Getting It Off Pat

Getting It Off Pat

Mini Teaser: Pat Buchanan will not go away; he is confident that economic nationalism will capture one or both major parties. In fact, he believes the tide has already turned, as demonstrated by the refusal of Congress to grant President Clinton "fast track" a

by Author(s): Walter A. McDougall

Patrick J. Buchanan, The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy (Boston: Little, Brown & Co., 1998).

Pat Buchanan will not go away. Even if his planned third run for the presidency should reduce him to Harold Stassen status, he is confident that the economic nationalism he espouses will capture one or both major parties. In fact, he believes that the tide has already turned, as demonstrated by the refusal of Congress to grant President Clinton "fast track" authority to reduce trade barriers. After sixty years of hegemony, the free-trade establishment finally lost an intellectual and political battle, and for him that means "the counter-revolution" has begun.

The Great Betrayal is a manifesto that conservatives will ignore at their peril. For whatever they think of Buchanan's economics, his political and moral broadsides against current U.S. trade policy thunder. Consider that since 1970 real wages of American workers have fallen 19 percent, while the price of an average new house has risen from two to four times the income of an average young couple, and the portion of young mothers in the workplace has soared from 18 to 63 percent. Consider that the federal tax bite, a mere 3 percent of the average family income in 1950, is now 25 percent, that the dollar has lost two-thirds of its value against the deutschemark and yen since 1970, that manufacturing now accounts for only 17 percent of the U.S. national income, and that government employees now outnumber factory workers in twenty-eight states. Consider that imports as a share of America's GNP, just 7 percent in 1965, are now five times that number, and that two trillion dollars in American capital has flowed overseas in the past twenty years to finance the trade deficits that exploded, according to Buchanan's charts and graphs, the moment the United States flung open its market to foreigners without receiving or even asking for reciprocation.

In short, Buchanan's message is that "Free trade is not free." And while statistics may not play well on the stump, he expects that stories of closed plants, gutted industries, dying towns, and ruined families in a de-industrialized, dependent America will resonate not only with blue-collar ethnics in Manchester, but with all voters who do not earn a living at a computer terminal. They will ask why there is no work for them at a time when the economy and stock market are booming, and if free traders make no reply, the field will be left to Buchanan, for whom the answers are not economic but political and profoundly historical.

Buchanan's technique is to return to the roots of American history and inquire how the United States became the greatest productive powerhouse and wealthiest society in the history of the world. He reminds us that Americans took up arms in 1776 for economic as well as political independence, to throw off their bondage to British manufactures, and that the Constitution was inspired in part by the new nation's need for a uniform tariff policy, lest the thirteen states be played off against each other by mercantilist, predatory foreigners. The first initiative of President George Washington and Speaker of the House James Madison was the Tariff Act of 1789, and the grand strategy of Treasury Secretary Alexander Hamilton was "the encouragement and protection of manufactures." Certain agrarians rued his vision of a mercantile, workshop America, but after prolonged commercial struggles with Britain led to the War of 1812 even Thomas Jefferson changed his mind: "He . . . who is now against domestic manufacture, must be for reducing us either to dependence on that foreign nation, or to be clothed in skins. . . . [M]anufactures are now as necessary to our independence as to our comfort."

Buchanan then explains America's rise to unprecedented economic power as a result of protectionism, beginning with the Tariff of 1816 that saved the infant American textile industry from British dumping following the Napoleonic Wars. Democrat Andrew Jackson was an economic nationalist and he stared down the South Carolinians who presumed to "nullify" the Tariff of 1828. Whigs under Henry Clay were protectionist, and Republican Abraham Lincoln won the nomination and presidency largely because of his pro-tariff stance. With the exception of Grover Cleveland's two interludes, the nation elected Republican protectionists for the rest of the century, during which time Americans quadrupled their national product, pioneered a host of technologies, ran a budget surplus almost every year (with no income tax), retired two-thirds of the national debt, saw real wages rise 53 percent and commodity prices fall 58 percent, and poured their own exports onto world markets.

There was an alien snake in the garden, however, who repeatedly hissed his temptations. It was not Adam Smith, whom Buchanan quotes chapter-and-verse to show that while Smith was a free marketeer, he was a nationalist when it came to "industry necessary for the defense of the country", "encouragement of domestic industry", and "retaliation" against unfair foreign practices. The real sources of free-trade ideology were utopians such as David Hume, John Stuart Mill, and above all Richard Cobden, who preached that wholly unfettered trade would eliminate empires and wars, melt nations away, and unify mankind: it was "God's diplomacy." Free traders found few converts in America until the turn of the twentieth century, when one branch of Progressives led by the Anglophile Woodrow Wilson made free trade a plank in its platform for a new world order. But after World War I Wilson failed to persuade his own people, not to mention Europeans and Asians, of the merits of free trade, and Republican congresses returned to protection with a vengeance. The happy result, the author suggests, was that the American economy in the 1920s boomed once again.

Then came the Crash of 1929, after which, according to Buchanan, a powerful lobby based not in business or labor, but government and the academy, persuaded Americans to reject the real lessons of history and swallow instead materialist myths. Avid one-worlders such as Secretary of State Cordell Hull argued that tariffs were somehow responsible for the Depression, fascism, and World War II, and the Smoot-Hawley Tariff of 1930 in particular became "an epithet, a synonym for a selfish, crabbed conservatism." How, Buchanan asks, could that tariff have caused or prolonged the Depression, inasmuch as total imports amounted to a mere 4 percent of America's GNP at the time, and the tariff applied to only a third of all imports?

