Is There a Smoot-Hawley in America's Future?

The Smoot-Hawley tariff during the Great Depression brought international trade down to a trickle. It intensified the depression.

Here is Kenneth Rogoff of Harvard arguing that this kind of trade protectionism may rear its ugly head in the very near future:

G-20 leaders who scoff at the United States’ proposal for numerical trade-balance limits should know that they are playing with fire. The US is not making a demand as much as it is issuing a plea for help.

According to a recent joint report by the International Monetary Fund and the International Labor Organization, fully 25% of the rise in unemployment since 2007, totaling 30 million people worldwide, has occurred in the US. If this situation persists, as I have long warned it might, it will lay the foundations for huge global trade frictions. The voter anger expressed in the US mid-term elections could prove to be only the tip of the iceberg.

Protectionist trade measures, perhaps in the form of a stiff US tariff on Chinese imports, would be profoundly self-destructive, even absent the inevitable retaliatory measures. But make no mistake: the ground for populist economics is becoming more fertile by the day.

The new US Congress is looking for scapegoats for the country’s economic quagmire. And, with a president who has sometimes openly questioned rigid ideological adherence to free trade, anything is possible, especially in the run-up to the 2012 presidential election. If trade frictions do boil over, policymakers may look back on today’s “currency wars” as a minor skirmish in a much larger battle.

There is much more to Rogoff's article. Read the whole thing.

These are dangerous times. Obama made them more dangerous by not focusing on getting the US economy recovered but instead focused on health care. The new crop of TEA party fanatics along with the rest of the antediluvian Republicans are likely get blue dog Democrats to join them in creating a Smoot-Hawley "look alike" with some legislation to cut down on trade. The Great Recession still stands a good chance of becoming Great Depression II.

Contemporary American Political Dialog

This is an excellent bit of show-and-tell... This is the state of political "dialog" in the US:



Sadly, the reasonable viewpoint urging Americans to vote didn't get his message across. It was too many words. Americans only respond to "sound bites".

The Mid Term Election

Here's a blog post by Paul Krugman with his take on it:

Obviously, Democrats are going to do badly today, the only question being how badly. And we’ll be drenched in punditry, most of it about how Obama overreached, etc..

So, to say the obvious: it’s mainly the economy, stupid.

...

To the extent that Democrats do worse even than the economy explains, one can point to a number of factors. Given that the stimulus was inadequate — which was obvious early on — Obama could have tried to warn Americans of a long hard road ahead, and placed blame on Republicans; instead, the WH kept pretending that things were going swimmingly, never once acknowledging that the original plan wasn’t sufficient (they still haven’t). Remember the Summer of Recovery?

Worse, since the fall of 2009 the White House has systematically adopted Republican positioning on the budget; remember how the State of the Union included a freeze in domestic spending?

...

On the organizational side, it’s still mind-boggling how the White House deliberately shut down the whole network of grass-roots organizing that helped put Obama there in the first place. All that idealism, all that energy — and they were told to go away and let Rahm Emanuel do his deals in peace.

There are a few more details in Krugman's posting, but those are the key ones. It comes down to this: leadership. Obama blew it.

Property Rights in America

People think they "own" stuff, but in reality they don't. They only get to hold onto something so long as the bank doesn't want it and walk off with it...



What the Great Recession of 2008 has proved is that the only property rights that count are the ones held by the big shots. The government's supposed claim of recorder of "rights" is a sham. As the above shows, even if you have the papers and the government agrees, the police will not act. They side with the banks. The courts and the legal system is impotent. The last, desperate defense for the "little people" is publicity. Get a news reporter, preferably a TV reporter, on your case and you have a chance at justice. Otherwise, there are no "property rights".

What is funny is that the ultra-rich and the big corporations rant about property rights, especially intellectual property rights, but they really mean the rights of the powerful to dispossess the powerless. These are the "rights" of the robber knights of old to waylay you and strip you of what you have as long as you don't have the power and the weapons they have.

A Canadian Looks at US Politics

Here is a bit from an article by Linda McQuaig in the Toronto Star:

Back in 1980, when Ronald Reagan launched his campaign for a right-wing revolution in America, David Koch was a disgruntled billionaire who thought Reagan wasn’t far enough to the right.

Today, Koch is still a disgruntled billionaire and still convinced the Reagan revolution hasn’t gone nearly far enough in cutting taxes on the rich, dismantling the welfare state and gutting government controls on business.

But today, as Americans vote in their mid-term elections, Koch is no longer in the political wilderness. After pumping more than $100 million into arch-conservative political organizations over the past 30 years, he (and billionaire brother Charles) now appear close to pushing U.S. politics significantly further to the right — even though the wealthy elite is already richer and more powerful today than it’s been since the 1920s.

