Rising Economic Nationalism

A pair of news stories has me spooked tonight.  This first is via Instapundit, and is a story of human pettiness that would be funny if the stakes were not so high:

President Chirac and three of his ministers walked out of the room
when Ernest-Antoine Seillière, the leader of the European business
lobby UNICE, punctured Gallic pride by insisting on speaking the
language of Shakespeare rather than that of Molière.

When M Seillière, who is an English-educated steel baron,
started a presentation to all 25 EU leaders, President Chirac
interrupted to ask why he was speaking in English. M Seillière
explained: "I'm going to speak in English because that is the language
of business."

Without saying another word, President Chirac, who lived in
the US as a student and speaks fluent English, walked out, followed by
his Foreign, Finance and Europe ministers, leaving the 24 other
European leaders stunned. They returned only after M Seilière had
finished speaking.

That's the silly part, but the underlying issue that was being discussed is not so silly:

In the absence of his President, M Seillière gave warning about the
dangers of the "economic nationalism" being pursued by the French
Government. The summit, aimed at restoring confidence in the future of
the EU, has been overshadowed by a row over the tide of protectionism
sweeping the continent, with Tony Blair and Angela Merkel, the German
Chancellor, cautioning about the danger of raising barriers to foreign
competition.

What has me really worried is that the US, the only vaguely consistent defender of free trade in the world for the last 60 years, is having the same discussion, initiated not so much by the economic problems in Europe but by security issues.  As I warned earlier, Congress seems ready to use the events of the Dubai ports mess and the fear of 9/11 to clamp down on foreign investment (sorry, $ required I think):

Building on their win in the Dubai ports deal, U.S.
lawmakers are moving to gain leverage over a swath of foreign
investments in the U.S., an effort that business leaders and President
Bush's aides warn could harm the U.S. economy.

In the first serious legislative move, Senate Banking
Chairman Richard Shelby (R., Ala.) released the summary of a bill
Friday that would greatly expand the array of foreign acquisitions
subject to automatic scrutiny and would require the administration to
notify lawmakers as soon as it begins to review any foreign
transaction. The bill also would require the administration to rank all
countries according to their relations with the U.S. and their support
for weapons-control deals. Approvals would then depend in part on the
ranking of a company's home country.

The administration would have to report to Congress on
why it approved or rejected any transaction, but the bill wouldn't give
lawmakers the power to veto a deal, as many critics feared.

Business groups and Bush administration officials
expressed immediate alarm over several provisions in the bill, which
Shelby aides claim has the support of other members of the Banking
Committee. In a letter to Sen. Shelby this week, seven groups
representing the nation's top banks and finance companies warned that
legislative proposals making the rounds of Congress "would threaten
job-creation prospects for the U.S. economy" and "reduce U.S. economic
growth."

Building on their win in the Dubai ports deal, U.S.
lawmakers are moving to gain leverage over a swath of foreign
investments in the U.S., an effort that business leaders and President
Bush's aides warn could harm the U.S. economy.

In the first serious legislative move, Senate Banking
Chairman Richard Shelby (R., Ala.) released the summary of a bill
Friday that would greatly expand the array of foreign acquisitions
subject to automatic scrutiny and would require the administration to
notify lawmakers as soon as it begins to review any foreign
transaction. The bill also would require the administration to rank all
countries according to their relations with the U.S. and their support
for weapons-control deals. Approvals would then depend in part on the
ranking of a company's home country....

The administration would have to report to Congress on
why it approved or rejected any transaction, but the bill wouldn't give
lawmakers the power to veto a deal, as many critics feared.

Business groups and Bush administration officials
expressed immediate alarm over several provisions in the bill, which
Shelby aides claim has the support of other members of the Banking
Committee. In a letter to Sen. Shelby this week, seven groups
representing the nation's top banks and finance companies warned that
legislative proposals making the rounds of Congress "would threaten
job-creation prospects for the U.S. economy" and "reduce U.S. economic
growth."

This sucks, particularly in the light of a president who has at best been only a luke-warm defender of free trade and who seems to have entirely misplaced his veto pen.  It is an interesting statement on how far this president has wandered from his party's traditional roots that I would greatly prefer to have his predecessor Bill Clinton in office for this fight.  Clinton was certainly a mixed blessing for us anarcho-capitalists, but he was always a strong and articulate defender of free trade, even to the extent of opposing the strong protectionist wing of his party.

In addition to the security issues involved, I have also tackled the overblown fears about trade deficits here, among other places.  For those of you in Arizona concerned about free trade, I know that Congressman Jeff Flake, one of the few remaining folks in Congress who understands free markets and small governments, shares some of these same concerns about rising protectionism.  I hope those of you in his district will continue to send him to Washington to serve us, and I would like to see where our other AZ Congresspersons stand on free trade.  I don't want to pre-judge, but this is one of those issues where I have no trust that McCain (for example) will land on the correct side of the issue.  I fear that conservatives are going to feel the need to flog the security horse right through the November elections, no matter what other principles get trampled in the process.

