Senator Sasse (Among Others) Needs a History Lesson

by WILLIAM R. HAWKINS March 15, 2018

 U.S. Senator Ben Sasse (R-NE) has come out strongly against President Donald Trump's decision to impose modest tariffs on imports of foreign steel (25%) and aluminum (10%) to aid these strategic domestic industries. On his website, the Senator calls this "kooky 18th century protectionism." On Fox News, he declared that "two centuries" of tariffs had shown this to be a policy failure. Both of his statements are wrong. America became the world's largest industrial power using tariffs to support lines of economic development in the face of rivals who were poised and eager to capture control of the U.S. market and keep Americans in the role of providing only food and raw materials to support advances elsewhere. Indeed, any analysis of the "comparative advantages" of the U.S. in the years after independence would have consigned the new nation to an economic dependence not much different than the colonial status it had fought to escape. But America broke out of its "assigned role" and took control of its own fate; and by the dawn of the 20th century was out producing Europe's two major industrial powers, Great Britain and Germany, combined. This achievement changed the entire course of world history.

 Even those who did not like the tone of this policy, such as the left-wing critic of nationalism, Max Beer, had to concede its success. He wrote in 1901, "The United States, with its ruthlessly protectionist trade policy, vast territory and endless energies, is proving the most powerful rival to England and Germany." When Beer wrote, President Teddy Roosevelt was in office. In a letter to his friend Sen. Henry Cabot Lodge (R-MA), TR had proclaimed "Thank God I'm not a free trader." The Republican Party in its days of political dominance was the party of nationalism and protectionism. It had preserved the Union and was committed to building up its strength.

The origins of U.S. protectionism date back to the Founding Fathers. One of the seminal documents of American history is the "Report on Manufactures" written in 1791 by Alexander Hamilton, Secretary of the Treasury in President George Washington­'s administration. He advocated a protective tariff, fearing that without import controls the southern states would turn to England and France for industrial goods rather than to the northern states. The lure of foreign trade with Europe could pull the Union apart. This nearly happened in the Civil War when the Confederacy turned to its overseas trading partners for military aid. The oligarchy of slave owners had no interest in industrializing the south and had always opposed tariffs. Their system was not just immoral, it was wrong-headed and doomed to stagnation and defeat.

The Constitution embodies Hamilton's thinking. Article 1, section 8 gives Congress the power to "regulate Commerce with foreign Nations, and among the several States" while Section 10 takes these powers away from the States. These two provisions create a large, unified internal market that can support the growth of domestic production in the face of overseas competition. Trade is clearly made a matter of Federal (national) policy. This had been the dream of the 17th century mercantilist Jean-Baptiste Colbert for France, but he had been unable to overcome the resistance of provincial interests. It was the dream of Friedrich List, who fled to the U.S. because of his advocacy of a united Germany. List's book The National System of Political Economy remains a classic and his ideas influenced Andrew Jackson, Henry Clay and James Madison, among others whom he met. But that large market was created to support domestic enterprise. As conservative historian Forrest McDonald has noted.

   While rejecting laissez-faire, however, Hamilton was emphatic in his commitment to private enterprise and the market economy. Primarily this commit­ment was moral, not economic. Hamilton believed that the greatest benefit of a system of government-encouraged private enterprise was spiritual---the enlargement of the scope of human freedom and the enrichment of the opportunities for human endeavor.

Hamilton's plan was to create a system within which Americans could attain their own success; not merely sit on the sidelines as foreign entities made the key decisions affecting the future of the U.S. economy.

Thomas Jefferson at first opposed Hamilton's trade and industrial policies. As an agrarian, Jefferson was quite content to let the factory system, which he equated with dirty smokestacks and urban slums, stay in Europe. Writing in 1785, Jefferson said "Were I to indulge in my own theory, I should wish [our states] to practice neither commerce nor navigation but to stand, with respect to Europe, precisely on the footing of China. We should avoid wars and all our citizens would be husbandmen." Not a wise choice of comparison given that China would soon be carved into foreign spheres of influence by the more advanced industrial powers. Today's People's Republic of China is driven towards rapid industrialization and technological development to prevent ever again being subject to such a "century of humiliation."

Jefferson as President attempted to implement several of the fashionable liberal notions about foreign affairs. He laid up most of the Navy, replacing blue-water warships with tiny coastal gunboats which he thought were less provocative. He reduced the diplomatic corps. This was in line with the views of his French friend and classical economist J.B. Say who claimed, "It is not necessary to have ambassadors. This is one of the ancient stupidit­ies which time will do away with." They should be replaced by consuls whose function would be to promote free trade.

Those on the putative Right who are led astray by "free trade" rhetoric should remember it was part of a larger body of liberal ideology which saw private commerce as the remedy for interstate war. If individuals could forge ties without regard to borders or national allegiances, then there would be no more conflicts. As the British Radical Richard Cobden claimed, "the motive for large and mighty empires, for gigantic armies and great fleets would die away." This was (and still is) the kooky notion that controls so much liberal thought. It leads to mistaken trade policy in the real world of contending states because, as List noted, it "has assumed as being actually in existence a state of things which has yet to come into existence....a universal union and a state of perpetual peace." The last two centuries have made hash of liberal sophistry.

The War of 1812 woke Jefferson from this liberal fantasy. He shifted to the Hamiltonian camp and argued for a new industrial policy including tariffs. He wrote, "The prohibiting duties we lay on all articles of foreign manufacture which prudence requires us to establish at home, with the patriotic determination to use no foreign articles which can be made within ourselves without regard to difference in price, secure us against a relapse into foreign dependency."

The Hamiltonian program became the party line of the Whigs before the Civil War and the Republican Party afterwards. "By the election of 1880 protectionism virtually equaled Republican­ism" states historian Tom E. Terrill in his book The Tariff, Politics and American Foreign Policy 1874-1901. President Trump has quoted President Abraham Lincoln's warning, "abandonment of the protective policy by the American government [will] produce want and ruin among our people." Anyone who has seen the empty factories and blighted communities in a Middle America plundered by the "outsourcing" of production overseas has seen the proof that Lincoln was right.

As historian Paul Kennedy has argued, "How a Great Power's position steadily alters in peacetime is as important to this study as how it fights in wartime." During the post-Cold War euphoria of "free trade" the U.S. position was altered in a negative way; running huge trade deficits ($796 billion last year) that measured the extent that net production capacity had shifted overseas. The reason for the shift was the rise of transnational corporations looking for cheap foreign labor to replace "expensive" American workers who expected fair treatment. This united Big Business with the ghosts of the southern slave owners in the embrace of "free trade"--- hardly a laudatory motive.

In contrast, proper government policy should seek to shape the flow of economic factors, including trade, with an eye to increasing the productive capacity of the nation, particularly in strategic industries. Protectionism is a central part of a proper trade policy. For example, Century Aluminum, the main domestic producer of high-purity aluminum used in military aircraft, will restart idled production lines at its smelter in eastern Kentucky in response to Trump's tariffs. It had closed most of its operation because of import competition from China and Russia. Does anyone really want our aerospace industry to be dependent on imports from these rival foreign powers? The philosophy of "free trade" just doesn't cut it in the real world. The United States must manage its own fate, and it can only do so from a position of economic strength; meaning resources, technology and industry under its own control.

William R. Hawkins is a consultant specializing in international economic and national security issues. He is a former economics professor and Republican Congressional staff member.

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