Trade, Markets, Tariffs, and Socialism (and Confusion)

Could you run your business the same way matters are pointed out in the articles mentioned below? Three interesting headlines from over the past few months baffle me as to what’s going on and let me know why there’s so much confusion in the marketplace.

  1. France Teaches a Lesson in Free Markets (Wall Street Journal)
  2. Charles Koch: Tariffs a ‘Cancer,’ Could Lead to Socialism (Newsmax)
  3. The Trade War’s Winners Don’t Include Us (Wall Street Journal)

As a businessperson the last thing I want to see is the rise of socialism. I want to see opportunity. What these three articles state is we’re compressing free markets and it’s coming from a political party that used to be for less government interference not more. You’ll notice the publications and/or people mentioned here are ones typically associated with the party currently in the White House and Senate, which makes this pretty mind-baffling.

Columnist Greg Ip wrote about how France has opened up competition and he compared cellular service, Internet service, and airfares. For the first two items he used the example of a graduate student from France who in 1999 found the US much better and less expensive for cell service and Internet access. That has now changed because we have four major cellular providers, about to be three, while France has opened up the market to competition and prices have dropped. 

Similar story with Internet service (I know what we pay for it and it’s not a low amount). The US also has four major airlines while France has a third of domestic and half of EU flights provided discount carriers, and lower fares than ever before. His overall theme was it’s not about size but about openness (of markets).

The Koch interview was the shortest article. He called “tariffs and looming trade war a ‘cancer on society’” and said it will lead to isolationism and the rise of socialism. He called tariffs corporate welfare and said, “The less trade we have, the worse everybody is.”

Former World Bank president Robert B. Zoellick wrote an op-ed piece with the highlighted section telling it all, “Lost foreign markets, retaliation, higher prices, falling investment. Where’s the upside?” An example given is from The Peterson institute for International Economics that estimated each steel industry job created (by tariffs) cost $650,000 as US firms pay product.

Zoellick tied the trade war to socialism by using the example of tariffs and how they’ve affected farmers. We tariff Chinese goods, they retaliate by putting tariffs on farm products knowing farmers are big Trump supporters, the farmers suffer, the government gives them money, and all of a sudden anything close to a free market has disappeared. In other words, it’s government control of markets.

In addition, we’re running trillion-dollar deficits during a boom (not even Keynesian’s advocate this type of deficit spending during an upcycle). All of this is what led Koch to say, “Corporate welfare and cronyism is, I think, a contributing factor to so many young people being socialists because if the government is going to determine who succeeds in business, who needs the businesspeople. Just let the government do it. So I think it’s suicidal for the long term.”

I’m writing on this subject because I’m puzzled. There doesn’t seem to be a comprehensive plan or strategy. None of us could run our businesses this way (and be successful).

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