Steve Bannon’s “Populism” Would Impoverish Working People

I listened intently to the New York Times’s interview with Steve Bannon, the nationalist man of mystery who might be the most influential force in politics today. He is widely credited with bringing Trump to power with his populist message against the establishments of both parties.

Listening to the interview, the appeal of his message is obvious. There is passion, even fire, in his voice. He is dedicated and focused. By his account, he represents the struggle of the common man against the elites. It’s a battle, a revolution, a war, and he won’t stop until the swamp is drained.

What thrill! Who doesn’t like an old-fashioned people’s revolution against the establishment? Who can doubt that the ruling class is corrupt and needs to be upended in favor of a system more responsive to the people?

I’ve been captivated by his ideological moorings for years but never quite had a handle on his core. It’s one thing to blast the status quo. But what replaces it?

What Is To Be Done?

What precisely does Bannon want? Here is a guy who thinks of himself as a Catholic and an American but cites a Nazi theorist as a leading influence on his thought, while denying having any sympathies with white supremacy or anti-Semitism. He dismisses the alt-right as a bunch of powerless clowns. He thinks he has transcended all previous categories of political pigeonholing in favor of genuine democracy.

It’s all very interesting, but once you get beyond the bravado and fireworks, the purges and power grabs, the sweeping talk of revolutionary upheaval, we have to ask the question raised by Vladimir Lenin: What is to be done? Lenin’s monograph made it clear that the one path forward for his own “people’s movement” was to seize the power of the state. This is something that the workers and peasants surely could not do, so therefore there needs to be a vanguard of elites to represent their interests.

What does Bannon want to be done? The answer keeps coming back to one central principle: economic nationalism. In the interview, he comes back to it again and again. He believes that production should be national, not global. He blames shadowy “globalists” for making trade cross borders in ways that harm the American people. His agenda is to punish these foreign bad guys for ruining the American way of life.

How do we punish these shadowy elites, in Bannon’s view? We build tariff walls. We impose quotas on imports. We stop imports in any sector where American jobs are threatened. We get the state to rally around national production even when it could be done for a fraction of the price in some other land.

Trade and You

Here is a great irony: Bannon’s argument is not with some dangerous cabal of globalists who are imposing trade on us. His argument is with the buying habits of the American people. You would rather pay $10 than $100 for a scarf. You want an iPhone for $600 not $6,000. You want sheets, candles, suits, furniture, towels, and electronics at the lowest price possible.

It is because of global trade that middle-income consumers enjoy, at the very least, a 29% higher living standard than they otherwise would. Trade resulted in a net gain of $1 trillion for the US economy in every year since World War II, which translates to $10,000 per household. Low- and middle-income consumers buy more products produced in a global marketplace than the rich, so any interruption would hurt them particularly hard.

Cory Iacono writes:

Low income consumers see even greater gains with 62 percent higher purchasing power as a result of trade. In contrast, the top 10 percent of income earners only saw an increase in purchasing power of 3 percent as a result of trade.

Just look at the prices for clothing that Americans pay, since 1994.

We see a huge drop – and at a time when high inflation has hit education, health care, housing, and other national goods. What else can you think of that has fallen this much over the last 20 years? This is because of trade. Do you want to pay more for your kids’ clothes or less? That’s the real question.

On a practical level, the only result of protectionism is that consumers in the United States pay more. This does not hurt the elites. It doesn’t hurt the establishment. If anything, it grants a subsidy to large businesses that the poor and middle class pay out of their paychecks that haven’t risen that much over the decades. Trade has been an enormous blessing for the very people who are drawn to Trump/Bannon rhetoric.

Protection and Plunder

Look at a sector that has been subjected to intense protection: sugar. Americans pay more than three times the world price for sugar. This is because of import restrictions. This is why your sodas use corn syrup instead of sugar. This is why the pie you buy at the store is made of corn instead of sugar.

The consequences for the American diet have been horrible. Diabetes is 20% higher in countries that rely on corn syrup rather than sugar. In other words, this trade protectionism is not only breaking the bank; it is also killing us.

Not only that, but the result has been job loss. James Bovard writes:

Food manufacturers that use sugar are hostage to a byzantine combination of price supports and arbitrary import restrictions (such as those that torpedoed the Mexican supply). As a result, producing candy and many other food products is far more expensive here than abroad. Since 1997, sugar policy has zapped more than 120,000 jobs in food manufacturing, according to a study by Agralytica, an economic consulting firm. More than 10 jobs have been lost in manufacturing for every remaining sugar grower in the U.S.

Do we really want to expand this model to every sector of American economic life, as Bannon would have it? I don’t think so.

The reason for global trade is that we want it. We prove it every day in our buying decisions. It is a saving grace in times of high taxes, stagnant economic growth, and flat incomes. The irony is intense: Bannon has somehow seized on the one feature of economic life that most benefits the working classes and targeted it for destruction in the name of helping the working class.

