Protectionism, War, and the Southern Tradition

0:00Politics, like war, robs words of their meaning. This is especially true of the language of economics. For example, economists know what investment means, and that it's good for the economy. But the Clinton administration uses investment to mean its profligate spending projects, which are, of course, harmful to the economy. In 18th century America, our forefathers knew what was meant by the word rights. When Thomas Jefferson and others used it, it meant limitations on government power. In today's America, however, the word rights becomes synonymous with government power. A violation of rights has come to mean the exercise of liberty.

0:46So it is with the phrase free trade. Politics and in particular that most concentrated form of politics, war, have ruined its meaning. In the 18th and 19th centuries the term described the economic regime under which people can buy and sell across borders without penalty from the government. The case for free trade was the case for free markets. When the government interferes in the freedom to contract it benefits some, that is powerful special interests, at the expense of others, that is the people. Under free trade on the other hand the general good is served. Essentially free trade was not like mercantilism, where the government monopolizes and otherwise hinders the right to trade across borders. Free trade was not like an export policy, where domestic producers are subsidized so they can push their goods on unwilling consumers abroad. Free trade was not like a producer policy, where large producers conspire with the government to decide what goods will be allowed to cross borders. Free trade was not

1:49Free Trade was not like an industrial policy where large corporations are given investment guarantees in the disguised form of aid to foreign regimes. Free Trade was not like imperialism where a more powerful government imposes its will on a less powerful one through intimidation and force. Free Trade was an ideal that grew out of the vision of liberty. The same freedom that governs the market at home, its proponents believed, ought to govern trade across borders. Just as private parties negotiate their contracts for goods and services at home, they would do so abroad. In the 18th and 19th century, to be a free trader meant to apply pressure to try and bring about this ideal through intellectual persuasion and political lobbying.

2:34Free traders brought that pressure to bear against their own government. That was where their moral obligation began and ended. What about the term protectionism? It meant government manipulation of trade on behalf of particular interest groups. Governments can do this alone by erecting tariffs, quotas and sanctions. Governments can engage in protectionism in cahoots with other governments, as in NAFTA or GATT. But however it is achieved, protectionism constitutes intervention in the natural order of liberty. To be consistent with history and theory, people who claim to favor free trade should be agitating against the U.S.'s protectionist policies and U.S.'s support of the protectionist policies of others.

3:20Instead, many of the so-called free traders devote their energies to lobbying for NAFTA and GATT, which represent the opposite of free trade. These agreements are mercantilist because they exalt the right of government to hinder trade. They support an export-driven policy under which producers are subsidized. They embody industrial policy where large corporations are paid off. They are imperialistic with regulations on labor and the environment to be harmonized across borders. How did this all begin? When did free trade come to mean its opposite? As with so much else it was the Second World War that changed everything. The trust and deference that the American people gave the government during the war spilled over to the post-war plans for Carving Up the Spoils.

4:11At the Bretton Woods Conference in 1944, trade came to mean investment guarantees and global bureaucracies and status treaties between governments. This was central planning exalted to new heights. As F. A. Hayek wrote in the neglected conclusion to his 1944 book, The Road to Serfdom, quote, if international economic relations, instead of being between individuals, become relations Ludwig von Mises concluded his 1944 book, Omnipotent Government, The Rise of the Total State and Total War, with a similar warning. The establishment, he said, of an international body for foreign trade planning will end in hyper-protectionism. These two great free Murray Markety has understood how government uses the period immediately following a war, as it does the war itself, for state power and special interest rewards.

5:12The Wilson administration had attempted this after the First World War. An early draft of the League of Nations Treaty included a World Trade Tribunal. After the Second World War, Mises and Hayek did not want such a thing to be imposed on us. Instead, they wanted to recreate the 19th century ideal. And thanks to the work of Mises and other partisans of the free market, when the Truman administration emerged from negotiations in Havana with something called the International Trade Organization, free market advocates were ready. We had had the World Bank and the International Monetary Fund foisted on us, but free traders did stop the ITO. The lobbying efforts of Philip Courtney under the influence of Henry Hazlitt proved definitive.