As a final note, I could add the current backlash against immigrants as
the third leg of this story on rising economic nationalism.  One of the
things that has surprised me the most in getting comments to this blog
is how many people who accept global free trade as right and beneficial
in turn support strong restrictions on immigration (Cafe Hayek comments on economist Robert Samuelson as one such person).
I see free trade and free immigration as having exactly the same
philosophic roots, based in the fact that our rights to trade,
associate, etc. stem from our humanity, not our citizenship.  I won't repeat my argument but you can read it here;
if you are pro-free-trade but anti-immigration, I ask that you give me
five minutes to make the case that no one else seems to want to make
today.  And even if you don't accept the philosophic similarities,
economicly open immigration and free trade are nearly identical issues,
each involving the free flow of labor, capital, and goods across
borders.  If you still can't see the similarity, here is a quick
example:  If I decide that my best sourcing decision is to subcontract
my tech support to Claude in France, I can do this equally well by
either straight outsourcing to Claude where he lives today (global
trade) or by encouraging Claude to move to the US to do the work for me
here (immigration).

 

  • Bob Smith

    Shades of what happened in the 80s when Congress enacted FIRPTA after the Japanese started buying famous pieces of US real estate.

  • http://www.screamingneurons.com Curt Doolittle

    >>> "I could add the current backlash against immigrants as the third leg of this story on rising economic nationalism"

    Economic nationalism in terms of trade and in terms of population are two different things. (And the underlying assumption that you rely upon is a linear progression of economic performance that is not possible nor do I think it is something that is desirable as it would require an even increase in knowledge production.)

    The issue of immigration, while related to that of free trade, is not the same as that of free trade alone, and connecting them as if people are simply a productive resource is simply an error in classifying people's productive capacity as their only capacity -- or at the very least, one that is extremely short sighted.

    Free trade is a known cost that permits people to coordinate in order to best manage the scarcity of resources and to do so for their own benefit. To do otherwise simply increases the total cost to them over time. In this way free trade is simply the preservation of one's property by incurring smaller costs immediately instead of larger costs in the future.

    Immigration is an unknown cost that affects their ability to manage the scarcity of resources and to protect the means of trade itself. It hides costs now that are substantive in the future.

    Immigration has an effect on the means of organizing itself, not just production and trade. They affect the political and social order which guarantees that trade, and especially the common knowledge which creates trust - the most important function of coordination, and it affects the idea of excellence, which is the goal that populations use to coordinate their offspring in order to obtain long term competitive advantage.

    Immigration also imports people that have different visions of the future and how society should function. This takes effort and money from the people who already pursue that vision. To ask them to incur this cost is simply coercive theft. Diversity of choices is effective in satisfying diverse preferences but it also is an increase in costs for those whose preferences are satisfied by the existing order. This is a forced subsidy on those who do not wish it.

    Immigration shortens median time preferences. The greatest cost to any population is to lengthen the time preference of its population. There is a time delay between additions to the population and the lengthening of those time preferences. This process is extremely expensive for populations.

    Immigration negatively affects the tendency to control one’s population. The most serious long term problem for humanity is still that of increasing populations. Removing the immigration barrier that forces people to adopt longer time preferences before entry, dilutes the productive capability of the existing population and forces them to incur the related costs.

    Immigration allows governments to increase the rate of social programs and be insulated from it’s effects in the short term, while transferring that cost onto others in the long term.

    Immigration consumes services that take from the people who have already produced goods in order to fulfill their own visions. This is simply theft. Incorrect anticipation of other people's innovations and consumptions is error. Incorrect anticipation of one's property is simply the theft of it.

    Immigration consumes property from those who settled it (created it as property), defended it, and maintained it. This is a violation of property rights.

    Trade itself is ONE means of human cooperation, and one means of training a population. Because it takes time for human learning and there is a constant change in the age and experience of the population, trade is an INSUFFICIENT means of training a population because the ideas that one has must be of a short time span. Some ideas take generations to mature. It is those ideas that have the greatest competitive advantage. And thinking that one can solve this by trade alone is simply ignorance or naivety. Advocating such an idea is far more detrimental than advocating economic nationalism.

    Arguments to the contrary also state that reductions in innovation are acceptable, which is a convenient, but sophomoric answer for any group who wants to prosper, given that prosperity is a function of differences in the rate of technological development, and sustainable differences are the greatest advantage that people who cooperate can obtain, and such development is achieved only by concentrating a group of people on a general direction for the purpose of sifting through two generations of population to find those capable of creating excellence.

    Counter arguments also say that we are insects, born with, or given by gift of the divine, knowledge, and that common sense in such matters is given to us at birth – quite contrary to history and personal experience.

    It is sensible to note that the purpose of advancing the idea of trade is so that we cooperate for the management of resources without simply taking property by conquest - which is effective but expensive for everyone. But the idea of conquest is always there, and men will always be there to attempt it. However, the purpose behind cooperative violence is mutual gain, as is the purpose of trade. And capitalization has many forms, not just money, not just resources, not just tacit knowledge, but also, one's long term objectives, and the common knowledge we use for the social organization that permits all of the above.