His whole agenda can be reduced to one idea: tax working people more. What’s even more amazing is that this is not even a pro-American idea. The Declaration of Independence blasts the king for “cutting off our trade with all parts of the world.” That’s exactly what Bannon wants to do.

Bannon is not a stupid man. He can read the statistics, price charts, and trade flows just like everyone else. Why does he persist? My own supposition is that this isn’t really about economics; it’s about power. His power and that of his friends. Here we find the real beneficiaries of the policies he recommends.

Bannon wants you to believe that some giant conspiracy is the reason for cheap products. If so, I invite you to visit the local WalMart or shop casually on Amazon. See what you do. See the origin of the products you consume. You have met the conspiracy, and it is you.

Bannon’s plan is to take away the choices you make every day in the marketplace. This is not authentic populism. This is a cover for a power grab that will only end in enhancing the amount of power that government has over your life.

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Jeffrey A. Tucker

Jeffrey A. Tucker is Founder and President of the Brownstone Institute. He is also Senior Economics Columnist for Epoch Times, author of 10 books, including Liberty or Lockdown, and thousands of articles in the scholarly and popular press. He speaks widely on topics of economics, technology, social philosophy, and culture.

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11 comments

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  • Jeffrey,
    Writing an article to say that “protectionism harms workers” is like writing an article to say that “water is wet.” Seriously? No shit. Setting up a strawman and then knocking it down is not particularly impressive.
    Why not address directly the argument made by Lauren Southern and others, that when one side in a trading relationship is completely open and the other is protectionist, the side that is completely open is going to suffer.
    https://youtu.be/tRV8GCvzUf8?t=5m40s
    If your goal is to eliminate protectionism on the side of your trading partner, then (1) using the tools available as weapons to inflict pain upon them and thus get leverage in negotiations has a much higher probability of achieving the goal than (2) libertarian virtue signalling about the evils of protectionism.
    From the arguments presented thus far, Lauren has you beat. Please consider addressing her argument directly.

  • Bummer, Alex Ryan continues to re-introduce himself with:
    ‘Writing an article to say that [Jeffrey says] “protectionism harms workers” is like writing an article to say that “water is wet.” Seriously? No shit. Setting up a strawman and then knocking it down is not particularly impressive…’

    After reading the rest of Alex Ryan’s post, I agree with him! That is an accurate assessment.

  • @alexryan
    1) Lol, you talk about straw men and show a video where a lady says that the only people for free-trade at the beginning of the Republic were the slave owners?
    Every exporter is interested in free trade, first because tariff might hit the export, secondly because it will buy cheaper the imput. More generally, before the Revolution, smuggling was the national sport, many of the Framers very good at it and Hancock the champion of all. To counter this lady straw man, i can easily ask you, how come that almost all the white separatists and kkk members are protectionists?
    2) Jefferson is the one of “friendship and trade with all, entangling alliances with none“. Hamilton was indeed interested in tariffs to protect the northern industry, but Jefferson was at the other end of the spectrum. For him some minimum tariff was necessary because it was the only way to maintain the federal government, there were no other taxes around, he would never accepted tariffs to protect useless domestic parassites. Jefferson Party is the original great Democratic Party, the until Bryan Jennings in 1896 strenuously fought against tariffs for protectionism.
    3) the only example of unilateral tear-down of tariffs in recent times I am aware of is the liberalization of Chile, happening a bit in ‘70s and mostly in 1980. In a couple of decades the country moved from being one of the poorest in Latin America, to the richest, with a current gdp per capita of 17.000$, measured at market price. The people most damaged when, say, Japan, put tariffs or other barrier to entry, are the Japanese consumers, not the foreign exporters.
    4) the Trump administration just put punitive tariffs on Chinese import of aluminium foil. Companies using aluminium foil in the US are already shelving plans to expand. There are only two companies producing aluminium foil in the US. One is foreigner and was already expanding capacity because it was working at full capacity. The other, owned by an American and the one that lobbied more for the tariffs, declared that it doesn’t plan to increase capacity, although it is working at full capacity as well. But of course that company already jacked up the prices to its clients. 99% of tariffs are just like that, a plot of local producers to limit competition and increase prices.
    5) what is this collectivism in phrases like “your goal is to eliminate the protectionism…”. Phrases like this imply that you are using the fictious constructs of the statists, “if America wants…”. America does not exist. Americans exist, and the large majority of them do not have any economic incentive to eliminate other countries barriers or tariffs. The worker of the companies exporting might have this interest, in order not to pay the transaction costs change job. Why the rest of the population should want to suffer with tariffs only to avoid somebody else the very temporary trouble to look for another job?
    5) the gdp, and therefore the income, of a country and the individuals living there depends on their productivity. If American companies cannot export, say, cars to Japan, that impacts very little the income of Americans, because the displaced workers can work in something else. The only loss of income is due to a small reduction in overall trade, that limits the gains of comparative advantage. The reduction would be much bigger if instead of having less export to Japan, the Americans would have less import from it.
    6) try to listen to this debate, between the excellent Don Boudreaux of CafeHayek against Ian Fletcher. You won’t find the dumb arrogance of a lady with nice legs thinking that talking fast and dropping out of context a couple of names she can convince the sheeple (she is right in that, btw), but you’ll find a decent, structured debate backed by hard numbers. https://m.youtube.com/watch?v=g_XYaEtlLx4

  • @alexryan
    “when one side in a trading relationship is completely open and the other is protectionist, the side that is completely open is going to suffer.”

