What I’ve noticed in commentary on the tariff war Donald Trump has declared on the rest of the world, is an undercurrent of disbelief. I think I sense many people silently asking themselves, “What’s going on?”
When free trade has been promoted, especially by the USA, since World War II/1945, and was in place for most of the world’s nations by the 1990s, and everyone seemed to be benefiting from it, the sudden turnaround is surprising.
But there have always been economists who disputed the value of free trade. Leading the way, at least as I’ve followed it, has been Ravi Batra, professor of economics at Southern Methodist University in Texas.
Batra has written several bestselling books, with his 1987 book The Great Depression of 1990 reaching number 1 on the New York Times bestseller list. Though that book is often dismissed as a failed prediction, in fact the recession of 1990-’91 was the severest since 1945, up to then. It was the first time in my lifetime (born 1946) that the price of residential houses fell significantly in Canada.
In his subsequent books, Batra has consistently argued that (1) unfettered capitalism creates corruption and poverty, (2) America became the world’s strongest economy by means of tariffs protecting its industry up to 1945, and (3) since 1945 the free trade access of most of the world to America’s markets has been steadily weakening America, and this should be reversed by means of tariffs. That’s his position in a nutshell.
To those who want to argue that this will simply impoverish the rest to the world for the sake of America, Batra’s response is that the world suffers from a weakening America. It’s been primarily America that has kept the ocean lanes and skies safe for trade for the past 70 yrs, and the world will pay the price of chaos if the USA is forced to withdraw from being the ‘world’s policeman’.
Though I’m not with Batra on abandoning free trade, his arguments are strong and interesting, and I think they’re behind this sudden emphasis on tariffs.
Tariffs will only work though if they’re maintained for years, convincing corporation to return manufacturing to the USA, which is supposed to be the goal here. They shouldn’t be simply used as tools of punishment for nations newly perceived as economic enemies (Canada, Mexico, the EU, etc). The North American free trade agreement between the USA, Canada and Mexico, for example, which has led to a complex infrastructure between the 3 countries, will have to be, more or less, abandoned if a Batra-style restoration of the USA is to happen.
My own objection, by-the-way, is not economic. Though free trade has obviously been the biggest factor in the rich getting much richer over the past 30 years, it is at the same time (through the creation of the WTO, etc) gradually forming the foundation for a future world government, which the world badly needs, and which will come eventually, one way or another. For it to come without war, the traditional way of expanding empire, I think we need ongoing free trade.
A part of me would like to see Batra’s ideas in action though, if only to see if he is right. But it’s hard to imagine Trump keeping a ‘steady as she goes’ path for years into the financial future, which will be required for this to happen. His choice though for finance secretary, Scott Bessent, is probably the most qualified of of Trump’s appointees. We can be sure, at least, that he understands what is going on.
Alan Conrad 