hard-earned money to the government or anybody else.
In 2020, trade will be as potent an issue as taxes were in 1984.
This election cycle, it’s starting to look like Democrats are about to make the same mistake of not defending the paychecks of working people. Only this time, the Democratic quote will be, “Trump won’t succeed in bringing home your jobs, but neither will I because I support all of the trade agreements that took your jobs in the first place.”
Instead, the Democratic Party must return to its pre-1992 progressive/protectionist/union roots and steal this issue right out of Trump’s mouth, saying that he’s not protecting American workers’ jobs well enough or fast enough. They should run hard in 2020 on the Progressive Caucus’s long-held position that we use protectionist policies, including tariffs, to end our trade deficits and bring back home our jobs.
The disastrous trade deficits we’ve been running since the Reagan era are damaging to the future of America for a variety of reasons, from national security to where the profits from American companies end up, to the flattening of American working wages and benefits.
Trump pointed this out in 2016, and, as Egberto Willies points out at DailyKos, it’s a large part of why he’s in the White House right now.
This was not how the founders intended it. And it’s not how working Americans want it.
Yes, tariffs will initially raise the price of foreign-manufactured goods. And that will make it viable for American manufacturers to start up new factories. As more manufacturing jobs come to the United States, wages will rise. American workers know this.
While nobody wants to pay more for a toaster or a refrigerator, with good manufacturing jobs, people will have larger paychecks. American workers know this, too.
In 1981, in a bow to their Wall Street and transnational corporate patrons, Republicans embraced “free trade,” rejecting traditional American protectionist trade policies. Through the 1980s, Reagan and George H.W. Bush negotiated NAFTA and helped kick-start the WTO while Democrats warned us of what was coming.
"The simple fact is that we no longer, in any meaningful way, make computers or TVs or clothes or power tools or toys or pretty much anything in the USA, except military hardware, guns, processed food and fracked gas."
Tragically, in 1992, a new but growing part of the Democratic Party (the “Democratic Leadership Council,” or DLC) joined Reagan/Bush when Bill Clinton said he was going to push and sign Reagan’s trade deals.
In that act, the Democratic Party turned their backs on the two centuries of American trade policy that had turned us into the industrial powerhouse of the world, beginning the “great decline” of working people here.
And American workers know it, no matter how much “centrist” Democratic politicians try to ignore it.
The simple fact is that we no longer, in any meaningful way, make computers or TVs or clothes or power tools or toys or pretty much anything in the USA, except military hardware, guns, processed food and fracked gas.
Thus, when we “stimulate” our economy by putting money into the pockets of working people, they go to Walmart and buy things made in Asia—creating jobs in that part of the world and leaving our wealth in China.
And American workers know it, regardless of the pundits on TV.
“Free trade” (rather than “fair trade”) is a guaranteed ticket to the poorhouse for any fully developed nation, and the evidence is overwhelming. King Henry VII, in fact, introduced the concept of “free trade” as something that England should encourage other countries to do while it maintained protectionism.
As John F. Kennedy told the nation in his October 13, 1960, debate with Richard Nixon, “We have to be able to sell abroad more than we consume from abroad if we’re going to be able to meet our obligations.”
But the Wall Street Democrats continued to push Reagan’s policies from the election of 1992 right up to and through the election of 2016. It’s been an electoral disaster.
For example, in July 2009, with no evident irony or apparent understanding of how South Korea went about becoming a modern economic powerhouse, President Obama lectured the countries of Africa during his visit to Ghana.
As the New York Times reported: “Mr. Obama said that when his father came to the United States, his home country of Kenya had an economy as large as that of South Korea per capita. Today, he noted, Kenya remains impoverished and politically unstable, while South Korea has become an economic powerhouse.”
In the same day’s newspaper, the lead editorial, titled “Tangled Trade Talks,” repeated the essence of the mantra of its confused op-ed writer, Thomas L. Friedman, that so-called “free trade” is the solution to a nation’s economic ills.
“There are few things that could do more damage to the already battered global economy than an old-fashioned trade war,” the Times opined. “So we have been increasingly worried by the protectionist rhetoric and policies being espoused by politicians across the globe and in this country.”
But South Korea did not ride the free trade train to success. (No country ever has, in fact.)
South Korean economist Ha-Joon Chang details South Korea’s economic ascent in his brilliant 2008 book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.
In 1961, South Korea was, as Obama said, as poor as Kenya, with an $82 per capita annual income and many obstacles to economic strength. The country’s main exports were primary commodities such as fish and human hair for wigs.
That’s how the Korean technology giant, Samsung, started—by exporting fish, fruits and vegetables. Today, it’s one of the world’s largest conglomerates by revenue and market capitalization ($254 billion in 2017).
By throwing out “free trade” and embracing “protectionism” during the 1960s, South Korea managed to do in 50 years what it took the United States 100 years and Britain 150 years to do.
After a military coup in 1961, General Park Chung-hee implemented short-term plans for South Korea’s economic development. He instituted the Heavy and Chemical Industrialization program, and South Korea’s first steel mill and modern shipyard went into production.
In addition, South Korea began producing its own cars and used import tariffs to discourage imports. Electronics, machinery, and chemicals plants soon followed, all sponsored or subsidized and tariff-protected by the government. Between 1972 and 1979, the per capita income grew over five times.
Then South Korean citizens adopted new protectionist slogans. For example, it was viewed as civic duty to publicly shame anyone caught smoking foreign cigarettes. All money made from exports went into developing industry. South Korea enacted import bans, high tariffs and excise taxes on thousands of products.
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By the ’80s, South Korea was still far from the industrialized West, but it had built a solid middle class. South Korea’s transformation was, to quote Chang, as if “Haiti had turned into Switzerland.” This transformation was accomplished through protecting fledgling industries with high tariffs and subsidies, and only gradually opening itself to global completion.