5:57In his book, The Economic Munich, Courtney explained the dangers of turning over trade policy to an international body. In the long run, he said, a centralized trade authority will globalize protectionism. Courtney cited the Charter of the International Trade Organization to make its point. It endorsed demand-side management and full-employment policies, which Courtney rightly regarded as code words for government planning. Thanks to such intellectual leaders and the old right in Congress, the ITO went down to defeat. Of course, during the debates, the elites never missed a chance to smear ITO opponents, and the language of trade was permanently subverted. Advocates of global bureaucracies began calling themselves free traders. The ITO, they said, would save free trade from itself just as the New Deal had saved capitalism from itself.

6:49The opponents of world bureaucracies, no matter how much they favored free trade, were called isolationists, protectionists and nationalists, words drawn from recent war propaganda. As true believers in trade, the old right would not accept the term isolationist, and as opponents of mercantilism, of course, they rejected the word protectionist. But they did not oppose the term nationalist, and I use nationalism in Clyde Wilson's sense of patriotism. They were nationalists, in fact, of the sort that Mises had praised in his 1919 work, Nation, State and Economy. They believed with him that, quote, no people or part of a people should be held against his will in a political association it does not want. Centralizing bodies managing trade are, of course, not compatible with self-determination, even if erected in the name of free trade.

7:39In holding this view, the old right was in a great American tradition of southern free traders from Jefferson to Calhoun. This tradition was not rooted in an internationalist ideology, obviously, neither did its proponents push for global treaties that violate sovereignty. The tradition was based on a hard-nosed understanding of the nature of power and a devotion to federalism and local control. When power is centralized, they argued, it expands and will be used against the people. The best way to limit power is to limit centralization. For example, it is in the economic interest of smaller political units to maintain open trading relationships. The larger the political unit, as Hans Hoppe has shown, the more inviting a policy of autarky can appear.

8:24The Southern free traders link their economic doctrine with states' rights as embodied in the Constitution, and with a non-interventionist foreign policy and severe limitations on what they called consolidation that is centralization. These ideas meld in on a theoretical level because they speak to the right of individuals and communities to be free from the arbitrary power of distant rulers. One of the reasons the Declaration of Independence gave for overthrowing King George III was that he was quote, cutting off our trade with of All Parts of the World." Jefferson presents a more elaborate argument in his 1774 essay Summary View of the Rights of British America. The outrages of the Sugar Act and the Towns and Duties demonstrated that Britain was willing to use coercion to deny Americans the liberty to trade, meaning to buy and to sell from whomever they pleased. Jefferson regarded this as the essence of tyranny intolerable enough to warrant a violent overthrow of the government. Single Relax if tyranny may be ascribed to the accidental opinion of the day," he wrote in 1774, but

9:27a series of oppressions begun at a distinguished period and pursued unalterably through every change of ministers to plainly prove the deliberate, systematical plan of reducing us to slavery. To ensure the right of trade among other rights, the founders established not a central government but a federal one. It was a union among states and these individual states who would protect Trade became an issue again in the debates on the Constitution, however. The so-called Federalists, actually the Centralizers, accused the states of erecting barriers to trade under the Articles of Confederation. This was among the most serious accusations that could be made and implied that the states were doing to each other what King George had done to The Federalists argued that the Constitution was necessary to bring about free trade among the states.

10:22In particular, they argued the Commerce Clause would be the essential guarantee of a free flow of goods. The Anti-Federalists, really the Anti-Centralists, and of course the official moniker as being another example of the misuse of language, countered that the Commerce Clause conflicted with another value of preceptive American liberty, that is, states' rights. The Anti-Federalists warned that the freedom of trade, like all freedoms, was best protected by the decentralized Articles of Confederation or something similar, rather than by a new central government with new powers, especially the power to conduct trade policy. The Anti-Federalists argued that this clause could and therefore would be abused to the advantage of one sector as opposed to another. But the Constitution passed upon James Madison's promise that this would never be so.

11:10The Commerce Clause, he said, would forever be used to protect the liberty of every American to trade in an unhindered way with every other American. Of course, history did not turn out that way. After the overthrow of the King, the partisans of Northern industrial and banking interests began agitating to abandon the principles of the Declaration. The Hamiltonians wanted the powers of King George to be exercised by the President in violation of the principles agreed upon in the Constitution. Their goal was the enrichment of special interests, manufacturing and banking at the expense of the southern states. The great statesmen of the first half of the 19th century, free traders to a man, were devoted to stopping the Hamiltonian policy of executive power, entangling alliances in war, taxes and protectionism to benefit northern elites.

