December 26, 2008
“I’ve abandoned free-market principles to save the free-market system,” President Bush told CNN, defending his offer of $17 billion in loans to the Big Three “to make sure the economy doesn’t collapse.”
Thus did Bush concede that protectionism, if a critical U.S. industry is in peril, must trump free-trade ideology. For in offering the bailout to GM, Ford and Chrysler, Bush, by omission, excluded BMW, Mercedes, Honda, Toyota, Nissan and Hyundai—though all operate auto plants here in the United States and all are feeling the same sales slump.
Indeed, Toyota claims losses for the first time in 70 years—though how Toyota’s management was able to keep sales up in 1945, when Gen. Curtis LeMay’s B-29s were conducting their nightly visits, escapes me.
Bush may believe he has sinned against free-market principles, but he is following the path of his great free-market predecessor. Ronald Reagan, too, was not prepared to see Japan take down the U.S. auto industry, or steel industry, or computer chip industry, or Harley-Davidson.
Believing Japan was dumping to destroy U.S. companies, Reagan put patriotism before ideology and imposed quotas on Japanese imports. He, too, was castigated by the same commentariat that is berating Bush.
Vice President Cheney, too, has endorsed the bailout of Detroit. Of the senators who voted to pull the plug on General Motors, Cheney is said to have remarked, “It’s Herbert Hoover time” up there in the GOP caucus
Averting Chapter 11 for GM, which could lead to liquidation of the greatest manufacturing company in U.S. history—cutting America out of the premier consumer market of the 21st century—makes sense not only from the standpoint of politics, but economics, as well.
For other nations, as the Washington Post reports, are far ahead of Bush in sheltering their industries and protecting their markets:
Moving to shield battered domestic manufacturers from foreign imports, Indonesia is slapping restrictions on at least 500 products this month, demanding special licenses and new fees on imports. Russia is hiking tariffs on imported cars, poultry and pork. France is launching a state fund to protect French companies from foreign takeovers. Officials in Argentina and Brazil are seeking to raise tariffs on products, from imported wine and textiles to leather goods and peaches, according to the World Trade Organization.
India has levied a 20 percent duty on soybeans to cut imports and protect her farmers. The United States has just filed charges with the World Trade Organization against China for “unfair support of its export industry—including the award of cash grants, rebates and preferential loans to exporters.”
Awfully late in the game, Bush seems to have awakened to an ancient reality. When the tough times come, nations protect their own interests first, free trade be damned.
“Country first,” as the John McCain slogan ran.
Libertarians of the Milton Friedman school may be unforgiving of Bush. But what has their free-trade globalism given us, but $5 trillion in trade deficits since Bush 1 and a new dependency on foreigners for the necessities of our national life and the loans to pay for them?
Were all the Playstations and Priuses worth it?
By traditional free-trade theory, a nation should import what it does not produce from the nations that produce it most cheaply.
But in 1946, Japan produced almost no steel, no TVs and no cars. Instead of buying them from America, Tokyo subsidized its own steel, TV and auto industries for decades, and protected their market. Now, as Sony did to Philco and Dumont, Toyota, Honda and Nissan are taking down Ford, GM and Chrysler. Were the Japanese foolish to subsidize their industries and protect their market? Were we wise to let our TV industry be taken down, and watch our auto and steel industries driven to death’s door?
To 1970, Boeing, Lockheed and McDonnell Douglas produced almost all of the world’s jetliners. But rather than rely in perpetuity on Americans for passenger planes, Britain, France, Germany and Spain subsidized a socialist cartel, Airbus, that did not make a profit for 25 years and sold its planes for less than it cost to build them.
That trampled all over free-trade theory, but it did kill Lockheed and McDonnell Douglas and almost killed Boeing.
Were the Europeans foolish to create an aircraft industry and subsidize the destruction of Lockheed and McDonnell Douglas? Or were they wise to sacrifice today to capture the world’s aircraft market of tomorrow?
Like Prohibition in Hoover’s phrase, globalism is “an experiment, noble in purpose, that has failed.”
As we have learned, at a cost of $10 trillion in wealth wiped out on Wall Street, the nations of the future are not the consumer nations that pile up debt as they live on imports, but the producer nations that save and sacrifice and make the things the world wants.
With the tax-and-trade policies of the Old Republican Party that made America first by putting Americans first, we can be that nation again.
As for President Bush, welcome to the Protectionists Club, sir.