Trade Policy and Economic Decline

In a book titled SELLING US OUT, J.R. Martin writes of Chinese companies “exploiting loopholes in the U.S.-China tax treaty signed by the Reagan administration in 1986.” He asks what the Founding Fathers would say about our current trade deficit, and our indebtedness to communist-ruled China. Martin asks, “What would Washington and Adams think about the corrupt and destructive power of the two major political parties in America? How would they judge today’s capitalism?”

According to Adams, American trade policy has been taking the wrong path for at least sixty years. Martin argues that more than thirty years ago, the “ongoing economic decline in the U.S. led to the election of Ronald Reagan in 1980.” But instead of correcting the problem, says Martin, Reagan made it worse by focusing on deregulation and the expansion of trade with communist China. Money that might have been used to rebuild American industry went flooding into Asia. And after Reagan left office our de-industrialization continued. Millions of good jobs disappeared.

In terms of disparity the Chinese worker is both winner and loser, just like the American worker. While the Chinese worker pulls himself out of the near-starvation of the Chinese countryside, the America worker is receiving unemployment benefits paid for by Chinese bond-holders who will never get their money back. One has to feel sorry for the Chinese. And yet, the American labor force is being demoralized as increasing numbers of people grow accustomed to food stamps and other government benefits. On the one side we see the insolvency of the United States. On the other side we see China holding trillions of dollars in worthless paper. Which side ultimately profits more from the relationship?

Martin points to situations where American corporations have collaborated with the Chinese communists in suppressing human rights. This is perhaps the most shocking aspect of U.S. capitalist behavior in recent times. Martin writes of corporate chiefs who actively seek to make their companies into Chinese companies. “It is time that we reminded CEOs of companies incorporated in the U.S. of their civic duties and responsibilities,” says Martin. “Such disloyalty is an insult to the many Americans who have served and sacrificed to preserve and protect the United States of America so that companies like GE, Cisco, Ford, and countless others could prosper and enjoy the benefits and privilege of operating in a free society.”

In pure theory, free trade is good. On this subject Ludwig von Mises was not mistaken. Tariffs do indeed impair the wage earner’s material well-being. But when a communist country sets about to trade with a free country, all bets are off. All theoretical calculations are subsumed into a strategic calculation – which takes us outside the sphere of economics altogether. Here the economy itself becomes a battlefield where one side is cheated and robbed by the other. The ultimate irony, of course, may be that the robber will find himself robbed when trillions in U.S. debt holdings eventually become worthless.

Full article: Trade Policy and Economic Decline (JR Nyquist | Financial Sense Online)

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