11:59These men combined the best of nationalism with a principal devotion to free trade and to private property. The Old Republicans wanted the political victory of 1800 years to roll back the centralizing that had taken place since 1787. Their goal was to secure a permanent victory over the Hamiltonians who were both pro-state and pro-war as well as pro-tariff. Among the greatest of the Southern Republicans was John Randolph of Roanoke, the aristocratic libertarian. He said, quote, let us adhere to the policy laid down by the second as well as by the by the first founder of our republic, by the Camillus as well as the Romulus of the infant state, to the policy of peace, commerce, and honest friendship with all nations, entangling alliances with none." He was among the earliest and most hardcore of all the anti-protectionists of the Old South. His reasons were part philosophical, part economic, and part political. As a partisan of states' rights, he saw no justification for granting an external power the right to

13:00to Interfere with Commerce and the Use of Private Property. Yet Randolph was also a nationalist of a particularly American sort. Quote, when I speak of my country, he wrote, John Brockenbrough, I mean the Commonwealth of Virginia. I was born in allegiance to George III. My ancestors threw off the oppressive yoke of the mother country, but they never made me subject to the New England in matter of spiritual or temporal, neither do I mean to become so voluntarily. Another great old Republican was John Taylor of Caroline. He was not only a brilliant political philosopher, he led the opposition to the Northern Protective Tariff. Quote, give us a free and open competition in our own market, he said, and we fear not to encounter like competition in the general market of the world.

13:46Taylor saw the tariff as part of the apparatus of status domination. The interest groups behind it were Northern industrialists who wanted to feed their private greed at public expense. Expense. Rather than selling their wares on a level playing field of free competition, they sought government privilege. In 1821, the Congressional Committee of Manufacturers issued a report calling for protective tariffs to expand industry. In today's language, they call this growing the economy, expanding trade, knocking fair trade, or any of a number of other chivalettes used to centralize trade authority. But Taylor saw the real motive of Tariffs, they were a power grab. But the manufacturers sought to gain what would come at the South's expense in two respects. First, economically, the tariff harmed agriculture and transferred wealth. Second, politically, it was contrary to the free trade sentiments of the Old South, and it subverted Southern rights of political self-determination, and was therefore a violation of the original Federal Compact. Taylor was a lover of peace, so the

14:49The industrialists were his natural enemies. As is so often the case, the pro-tariff party was also the pro-war party. The industrialists favored Hamilton's attempt to foment a war with France to enhance the executive. Taylor noted that the industrialist's 1821 report complained that, quote, we flourished in war and are depressed in peace because manufacturers then flourished and now are depressed, unquote. They hoped that the tariffs would similarly really enhanced their profits. Only today's war and tariff party were half that honest. Taylor responded as follows. They say, he said, quote, we flourished in war. Who are we? Not the people of the states generally. They were loaded with taxes, deprived of commerce, and involved in debt. The families which flourished during the war were the contracting and industrial families, the latter by loans and premiums and by selling the wares of their factories had a profit for 50 or 100 percent of them.

15:47Had the great family of the people flourished, said Taylor, they would not have failed, pay peace and trade, unquote. The industrialists wanted to revive what Taylor had called the, quote, property transferring policy which operated so delightfully in war, unquote. Taylor said, quote, it is a consequence of war to transfer property, and this has hitherto been considered one of its evils, unquote. But the Northern industrialists wanted to redefine redistribution as a virtue of war, with themselves on the receiving end of the loot, of course. A third great Old South free trade theorist was John C. Calhoun. He too denounced the tariff imposed by the Northern usurpers, quote, By a perversion of the powers of the Constitution, which was intended to protect the states of the Union and the enjoyment of their natural advantages, they have stripped us of the blessings and other things bestowed by nature and converted them to their own advantage, restore our advantages by giving us free trade with the world and we would become what they are now by our means

16:49the most flourishing people on the globe." Contrasting himself with his opponents, Calhoun said, quote, we want free trade, they restrictions. We want moderate taxes, frugality in the government, economic accountability and a rigid application of the public money to the payment of debt. Calhoun granted that the Constitution allowed the central government to impose a duty on imports for revenue purposes. But his analysis of power politics led him to believe that more was involved. Neither the tax imposed nor the revenue collected were being used for the general interest. They were being used by one group to destroy another. The tariff therefore violated the Constitution by benefiting one group at the expense of another without not the exploited group's consent.

