Bastiat and the Dangers of Trumpism

By David Libertas

What is the greatest threat from Trumpism? It isn’t racism, as I wrote here. Nor is it his foreign policy, which I touched on as part of this article.
Clinton was better on economics, which is rare for a Democrat. Yes, Clinton wanted to raise income taxes, but Trump also wants to raise taxes in the form of import tariffs. This brings us to the biggest danger of Trumpism: war due stemming from bad economic policy.
Ironically, war was also the biggest danger of a Clinton presidency, and I still maintain that she would have been the more dangerous of the two. Clinton’s foreign policy could best be summed up as “war is peace.” Trump lacks Clinton’s enthusiasm for bombing the Middle East and Russia.
The difference is:

• Clinton explicitly wanted to escalate existing wars and initiate new ones.
• Trump does not seem to want war, but he advocates policies that make war a more likely side effect.

That Which Is Unseen

To understand this, we must recall the wise lessons of Frederick Bastiat and Henry Hazlitt who taught us to evaluate the unseen consequences of an economic policy.

…said no politician ever!

A visible consequence of trade barriers are more domestic jobs in the taxed industries. Another visible consequence is increased prices in consumer goods, but advocates claim the value of the jobs outweighs the cost of prices hikes.

What is unseen are job losses in industries hurt by the decreased trade. Some cars are still manufactured in America. Those jobs will be cut when the cost of the imported parts they assemble skyrocket.
What is especially unseen is how the trading partner retaliates in a trade war. China has already threatened to end domestic sales of iPhones, American cars, and American soybeans, and to replace orders of American Boeing jets with French Airbus jets. This will result in further American job losses.

Most threatening of all that is unseen is that a trade war increases the likelihood of a real war. To put it bluntly: when your neighbor has something you want and it’d cheaper to trade for it than to plunder it with expensive armies then governments have less an incentive to plunder. Furthermore, the employees, shareholders, and customers of Apple don’t like it when the factories make their iPhones are being bombed by their own rulers, which turns popular support against such wars. When all iPhone are made in American factories then there is less public concern about bombing anonymous factories in China.
War has been on the decline, and especially the latter half of the 20th century has seen a sharp decline in war. Free trade takes much of the credit. War has been mostly limited to authoritarian regimes that do not trade freely with the world. This even includes America’s imperialist wars: the US is known for bombing countries for their oil, but free trade is why the US has not bombed Venezuela, Norway, and Canada for their oil.

Trade Wars Lead to Real Wars

Trump didn’t get the memo.

Slapping tariffs on an economy is a scorched earth policy that extends beyond American borders since it affects the trade of all nations. It opens the door for nationalist movements, which by their nature create an “us vs. them” culture and view foreign lands not as mutual partners but rather potential rivals and threats.
Tariffs initiated the Great Depression, which escalated into a global depression. The resulting market crash in Germany, a country already bitter over their treatment by world powers coming out of WW-I, was primed to embrace a dictatorial “champion” that blamed all their problems on outsiders and promised to use strongman tactics against the world. The economic crash breathed life into that movement. The crash certainly didn’t hurt the rise of the Italian Fascists, either. We know how all that ended.
This is why Trump’s economic policy is far more dangerous than Clinton’s. A Clinton income tax hike would surely damage the fragile economy limping along anemically from eight years of Obama. A Trump tariff tax hike, if large enough, and the ensuing trade war could not only damage the American economy (arguably even worse than a Clinton income tax hike), it could also risk triggering military wars between nations and crashing the economies of the world.

Conclusion

Trump and Clinton were both awful, terrible candidates. Although I believe the Trump presidency makes WW-III less likely than a Clinton presidency, I remain pessimistic for the future.
Trump is wishy-washy, and he’s already walking back his rhetoric on NATO, the stupid border wall, repealing Obamacare, prosecuting Clinton, and deportation. For the safety of the entire planet, let us hope he also walks back his promises of protectionist trade. (And stick to his Obamacare repeal promise instead!)