The American people are being misled into believing that:
- Everyone in the world hates us
- Major powers such as Russia and China want to defeat us militarily
And
- The answer is to create an autarkic state and maintain a military capable of intervening decisively almost anywhere in the world.
To this end our government has adopted an unsustainable policy of massive military spending, interventions all over the world, and erecting trade barriers with the rest of the world, even our friends and allies. Not only is this policy unsustainable (it is bankrupting the nation), but it is unnecessary and even harmful.
First of all, the world is not hostile to us. The rest of the world, including Russia, China, and even Iran, admire us. But they do not want us to interfere in their affairs. In other words, they do not want us to judge right and wrong for their actions, as if we were wise Solomons and paragons of virtue ourselves. And they do not want us to try to rig the world’s financial and economic relationships to garner spoils for ourselves and to punish those who deign to object. A good example is the destruction of Russia’s Nord Stream pipeline that I have no doubt was planned if not executed by our security forces. The rationale is that we do not want our allies to become dependent upon cheap Russian energy. They want us to believe that the fact that making these self-same allies dependent upon our much more expensive liquefied natural gas is just a coincidence.
Secondly, we are told that any economic success by China is just a plan to defeat us. For example, becoming a leader in rare earth metals extraction and processing, an industry that takes a decade or more to build, is just a giant plot to make us dependent upon the Chinese so that they can blackmail us by threatening to “cut us off” unless we do their bidding. Supposedly it isn’t possible that the Chinese are better at foreseeing future demand and taking the steps to meet that demand. The same with robotics, microchips, you name it. Furthermore, we are told that it is wise to build a strong military that can project power anywhere in the world, but the Chinese are warmongers when they attempt to expand their military capabilities to protect their homeland. In other words, if we do something it’s simply a wise precaution. If the Chinese do the same it’s another example of their march to conquest.
Thirdly, in just a few short months of his presidency, President Trump has abandoned eighty years of enlightened trade policy that sought to lower and even eliminate barriers to world trade. The free trade rationale, still the mainstream consensus among economists, is that trade mitigates war and makes everyone wealthier. Frederick Bastiat’s dictum that “When goods don’t cross borders, armies will” has been brushed aside as another example of countries trying to defeat us by providing us with goods we wish to buy. This economic fallacy is reinforced by another; i.e., that when a nation sells more to us than we sell to them, the resulting trade deficit somehow harms us and must be countered by high tariffs. This is economic nonsense and is leading the world to another, perhaps even more destructive, Great Depression, and, per Bastiat, possibly war.
A Better Policy
The solution is simple but requires convincing the electorate. (Forget trying to convince the elite political class. Their sole purpose is to reward big business and big labor in order to maintain their lock on power, whether Democrats of Republicans.) First of all the US does not need a huge military empire. This does not mean that the US is abandoning its allies. Rather, our military empire foments tensions unnecessarily, actually making us and our allies less safe. Furthermore, it creates moral hazard, an economic term that can be applied to international security guarantees; i.e., that nations who believe that the US will backstop them for every petty and not so petty disagreement with their neighbors are less likely to listen to their neighbors’ perhaps legitimate complaints and negotiate to lower tensions. Disputes are elevated to major crises, often with the now tired claim that the “other side” is just like the Nazis in 1938 and must be opposed with maximum military force NOW!
The world needs economic leadership to reduce trade barriers, which will unite the peoples of the world rather than isolate them. Free markets allow the wonders of specialization to improve the lives of all the peoples of the world, just as specialization improves the lives of individuals. Few of us grow our own food, weave cloth to make our own clothes, or construct, plumb, electrify, etc. our own homes. Likewise, the US should not rig the economy to force us to buy more expensive, lower quality goods locally rather than internationally.
The Enabling Role of Fiat Money
The mechanism which enables governments to spend beyond their citizen’s means is fiat money; i.e., money that is unanchored to gold and can be produced in vast quantities at the click of a Federal Reserve Bank computer button. Were the dollar anchored to gold, increased spending would have to be funded from increased taxes or borrowing honestly in the bond market. The bond market would force up interest rates, denying business needed capital funds. The alternative is very unpopular tax increases. Of course, governments propagandize the electorate that monetary expansion is not only necessary but beneficial! “Why, money printing provides the capital funds required by business!” But a quick retort is that to believe that nonsense one must believe that counterfeiters provide the same beneficial liquidity to the economy as Fed money expansion. Counterfeiters manufacture money out of thin air, just like the Fed. Why prosecute the former and lionize the latter?
The Four Pillars of a Prosperous Economy
- Sound money
- Reduced government spending
- Reduced regulation of all manner of life
- Lower taxes
This was the Republic Party platform in 1980. Vice Presidential candidate George Herbert Walker Bush explained the benefits of this policy at a campaign address on the steps of the Capitol Building in Springfield, Illinois. I was there. This well articulated policy must be presented again to the American people as a legitimate alternative to the warfare/welfare state.