    Excellence is the greatest competitive advantage and it is only created by social coordination, capitalizing knowledge and resources, the widespread idea of competitive excellence, and extended time preference - this is any population's greatest competitive advantage, and greatest cost of production.

    People are not things. They can be a resource, but they are not only a resource. It always seems that the people against immigration are defending property rights, and those who are for open immigration are either economists suffering from the seduction of the quantitative method, or those whose compassion outstrips their reason.

    Forced immigration is simply the theft of capital, in all its forms, from those who have made it. To permit unregulated immigration is just another error in property rights common to the left. It is a convenient beneficence whose short term economic and emotional fulfillment, come at the expense of a long term, and at least in human history, economically destructive consequence.

    You do not have someone live in your home unless you are willing to pay the long term costs of doing so. This principle is infinitely scalable, because the cost of decisions needs to rest with those that made them, or else what occurs is only theft from others with better judgment and an outcome that does not prevent such bad judgment from the less wise person in the future.

    Cheers.
    (cross posted on my website)

  • JohnDewey

    "If I decide that my best sourcing decision is to subcontract my tech support to Claude in France, I can do this equally well by either straight outsourcing to Claude where he lives today (global trade) or by encouraging Claude to move to the US to do the work for me here (immigration)."

    Wouldn't the U.S. economy benefit more when Claude is spending his earnings in the U.S. instead of in his home coutry? Unlike Mr. Doolittle above, I do not believe immigrants consume services that should have gone to citizens. As I see it, immigrants expand the domesic market for goods and services our citizens produce.

    Mr. Doolittle: "Immigration is an unknown cost that affects their ability to manage the scarcity of resources and to protect the means of trade itself."

    Didn't the 20th century demonstrate the folly of nations managing the scarcity of resources? I think free markets perform that function quite well.

  • http://www.screamingneurons.com Curt Doolittle

    >>>Didn't the 20th century demonstrate the folly of nations managing the scarcity of resources? I think free markets perform that function quite well.

    You must misunderstand because what you've said posits a non-sequitur. "nations managing the scaricity of resources" as you apply it refers to governments, which as you state, fail miserably at this task. Just as they use unregulated immigration to manage the scarcity of their population's right to manage their resources. In other words, this is iterference in the population's ability to manage it's resources. All resources. And especially intertemporal resources.

    In the context I used, of property rights, I refer to those of individuals not those of governments as you suggest. Governments cannot have property rights. They can only protect or destroy them. And our elected governments perform this destruction that few kings or princes in history could even imagine, even less execute.

    Regarding the cost of immigrants, a person's labor is equal in result no matter where it is performed, but not the costs, since all costs are subjective and local. His education is a collective cost that all persons pay, in anticipatoin of greater future returns. If that education is paid for by citizens of another state and that person comes here, then it is their loss. If the immigrant brings along his family, and especially if he is in the lower income bracket and does not pay taxes, it is a dramatically increased cost for our citizens. Indirect costs abound. Such seemingly innocuous effects are that our teenage children cannot find good paying jobs and therefore learn the discipline that will make them productive in the future. The increase transaction costs in time in our stores. The difficulting finding good contactors who are driven out of the business. The lowering of the mean education level in our schools. No person objects to immigrating doctors. They object to the fact that we are loosing sovereignity over our lives and large portions of the country.

    Trade is a temporal cost and a temporal perception. Trade is a cost that the frog notices as an increase in temperature. That these less visible and longer term effects are less noticeable does not mean they do not exist, nor are they less expensive. Intertemporal costs are those that the frog canonot judge because the water heats more slowly.

    Essentially, longer term production cycles are more productive. Longer term outcomes of social interaction of this nature have the same compounding destructive force of the population's ability to organize for production.

    Unregulated immigration that overrides the wishes of local people is the management of and interference in people's property rights and intertemporal property calculation, by a governement. It does not matter if the population knows that the water is boiling, or that the governemtn knows that it increases the temperature. It simply is theft. Or more gently, the forcible distribution of resoucres from one population to another.

    Cheers

  • Craig

    I agree with Curt that immigration is far more than an economic issue, thanks in large part to our vast entitlement system. If you bring someone in from Mexico to do "a job that Americans won't do" for a low wage, we citizens have to pay for his trips to the emergency room, his crimes, and his kids' education.

    In response to John's claim that it's better for "Claude" to spend his earnings here rather than his own country, many Mexican immigrants send large proportions of their salaries back to Mexico, removing that money from our economy, while at the same time imposing the aforementioned costs on our citizens.

    I think that what's going to happen in the Senate here in the coming weeks is that a watered-down immigration bill, creating an easy path to legal residence for illegals, will pass and be signed. The outrage that will ensue will be similar to what we saw post-Kelo, and Republicans will suffer for it in November.

  • phuong

    Xin chao, Minh den tu HL, minh mong muon duoc lam quen voi tat ca cac ban. Thanks you