17:38Calhoun was, in addition to all his other achievements, an impressive economic theorist. He defended free trade as necessary to the division of labor. As he explained, the South has, quote, from Soil and Climate, a facility in rearing certain great agricultural staples, while other and older countries, with dense population and capital greatly accumulated, have equal facility in manufacturing various articles suited to to our Use, and thus a foundation is laid for an exchange of the products of labor mutually advantageous." The tariff, he argued, acted as a tax on this trade, and a tax hurts the producer, he said, whether it is laid on the vendor or the purchaser. It doesn't matter whether the tax is a consumption tax or a production tax, in the end it hurts production because, as he said, the tax must always eat into profits and therefore future capital.

18:28The effect on us is to compel us to purchase at a higher price both what we obtain from them and from others without receiving a corresponding increase in the price of what we sell. Calhoun developed a unique way of thinking about the tariff that turned it into a populist issue. If the tariff is one-third, it is the same as the government taking one-third of what producers raise in cotton, rice and tobacco. Whether the goods are coming into the country or leaving at a tariff of one-third is a theft of one-third. To Calhoun this meant that one-third of the toil and labor of the people of the South was being transferred to the North to build Northern industry and to feed a hostile government. Quote, we are the serfs of the system, he announced, out of whose labor is raised not only the money paid into the treasury, but the funds out of which are drawn the rich rewards of the manufacturer and his associates in interest. Their encouragement is our discouragement.

19:24The survival of the South is at stake in this issue, we said. The last remains of our great and once-flourishing agriculture must be annihilated in the conflict. In the first instance, we will be thrown on the home market, which cannot consume a fourth of our products, and instead of supplying the world as we would with free trade, we would be compelled to abandon the cultivation of three-fourths of what we now raise and receive for the residue whatever manufacturers who would then have their policy consummated by the entire possession of our market might choose to give. Free trade, Calhoun believed, represented the ultimate safeguard of Southern political rights. Without such trade, the South would become a captive nation and served for a cabal of Northern industrialists tied to and dependent upon government power.

20:11His solution, of course, was to assert the right of interposition, whereby South Carolina would stand as a buffer between the individual and the central government. To protect the Constitution, that is, Calhoun advocated, Disobedience to the Central Government Let's compare Calhoun's arguments against the tariff of abominations with Jefferson's summary view. Both argued against violations of free trade. Both argued against a centralized government. Both argued that tariffs were taxation without representation. Both argued that this is tyranny, and both argued that radical means were justified in overthrowing the oppressor. This is one of the reasons that the founding fathers of the Confederacy felt themselves to be the heirs of the original founders.

20:57Tariff taxes precipitated both independence movements, and both were based on the view that liberty, free trade, and nationalism were of a piece. If Randolph, Taylor, Calhoun, and their followers had been able to repeal the tariffs and prevent their reimposition, the war between the states might never have occurred. Our best young men might not have died, and our nation might still be free. Instead, after a reprieve in 1833, the central government engaged in more and more trade protectionism and centralized tyranny, which helped lead to war. In his seldom quoted first inaugural address, or I guess I should say seldom quoted except here, Abraham Lincoln pledged no, quote, no bloodshed or violence, but he also promised to, quote, collect the duties in the impost no matter what. He effectively announced he planned to tax the South to death, and as soon as he was able to do so, Lincoln imposed the highest tariff in U.S. history, doubling the rates to 48%.

21:54It's no wonder that when Edmund Ruffin fired the first shot in the beginning of the war between the states, he aimed at a customs house for some time. The war is also appropriately called the War of Northern Aggression, and one aggression occurred in 1861 with the passage of the Morrill Tariff. South made the choice for liberty through secession and the Confederate Constitution a marvelous document, specifically for bad high tariffs. The beginning of the war, a revealing Boston newspaper editorial accused the South of the gravest crime of all, which the editorial has called the cause of the war.

22:41The South, said the editorial, wanted a system, quote, verging on free trade. If the Southern Confederation is allowed to carry out a policy by which only a nominal duty is laid upon imports, no doubt the business of the chief northern cities will be seriously injured. Alas, the South was not allowed to carry out its policy of free trade, and the nation paid a terrible price. It is a price that we are obviously still paying. And we're repeating the same errors with regard to current trade policy. Despite the rhetoric we hear from Washington, there's no threat that free trade is going to break out any time soon. A true regime of free trade, as Murray Rothbard has pointed out, would be greeted by Washington, DC with about the same enthusiasm as a repeal of the income tax.

