Why Economic Nationalism Must Be The Future

Republicans have the opportunity to secure a major new realignment. Whether that comes to fruition will depend on embracing the Trump agenda of economic nationalism. Here's what that means.

Now that the Republican primaries are winding down, with Trump Insurgents having won substantial victories, and with more people in the middle and working classes ready to flee the Democratic Party, it’s time to look ahead and figure out how to consolidate this political advance.

It has to be emphasized that polling indicates that working-class people still have a skepticism of the Republican Party (correctly so), so the wins won’t amount to much, or last very long, if not followed up with constructive action aimed at real social justice, as opposed to the fraudulent type of justice that is offered by everyone from Hollywood influencers to prominent Democratic leaders.

Legitimate social justice can be defined as helping everyone work their way to a place at the table and take care of those who, through no fault of their own, cannot. It’s something that goes well beyond government policy. But for the sake of clarity in this post, we’ll focus squarely on how the government can restructure its economic policy to help those trying to work their way up the ladder.

The policy can summed up in two words—economic nationalism. It defines how the United States (or any country) approaches global trade, which in turn has ripple effects through the stock market and right down into the grass roots of wages, benefits and opportunity.

Economic nationalism is driven by tariffs on imported goods. A tariff is a tax, and this simple fact has led at least three generations of Republicans to run screaming from the idea. I recall the late political reporter Bob Novak, a diehard conservative and one of the best journalists of his era, always dismissing the idea of tariffs on these grounds alone.

I like Novak—in fact, his autobiography The Prince of Darkness—is an absolute must-read for any political junkie. But his thinking on this was wrong and superficial. What’s more, he spoke for what was, by far, the mainstream Republican opinion prior to the rise of Donald J. Trump. Any government is going to have some taxes. Why not tax goods coming from abroad? Doesn’t it make more sense to tax the textiles from China rather than the income earned by American citizens?

These tariffs can serve two key purposes—equalization and protection.

Equalization Tariffs

The reason Republicans have run from tariffs is their commitment to a free market, one in which there is no government intervention. But for a free market to work as it should, all sides have to be competing on a level playing field. A free market can exist between, say, the state economies of Massachusetts and Connecticut, because businesses in each state face reasonably comparable regulations and taxes.

Even allowing for the substantial differences that can exist between states (e.g., California and Florida), trade within the United States can be free, because companies are competing on what is at least a reasonably level playing field. If we look at the global picture, the U.S. has a reasonably compatible economy with Great Britain. As such, there is little controversy about the trade relationship.

But those compatible relationships are the exception, not the rule. Over the years, foreign competitors have undercut U.S. firms in ways that include the following…

*Cutting back regulations, including those on the environment. Companies abroad, that face laxer environmental standards, can set their prices lower.

*Wages throughout the Third World and in China are appallingly low. There’s a reason so many American manufacturers throughout the Rustbelt packed up and went south after the bipartisan North American Free Trade Agreement (NAFTA) was passed in 1993, with Bill Clinton and Newt Gingrich joining forces to make it happen. Gingrich is now one of many Republicans who, in the wake of Trump’s rise, seem to have forgotten their role in all of this.

Once companies were given the opportunity to go to Mexico and elsewhere and pay workers pennies on the dollar, there was no economic reason to offer a good wage and benefits package to people in Detroit. And the condition of our great Rustbelt cities has suffered drastically as a result.

*Governments abroad will give direct subsidies to businesses in areas they want to see succeed. A prime example would be the European Union subsidizing Airbus, for the direct purpose of undercutting American-headquartered Boeing. With the subsidies, firms can naturally win the battle for price a little more easily.

*Finally, governments abroad themselves use tariffs. The reasons range from protecting economic spheres seen as essential to their cultures (The rice industry in Japan and the wine trade in France), to industries essential for national security.

An appropriate response for the United States is to evaluate all of these factors and then set an equalization tariff on goods arriving here. For example, if it’s determined that, after adding up all of the above, an auto plant based in Mexico has an inherent 20 percent advantage on price over a plant based in Detroit, then all cars coming from Mexico should be subject to a 20 percent equalization tariff.

Apply the same principle to each specific product from each specific country. By the time all is said and done, you have a landscape that’s much closer to a true free market, where the best product wins. Workers in American industries and elsewhere can be rewarded on the quality of their work, rather than their willingness to work for the lowest wages.

Protective Tariffs

Is it enough, though, for the government to simply step back and say “let the best man win”? In cases where the competition is within the United States, the answer is generally yes. Let the marketplace of consumers decide the winners and the losers. But if we look abroad, I don’t think the government can be so casual.

The equalization tariffs are about putting everyone on a level playing field. But being on a level playing field is not enough. We also want to win.

We have a direct interest in whether an tire manufacturer from Youngstown wins its battle with one from Tokyo. The United States has a vested interest in whether a textile mill in the Carolinas successfully competes in the domestic market with one from Beijing. Our society as a whole is impacted by whether an airline parts company in Seattle successfully wards off a rival from the European continent.

