Le Pen goes down; "Beggar-thy-Neighbor;" the end of Exorbitant Privilege; Pro-Tariff industry; Wladimir S. Woytinsky (1885-1960)
Reading, Watching 04.06.24
This is a regular feature for paid subscribers wherein I write a little bit about what I’ve been reading and/or watching.
A huge piece of news that got obliterated in the tariff apocalypse: the conviction of French far-right politician Marine Le Pen. I refer you as always to Arthur Goldhammer’s essential commentary:
The RN, taking a leaf from Trump’s playbook, will of course attack the “weaponization” of the judicial system. And they will have a point, since many other politicians, including the current prime minister, François Bayrou, and former president Nicolas Sarkozy, who is even now wearing an electronic bracelet of his own, have been accused of similar campaign finance violations. Sarkozy is on trial now for accepting money from Libyan dictator Muammar Gaddafi, surely a worse offense than siphoning money out of the European Parliament, but Sarkozy was never disqualified from office, even though suspicions of occult financing date back to before his presidential campaign.
Still, recent experience in the US with election tampering teaches us that courts should not be dissuaded from enforcing the law simply because the accused is a popular politician. On the other hand, democratic deference demands that unelected judges should be wary of depriving voters of the opportunity to express their will freely. The dilemma is acute and likely to become worse unless France reforms its campaign finance laws. But reform is a double-edged sword, since expansion of legal financing sources can easily open the way to more direct influence of wealthy donors on the electoral process. Indirect influence through media owned by wealthy individuals such as Vincent Bolloré is already a problem that could become worse if such individuals are allowed to finance political campaigns.
One crucial thing I didn’t make explicit in my previous newsletter on FDR opening U.S. trade: it allowed the United States and its partners to avoid “beggar-thy-neighbor.” That’s the great economist Joan Robinson’s term to describe the behavior of nations during the Great Depression who tried to use trade restrictions and currency depreciation to improve their economic situation at the expense of their neighbors, a practice which made everyone worse off in the end. She got the name from a card game, which is similar to a game Americans might be more familiar with and is a better description of contemporary conditions: Egyptian Ratfuck. This zero-sum approach to trade is also a much better characterization of Trump’s attitude than “protectionism.”
Here’s economist Nina Eichacker writing the tariffs and the end of “Exorbitant Privilege” that the US enjoyed with the dollar as the world’s reserve currency:
Will these tariffs lead to more manufacturing? They’re a painful way to get there, with a lot of degrowth to come along the way. Though I think advocates for degrowth generally come from a good place (we do generate too much waste, I’d rather people enjoy leisure time as Keynes hoped we would by this time), I’ve never been a fan. I really think that what Degrowthers want is a shift from spending on goods to spending on services, which is an accounting shift rather than an actual move to generate recessions. What these tariffs are going to do is make the cost of production much more expensive. Workers are going to take this on the chin as their employers try to cut costs. Businesses that make silly holiday sweaters are going to go out of business as their supply chains blow up. Smaller businesses are going to compete with each other for limited access to domestic suppliers as their costs rise, and larger businesses with better logistical capacity are going to have the greatest leverage to find new suppliers. And that’s setting aside all the pain in store for households that get by on cheap imports. That was the Faustian bargain of neoliberalism: deindustrialization and hollowing out the labor movement and social services in exchange for cheap stuff from around the world.
So, it might produce reindustrialization in the long run, but, as Keynes said, “in the long run, we’re all dead.”
Who even wants this?! If you follow the business media you might get the impression that there is no sector of American commerce—from finance to manufacturing to tech—that’s not recoiling in horror at the tariff announcement. But that’s not the whole story. I’ve been looking into the types of businesses that not only seem to like the new policy but have long demanded something like it. So far, I’ve found four trade organizations that have responded favorably to the policy: The Alliance for American Manufacturing, the National Council of Textile Organizations, American Iron and Steel Institute, and the Center for a Prosperous America. Of these four, I would say that only the last two are unambivalent in their defense since April 2nd. But if you look on their website, what they wanted was an across-the-board 10 percent tariff, which incidentally was what both Wall Street was expecting to absorb and what the administration’s own formula would’ve spat out if not tampered with to generate larger numbers. But if they are nervous now they aren’t showing it. In response to the news that Boeing’s component supplier Howmet Aerospace might halt shipments, CPA chairman responded to Bloomberg’s Joe Weisenthal on Twitter thusly,