23:28Let's consider the linguistic categories that govern the great trade debates of our time NAFTA and GATT. The media and the government have successfully created a political split of Manichean proportions. On one side we have the representatives of pure light, multinational corporations, every executive branch agency, the leaders of both parties in both houses of Congress, the media, all the ex-presidents, respected public intellectuals, beltway think tanks, professors at every top university, sort of the trilateral commission, right? They're called the free traders. On the other side, we have almost everyone else. Public opinion has been solidly against both NAFTA and GATT, at least before it has been shaped by those on the other side. We can add to the public a handful of columnists and academics who have actually bothered to look at the documents in question.

24:20The people of light say that this latter group represents the forces of darkness, isolationists, nationalists, reactionary opponents of free trade and progress. Let's look at how this reality changes this conventional grouping. NAFTA established a trade bloc primarily to benefit government-connected corporations and banking interests. It invested new powers in the executive to interfere with trade from non-North American nations. It's a natural consequence of NAFTA that the U.S. government would threaten trade war with Japan. It's a natural consequence of NAFTA that the U.S. would set up a multi-billion dollar fund to support the Mexican peso. It's a natural consequence of NAFTA that unprecedented levels of foreign aid would flow to Mexico City.

25:06Like Hamilton's domestic policy, NAFTA is status to the core. It tells us that we cannot reduce regulations on labor and the environment to attract investment. Not only that, the Congressional Research Service tells us that under NAFTA, we cannot reduce regulations on labor and the environment even to retain investment. The Labor CIDA Court tells us we are to have equal wages between men and women, which not even Hamilton would have favored imposing by executive fiat. The NAFTAites tell us that we retain our sovereignty under NAFTA. That's partially true. We retain our sovereignty to increase restrictions on business, to increase labor and environmental regulations, but we do not retain our rights to reduce them without monetary and trade penalties from tri-national secretariats.

25:52NAFTA is imperialist. It preaches to other countries about what kinds of laws and regulations they should have, the social democratic mixed economy that's impoverishing us. NAFTA is of course not the free trade of Jefferson, Randolph, Taylor and Calhoun. It is trade for the few and not the many, for the particular interest and not the general interest. What about GATT and the World Trade Organization it proposes to establish? Same is true. It is sold as free trade, yet it represents something else entirely. It enshrines the principle of manipulating economies by demand-side management. It embraces so-called sustainable development, The World Trade Organization comes complete with a new ministerial conference, a director general, a secretariat, a plethora of committees, councils, and review bodies in a bunch of very fancy new office buildings in Geneva.

26:46WTO's mission will not be the lowering of trade barriers, but rather its stated goal of, quote, achieving greater coherence in global economic policymaking, unquote. As U.S. Trade Representative Mickey Cantor was toasting the end of the GATT negotiations in December, the New York Times hailed the WTO as the trade equivalent of the World Bank and the International Monetary Fund. Jefferson, Randolph, Taylor and Calhoun were right. Centralized government is the tyrant, we are its serfs. These free trade revolutionaries found the remedy to Tyrian serfdom in a love of liberty and a willingness to fight for it and into passionate nationalism. For Jefferson, Randolph, Taylor and Calhoun, nationalism was the force powerful enough to rally the public against distant rulers. But their nationalism was not directed against any other country, and free trade was a key to this. As Cool at Calhoun said when he wrote to the Manchester Anti-Corn Law League in 1845, quote, I regard free trade as involving considerations far higher than mere commercial advantages as great as they are. It is, in

27:54In my opinion, emphatically the cause of civilization and peace. But civilization and peace are threatened. In Jefferson's day, the tyranny was centered in the British crown. In our day, the tyranny is centered in Washington D.C. and in New York and in Geneva. We're surrounded by D.C. bureaucrats, NAFTA bureaucrats, U.N. bureaucrats, bureaucrats from the World Bank and the IMF and assorted scallywags in the pay of the governing elites. If we are to restore liberty, limited and local government, free enterprise and yes, free trade, we must begin by understanding the power that a legitimate regionalism and an old-fashioned nationalism will have in uniting us against the forces of central control. In doing so, we will stand with the author of the Declaration of Independence, with the Republicans of the Old South, and with the signers of the Confederate Constitution.

28:44Eventually, perhaps, we may also have to stand with Edmund Ruffin.