But the tides of history, argues the author, washed away what was once common sense to Americans. First, economists rejected protectionism as "old-time religion" (even as John Maynard Keynes was embracing it). Next, the neo-Wilsonians in FDR's brain trust blamed the failure of peacemaking after World War I on economic nationalism and based their own postwar planning on free trade. Third, former protectionists reasoned that as the U.S. economy accounted for 40 percent of the world's production in 1945, it had nothing to fear from foreign competition. Fourth, the Cold War broke out, and Truman and Eisenhower alike judged that the opening of the U.S. market to Europeans and Asians was needed to ensure their allegiance. Finally, the Goldwater conservatives who captured the Republican Party "read Milton Friedman and mocked William McKinley with the relish of a New Dealer. I know", writes Pat, "because I was one of them."

Buchanan grants that favoring foreign traders who themselves neither believed in nor practiced free trade (viz., Japan) may have been necessary to help Europe and Asia recover from World War II and to cement our Cold War coalition. But by the 1960s, he insists, generosity had turned into folly as succeeding administrations pushed for reductions of tariffs through the GATT, granted privileged access to Third World products, made one-sided deals with Japan and Europe, and later awarded most favored nation status to China, and finally concocted the NAFTA. The result was that the U.S. government itself subjected one industry after another--from fisheries to chinaware, textiles to cameras, tomatoes to automobiles--to unfettered competition from subsidized foreign firms that paid wages a fraction of those earned by American workers, even as it burdened U.S. firms with punitive taxes and regulations. American workers may be the most productive on earth, quips Buchanan, but if you put five hundred pounds on Secretariat's back even he would lose the race to a Chinese mule or Mexican burro. That is why he does not blame American executives for taking their operations offshore. But having done so, he laments, they cease to think of their firm as American and instead, as National Cash Register's chief executive boasts, "as a globally competitive company that happens to be headquartered in the United States."

Do not all Americans, including the working class, benefit from free trade as consumers? No more than the profligate grasshopper "benefited" more than the industrious ant, rebuts Buchanan. Common sense says that money must be earned before it is spent, and that a nation is no mere "consumer cooperative." Citing nineteenth-century examples, he argues that dynamic American companies do not need the stimulus of foreign competition to produce cheap, high quality goods. At worst, tariffs impose "temporary sacrifices on the part of the consumers, for the long-term independence of the nation", and are a small price to pay to save the American dream, reduce dependence on foreigners for strategic goods and commodities, and halt the return of America to the status of "colony--a colony of the world."

Buchanan concludes with a fetching pitch for "enlightened nationalism." First, he would exit the World Trade Organization and levy a 15 percent revenue tariff (modest by historical standards) on all imports. Second, against countries whose labor is cheap he would enact Teddy Roosevelt's Rule of 1907, which adjusted tariffs on the basis of "the difference in the cost of production here and abroad . . . for the well-being of the wage-worker must ever be a cardinal point of American policy." Third, he would use the bountiful proceeds from tariffs to abolish the IRS and enact a flat tax or national sales tax. Fourth, he would halt illegal immigration and reduce the quotas for legal entry. Under this plan, he promises, the trade deficit would disappear, American vulnerability to global financial turmoil would be reduced, corrupt foreign influence on our politics would abate, U.S. corporations would rush to build plants at home, millions of young people would find jobs, thus relieving social pathologies (crime, drugs) borne of indigence, and taxes would fall for all Americans. The only losers would be the internationalist, corporatist, "knowledge-based" elites who get rich at the expense of the little guy in the name of a one-world utopianism that was never "the American Way" to begin with.

As a political tract, this is powerful stuff, but its history is rather "too pat." Many factors other than tariffs account for U.S. industrialization (including huge doses of foreign capital and a domestic market and work force swelled by foreign immigrants), and many factors other than free trade account for Britain's decline (including a rigid class system, empire and wars, bouts of socialism, and the inevitable diffusion of technology). Nor must one embrace Cobdenite theology to argue that while politics may indeed trump economics in the competition among nations, economic policies can have mighty political effects (as when U.S. tariffs and Chinese boycotts helped push the Japanese into militarism). Likewise, the dire statistics of the past twenty years cannot be explained without reference to the massive inflation stemming from America's loss of cheap energy after 1972.

But perhaps the most ironic rejoinder that can be made to Buchanan is that he appears to make government the solution. An equalization tariff would require the Commerce Department not only to keep minute statistics on the production costs in every American plant, but somehow to obtain the same data for every plant in the world in order to fix tariffs--and therefore prices--on every product sold in this country. If American manufacturers carry burdens such as the minimum wage, environmental and social obligations, corporate taxes, and regulations of all sort, is the solution then for the U.S. government artificially to impose the same burdens on foreigners? Would not the proper "conservative" solution be to expand freedom at home rather than regulation abroad?

I shall leave it to the economists to judge whether Buchanan is "full of prunes" (as my old Hoosier dad used to say) about theoretical questions. But his political appeal is an empirical question that will soon be answered in Congress, if not the snows of New Hampshire. For come what may, Pat Buchanan will not go away. Dismal Science, meet the Happy Warrior.

Essay Types: Book Review