In addition, the government ran or heavily funded many of the larger industries, at least until they were globally competitive. The government ran or regulated the banks and therefore the credit. It controlled foreign exchange and used its currency reserves to import machinery and industrial imports.
At the same time, the government tightly controlled foreign investment in South Korea, and largely ignored enforcement of foreign patent laws. Korea focused on exporting basic goods to fuel and protect its high-tech industries with tariffs and subsidies.
Had South Korea adopted the “free trade” policies espoused by Friedman, Bill Clinton and the New York Times, it would still be exporting fish and be just as poor, per capita, as Kenya.
While American voters may not know the details of South Korea’s rise, they understand the principles. No matter what the pundits say on TV.
Another favorite Friedman free-trade example is the success of Toyota’s Lexus luxury car, immortalized in his book The Lexus and the Olive Tree. But again, the reality is quite different than what Friedman naively portrays in his book.
In fact, Japan subsidized Toyota not only in its development but even after it failed terribly in the American markets in the late 1950s.
In addition, early in Toyota’s development, Japan kicked out foreign competitors like GM.
Thus, because the Japanese government financed Toyota at a loss for roughly 20 years, built high tariff and other barriers to competitive imports, and subsidized exports, auto manufacturing was able to get a strong foothold, and we now think of Japanese exports being synonymous with automobiles.
For about 200 years, we understood well the benefits of tariffs, subsidized exports and protectionist policies in the United States, and American working people still understand them.
Every president from George Washington to Jimmy Carter aggressively used tariffs and regulated foreign investment.
Every president prior to Reagan considered “free trade” (particularly in which every other country maintains VAT taxes to protect their domestic economies, but we don’t) to be absurd and worked, instead, for “fair trade”—trade that would benefit America and American workers.
In his 1978 State of the Union address, for example, President Carter said:
“By working closely with our friends abroad, we can promote the economic health of the whole world, with fair and balanced agreements lowering the barriers to trade.
“Despite the inevitable pressures that build up when the world economy suffers from high unemployment, we must firmly resist the demands for self-defeating protectionism. But free trade must also be fair trade. And I am determined to protect American industry and American workers against foreign trade practices which are unfair or illegal.”
Three years later, when Ronald Reagan came into office, as the result of 190 years of Alexander Hamilton’s plan, the United States was the world’s largest importer of raw materials; the world’s largest exporter of finished, manufactured goods; and the world’s largest creditor.
We bought iron ore from other countries, and manufactured it into TVs and washing machines here that we then exported to the rest of the world. And when countries couldn’t afford to buy our manufactured goods, we loaned them the money.
Because of Reagan/Clinton’s neoliberal “free trade,” we’ve completely flipped that upside down.
We’re now the world’s largest exporter of raw materials, the world’s largest importer of finished goods, and the world’s largest debtor.
We now export raw materials to China, and buy from them manufactured goods. And we borrow from them ($1.2 trillion as of this moment) to do it.
This, by the way, is the virtual definition of a third-world country.
Democrats need to re-embrace Hamilton’s principles, as put into practice in 1793 and largely kept in place until 1993 when Clinton signed the NAFTA agreement that had been negotiated by Reagan and Bush.
The Congressional Progressive Caucus knows how to do this, and Donald Trump sure knows the politics of it. It’s pretty straightforward, notwithstanding all the chatter from “New Democrat” Democrats and the talking heads on cable news.
Returning to the governing principles the Democratic Party has held since its creation by Thomas Jefferson in the 1790s is a bold move, no doubt, for any president or party to make, but they’re largely the policies that progressive Democrats like Ohio’s Senator Sherrod Brown have been running and winning on for generations.
Tariffs built America. They paid the largest share of the cost of the federal government from the founding of the republic until the Civil War, two-thirds of the federal budget until World War I, and about a third at the time of World War II. Thus, Jefferson noted how tariffs were producing surpluses for the United States (tariffs paid for 90 percent of his 1806 budget) in his 1806 State of the Union message to Congress.
“The question therefore now comes forward,” Jefferson said, “to what other objects shall these surpluses be appropriated, and the whole surplus of impost, after the entire discharge of the public debt, and during those intervals when the purposes of war shall not call for them? Shall we suppress the impost [tariffs] and give that advantage to foreign over domestic manufactures?”
He answered his own rhetorical question a few sentences later, pointing out that Americans wouldn’t want the government to drop the tariffs.
Instead, he noted, “Their patriotism would certainly prefer its [tariffs’] continuance and application to the great purposes of the public education, roads, rivers, canals, and such other objects of public improvement as it may be thought proper to add to the constitutional enumeration of federal powers.”
Progressive Democrats have been pushing for a return to Jefferson-until-Carter protectionist policies ever since Bill Clinton split apart the party over the issue with his advocacy of NAFTA in the 1992 election.
If the Democrats want to beat Trump, they need to get with the progressives’ trade program in a big, strong, and fast way.
Democrats must point out that Trump is doing protectionism wrong because he’s doing his tariffs by executive order, which only last as long as his administration does; no company is going to build a factory based on that thin assurance. (And the anti-tariff Republican Party will never pass such a policy; Trump is screwed in that regard.)
Congress should be negotiating our trade agreements in the open and passing them as solid, long-lasting legislation, so companies have multi-decade horizons of tariff protections; Democrats need to return the party to its past mission of putting American workers and the environment first.
But if the Democrats promote “free trade” in 2020, get ready for four more years of Donald Trump gloating at us all from 1600 Pennsylvania Avenue.
“I’m for free trade,” if it becomes the party’s mantra, will be the 2020 version of Mondale’s “I’m going to raise your taxes.”
This article was produced by the Independent Media Institute.