Monday, July 24, 2017

"A Warning from the Future"

"A Warning from the Future"
by Bill Bonner

"A young man drove up yesterday. Shaved head. Earring. Nice car. Sad look. ‘Monsieur Bonner?’ After the introductions, he got down to business. ‘Damien [our gardener] told me you were looking for chickens. I’ve got about 10 of them I’d like to get rid of.’ ‘Why do you want to get rid of them?’ ‘My girlfriend was cheating on me. You know what that’s like. So I kicked her out. Now I’m getting rid of her chickens. ‘You know what it’s like. I don’t want to take care of her animals anymore.’

We agreed to buy his chickens, bringing our flock up to 16…from which we get a few eggs every day. Later, we said to Elizabeth, ‘He kept saying, “You know what it’s like.” He was talking about his girlfriend stepping out on him. But I don’t know what it’s like. And I don’t want to know…’

‘Of course not, honey…’

Warning labels: Girlfriends, world improvers, and candidates for public office should all come with warning labels. Like prescription drugs, people should know what they’re getting themselves into. Imagine how much grief could have been avoided if Hitler had announced: 'I’m going to go to war with the rest of Europe. This may mean diverting at least half of total GDP to weapons production and support of the army; consumers may struggle to find basic necessities. And it may put Germany in a two-front war that it may not win. Millions could die, our cities could be destroyed, and our country could be occupied by foreign armies for the next 40 years.' ‘OK, then,’ the voters might say… ‘Sure, why not?’

A shrewd and honest Joseph Stalin could have given a heads-up, too: ‘We’re going to organise the whole economy like the military. The insiders, like generals, will control everything and get the best food, lodgings, work assignments, and so forth. The plain people will be assigned cells…oops…I mean houses. There will be no unemployment. Everybody will have work to do…a lot of it. Malcontents and people I don’t like will be sent to special camps in Siberia for retraining or extermination, whichever comes first. Then, we all may get poorer every year for the next half-century…until our children and grandchildren finally come to their senses.’

Again, citizens would have a chance to look at the program carefully and decide if they still want to take the medicine: ‘Sure… Sounds good to us…’

Invitation to surprises: Of course, no one can see into the future. And who knows what will happen? Still, there are some basic propositions that can provide guidance. If you do what others have done, for example, you will probably get similar results.

Imagine this warning label from former Venezuelan President Hugo Chávez: ‘I’m going to put into place the programs that worked so well for Russia and Cuba. You know, nationalizing major industries. Price controls. Trade restrictions. Spending money we don’t have. Then, when the price of oil goes down and the bills come due, there may not be any food on the shelves. Inflation could hit more than 1,000%. Crime might soar. The government could crack down. That sort of thing.’

Just being alive is an invitation to surprises. But live-in girlfriends and public policies have predictable risks…and almost predictable results. Mass murder is never a good idea. Neither is starting a war. Or restricting trade.

Bird watchers: The future is our subject. Unpredictable. Full of slipups. Nevertheless, there are two things we know about it. First, tomorrow deeply affects today. Second, it probably won’t be that different after all. As we explained last week, the future casts its shadow backward on the present. We anticipate what will happen. And we adjust for it. Today changes depending on what we expect for tomorrow. That’s why the old economists eschewed activism. They were like bird watchers, not zookeepers.

It is one thing to keep your eyes open and watch what people do. It is quite another to tell them what to do. Once you begin trying to control the future, you become a part of the thing you’re trying to understand. And now, standing in his own shadow, dark and benighted like the bottom of a well, is economic activist Peter Navarro.

Previously, he had been a bit of a local celebrity in the San Diego area where, after failing in four campaigns for public office, he was regarded as a hopeless loser. He was known in the economics community, too, but mostly as a crackpot. Then, all of a sudden, national fame came to the Harvard PhD. He was named director of something that hadn’t existed until ‘The Donald’ created it: the White House National Trade Council.

The National Association for Business Economics sat politely through one of his speeches. And in March, The Wall Street Journal published an op-ed from him. The Journal did us a favor. Navarro laid out his basic ideas for the world to see.

And there he is, egging on the president to do more of what never works - to block win-win deals with trade restrictions, to raise prices for consumers (leaving them less money to spend), to contradict the principle of comparative advantage, and to make Americans poorer. He writes: ‘Reducing a trade deficit through tough, smart negotiations is a way to increase net exports - and boost the rate of economic growth.’ Where’s the warning label, we wonder?

More to come… Next week, we will be writing from Switzerland and concluding our meditation on the future: why Peter Navarro is wrong, how trade increased productivity by 3,000% in the last half-century, and why the principle of comparative advantage still works.

Stay tuned.”

1 comment:

  1. British imperialist free trade bull crap. One of the reasons we fought the Revolutionary War. Applying directions to a nation's economy in its own best interest is part and parcel of national sovereignty. Comparing it to The Soviets or the Nazis is a false analogy. I hate to sound like a broken record but once again I must refer back to Hamilton's reports on manufacturers and banking. The adoption of the methods and principles he laid out are what made America great both economically and politically, and the envy of the world.

    It is not the responsibility of government to tell people what to manufacture or how to do it but rather to Foster the development of the infrastructure that allows them to to trade amongst themselves and indeed with the world. That means roads, bridges, canals, ports etc.

    It also means that a sovereign nation must have the military strength to defend itself in a hostile world. That means it must at a minimum the means to build and support those armed forces internally and not to be dependent upon foreign supplies that become the first thing cut off in case of war.

    Hamilton envisioned a vast Continental nation a the way back in the 1780s. A nation rich in resources and potential that need not engage with the corruption of Europe except as absolutely necessary. Read Washington's farewell address, your reading Hamilton's words.

    Trade with the world we must but there is no reason it should be anything but mutually beneficial. We have no obligation to prostrate ourselves to the rest of the world because Bill Bonner says so.

    Writing from Switzerland? Since when has Switzerland done anything except in their own interest?

    Hamilton's fundamental point was that no nation can expect to become and remain politically free unless and until it sets itself on a path of economic self-directed. That logic is irrefutable. And the best path to political and economic freedom for the nation is the political and economic freedom of the individual citizen.