When our companies succeed, everyone benefits. Our workers get more wages and better benefits. Communities thrive. When our companies fail, economic desolation sets in. It’s not enough for the government to just say “well, we lost on a level playing field”. A level playing field is a sports analogy, but this is no mere game that’s being played. It’s economic survival. We have to give American companies the best chance to win.

Furthermore, there are some industries where winning is essential to national survival. The reason we’re currently so concerned about what happens in Taiwan, is that the American semiconductor industry was long ago lost, and the U.S. is now completely dependent on what we can get from Taiwan. On the flip side, the reason the United States was able to ramp up quickly in the early 1940s, after the attack on Pearl Harbor, was that we had a thriving manufacturing base—one that benefitted from what was then a tradition of heavy protective tariffs.

The security of the United States relies on having successful, domestic industries in areas ranging from technology to manufacturing. To simply say “we lost on a level playing field” is to commit national suicide.

Now, there are situations where protective tariffs can be abused by the industries that benefit from them. The most notorious example is the auto industry in the 1970s, which began producing gas-guzzlers. Both management and the unions got greedy and soft. It was fully appropriate, under these circumstances, to pull the protection and let Japan flood the market with good Toyotas.

An essential part of the debate over protective tariffs should always include whether the industry involved is doing what it can to produce the best product at the best price, and whether the fruits of their success are being appropriately shared out in wages and benefits.

The right level of protective tariff is certainly subject to reasonable debate. I’m thinking anywhere between 5-10 percent would be appropriate. It’s enough to give the American company an advantage, but not so much that they can afford to put a piece of junk on the market.

So, to use our hypothetical of an auto plant in Mexico, we would start with a 20 percent equalization tariff, ensuring that we at least have a level playing field. Then we tack on 5 percent to give the American company a little boost. That adds up to a 25 percent tax on every automobile coming across. That’s a nice advantage for the American industry, and if capitalized on, will mean more wages—and less paid out in unemployment and welfare—in cities like Detroit.

All of this is government intervention in an economy, which the Republican mainstream is understandably skeptical of. But it is about the protection of the national interest, both from a security and economic standpoint. Which is why economic nationalism is the term best used to describe the policies outlined above.

Why Tariffs = Real Social Justice

Without at least equalization tariffs being applied, workers are subject to exploitation. Even if jobs aren’t shipped overseas, the threat of this happening has a depressing effect on wages. The winners of a tariff-free economy are multi-national corporations and their investors. The losers are American-based firms, particularly small businesses who lack the capacity to dramatically scale their operations and compete on price, or to just move operations abroad at the flip of a switch. That’s why mom-and-pop stores are disappearing, while Walmart rises up in their place. It’s why a small firm with 20-30 employees is left unable to compete with a large multi-national operation.

All of this takes its toll on the life of a community. Yes, there are cheaper goods at the large outlets. But at the cost of real employment opportunities for larger numbers of people. The toll has been heaviest in working-class communities and urban areas, but it’s working its way towards the middle class and can be seen in the widening income gap between those at the very top and those in the middle.

The election of Donald Trump in 2016—first over his rivals in the traditional Republican establishment, then over Democratic free-trader Hillary Clinton—represented a cry for help.

When manufacturing and other industries that benefit from tariffs thrive, working-class people can earn more wages and benefits. They can get a real piece of the economic pie. That can turn into more stock holdings and perhaps the starting of their own small businesses. Their children can go to college or vocational schools without incurring mountains of debt. Neighborhoods that have economic opportunity are less prone to problems ranging from addiction to crime. Teenagers that can see a future are less likely to see drug dealing as the only way out.

All of these problems transcend economics and politics. The ultimate solution is The Gospel, the sacraments of the Catholic Church and the rosary. But God Himself, through the Epistle of St. James calls on us to feed the hungry man before preaching at him. Of course, this work of feeding, preaching and ultimately conversion, goes well behind issues of free trade. But a just economic structure is a part of it and it’s the one thing that is within the scope of the government to fix.

Trump Changed The Game

For too long, Republicans and Democrats have been united in the defense of multi-national corporations through the bipartisan pursuit of free trade. The two parties staged ferocious debates over how best to distribute crumbs to the people—the GOP wanted tax cuts, Democrats wanted spending programs. But they both protected the real feast that was going on in an unjust global economic structure, to the benefit of their donors and wealthiest constituents.

Donald Trump was a threat to that order, and he delivered on his promises when he threw out NAFTA, confronted China and put Europe on notice that the days of the American middle and working class playing sucker were over. It’s no coincidence that the Trump era saw wages rise for the working classes of all races. And it’s no coincidence that the established order in both parties loathed him, continue to loathe him and remain committed to his destruction. There’s a lot of money at stake.

When Trump says “They hate me because they hate you—I’m just standing in their way”, it’s a statement that has many layers. One of those layers is that both parties have a donor class desperate to get back into the business of completely unregulated trade, with no regard to the damage it does across the country. If the Republican Party wants a real and lasting realignment of working and middle-class loyalties, then economic nationalism has to be their future.

And economic nationalism can be delivered with a simple two-part message: Equalize, then protect.