Through their Americans for Prosperity (AFP), the Koch brothers have micromanaged the rise of the purportedly grassroots Tea Party movement, as documented in a recent article by Jane Mayer in The New Yorker.

...

But today’s Tea Partiers are fighting for the elite. It’s hard to get much higher up the establishment food chain than the Koch brothers, who through their ownership of oil giant Koch Industries, have a combined fortune of $35 billion.

All this is a sharp departure from the upheaval that followed the 1929 financial crash. Spurred on by a furious public that held Wall Street responsible for that crash, Franklin Roosevelt’s administration introduced sweeping changes that significantly reduced the power and wealth of the very rich.

Signalling a new labour-friendly era in 1935 with the far-reaching Fair Labor Relations Act, Roosevelt also brought in tough laws on banking and pushed up the top marginal tax rate on very high incomes, eventually to 88 per cent.

Unions flourished in the decades that followed, as gains made by the leading union, the United Auto Workers, helped push up wages across the country, creating a prosperous and politically influential middle class.

Today the right is managing to direct public anger against unions and government social programs.

... living in splendour befitting kings, the Koch brothers quietly supervise an incoherently angry army that promises to gut what’s left of benefits for the poor while adding to the bonanza of billionaires.

It is horrifying to watch what is going on in the US. But it has happened before. The McCarthy years were a time of crazy anti-communism that ruined the lives of hundreds of thousands of innocents. The Nixon election on a "secret plan" to end the war in Vietnam was another significant lurch to the right. The Reagan "morning in America" which spelled the death knell for unions. And the "war of choice" of George Bush which have bankrupted the US. It is a long history of grotesqueries which the voting public just doesn't see. They get sold the same "fear and anger" campaigns again and again. Meanwhile, the country has lurched from being the richest, happiest, best educated, well-governed country in the world to a rancid cesspit of recrimination, hate, fear, and greed. And today the Republicans will take yet another giant leap deeper into this horror story as they will tote up election "victories".

How to Rob the Tax Payer More Efficiently

Yep... that's what this report says will be happening the next couple of days as the Federal Reserve does a half trillion of QE (quantitative easing). Watch and be amazed:



This is what you get with a "leader" like Obama who refused to take the unemployment and depressed economy seriously. He put in place a half effort "stimulus" which was more tax cut than actually job creation plan. It didn't put money in the hands of people who would spend it (that's how you "stimulate" a depressed economy). So the Federal Reserve is having to do the heavy lifting by providing QE. But as this report points out, that really puts money in the hands of the banks and not necessarily into the economy (the banks aren't lending! instead they are "cleanup their balance sheets" by offloading bad assets to the Federal Reserve, i.e. offloading losses to the taxpayers).

This clip complains about inflation, but inflation is one way to drag an economy out of depression. It makes it expensive to sit on cash. I means that people who are underwater with their houses will see their house prices go up to help get them out of being "underwater".)

Cringely's Theory of World Domination

Here is the start of a post by Robert X. Cringely that argues that while the US & Europe are spiraling down, it isn't China who will dominate the world, it is India. I think his ideas are worthy of serious consideration:

Something has been bothering me lately and it is our assumption that China is the world’s next superpower and that we’d darned well better get used to it. Hogwash. We’re into the Chinese decade, not the Chinese Century.

The century belongs to India.

Last century was all-American. We came into the 20th century a huge but unsophisticated nation. Our industrial might made us a factor in World War I. Our cultural ingenuity caught the world’s fancy in the 1920s and — 90 years later — still hasn’t let go. As a result this will not be the Bollywood Century. The Great Depression secured our place at the table by showing we could take much of the world down with us. World War II saw us save that world, grabbing half a century of global dominance in the process (thanks Dad). But now we’re screwing it up a bit out of inertia and greed and ignorance of the very world we created. We did it to ourselves by thinking that nothing could really hurt us. But in the end that wasn’t true any more than the idea that Harry Houdini’s stomach could take any punch.

So we’re giving it up to the Indians. not to the Chinese.

I hope he is right. India has started very few wars. China, which you might think hasn't started many wars, has in fact attacked all of its neighbors in the last 60 years: Korea, USSR, India, Vietnam. And it has sabre-rattled at Taiwan, Japan, and the US.

The world needs leadership by a country that is only interested in economic "conquest" and not political/military/cultural conquest. India is a nicely complex country too disorganized to carry out this kind of conquest. But it can be the breeding ground of entrepreneurs and economic growth which would be good for the world.