    This is completely false. And it has been understood by economists to be a specious fallacy for almost two centuries!

    Trade, voluntary exchange of any sort, is always beneficial to part parties; it never causes anyone any suffering. If trade is restricted so that some potentially acceptable trades do not occur then the benefit, to both parties, is less than it could be but that is NOT suffering.

    If one party is protectionist it both gives up benefits on its own side and denies potential benefits to the free side. Lamentable tho less benefits may be, they are NOT harm or suffering. If the free party responds with restrictions of their own they are just shooting themselves in the foot, making everyone less well off than they could be.

    As economists have known for 200 years, the optimum “trade policy” is unilateral free trade regardless of what anyone else does.

    • This sounds intersting. I would like to research this more deeply. Would you be able to recommend a good source? Thanks.

      • @alexryan

        Tyler Cowen and Alex Tabarrok have written a several very popular economics textbooks.

        In this video, they explain that protectionism wastes resources on protecting less efficient domestic industries and reduces gains from trade, helping protected industries, but bad for consumers, and bad overall.

        Tariffs and Protectionism: https://youtu.be/Gr-Ld7DnBZQ

  • @alexryan – you opened up a real can of worms here. In an asymmetric trade relationship, the open side always wins. (In a free-trade arrangement, the open side wins, too. How about that?) Protectionism causes subsidies to the protected business that come in the form of higher prices to consumers in the protectionist country. The free-trade country gets lower prices, more goods, more services, and a higher standard of living — on the backs of the protected side, which is kept poorer and weaker by its government. This is Bastiat’s “unseen” consequences of protectionism. Tucker explained them clearly but just didn’t label them. It seems to me, if China wants to fleece its own citizens in order to sell us more stuff at lower prices … GREAT! They are paying us to buy their toys.

    • This doesn’t actually answer my question. I am genuinely looking for a plausible alternative to tough negotion tactics.
      To make it concrete. Let’s say that you wished to form a trading relationship with another person. Say an employer. You might, initially, offer to work for a wage less than you think you are worth because you want the relationship. After a period of time, when you have grown your skills and are contributing significantly more value, you believe that you are worth a raise. Your employer says no. You dont want to leave but you do want the raise. What do you do? Would you seriously rule out hard ball negotiation? If you do, what makes you think that people are not going to take advantage of you for the entirety of your life?

  • @alexryan
    “This sounds intersting. I would like to research this more deeply. Would you be able to recommend a good source?”
    Virtually any economics text book will do. It is one of the few topics on which there is almost universal agreement among economists. For a non technical, non text book discussion you can see Chapter 19 (International Trade) of Thomas Sowell’s “Basic Economics.”

  • @alexryan @alexryan What have you done in the past?

    Did you make a honest request in good confidence that you will grow the business so that a bonus makes sense and tests the owner’s needs?

    Indeed what carry forward prototype, impact, image, symbol can you take immediately to another owner c suite type and trade up with? What you got?

    You may want to work on getting something. Sit with the idea. You may already have something that you missed…

    Re: “Would you seriously rule out hard ball negotiation? If you do, what makes you think that people are not going to take advantage of you for the entirety of your life?”

    Case you don’t know it, fear and resentment–you were not really enjoying the surfing–translates to aggression to the recipient…

    Something called a Suicidal expression of unmet needs…translates to not getting what you ask for when you do ask from that frequency energy dynamic…

    How about you offer to buy the business? What could you pull off?

    Maybe provide a project that shows you got the stuff?

    Without building an oasis as opposed to hardball chances are the little timid tortoise mind your boss has–and ultimatly we all do–he won’t want to come out and eat with you…in a division of labor Comparative advantage mkt to the extent that’s remnant

    Without other penguines on the icefloe following your lead, boss penguin probably not going to naturally jump into your pool…

    Any way…

    The hard ball tactic cause you think you will be a doormat the rest of your life is kinda the strategy and self talk that could possibly come true…ouch

    Thought I would share my thoughts…

    As for something tangible that you could do right now, maybe something you could do more of right now is practice a little more care, curiosity…

    And from perhaps that your eyes will soften, your posture will lengthen, you’ll perhaps begin to hold polarities that will make you bigger instead of splitting you…emenate leadership presence and rapport…

    Let me know how this lands on you?

    AtlasAikido

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