Free Market Fallout
It is no surprise that Patrick Buchanan has chosen to begin his next campaign for president with a book that blames free trade for all of America's problems. What is surprising is how ordinary, even restrained The Great Betrayal is. For the most part it is no worse than -- indeed is largely based on -- the sort of thing you can read all the time in the Atlantic, the National Interest, and other respectable journals. If Buchanan is prone to logical whoppers, garbled statistics, and warped history, he is no different from many other people who imagine themselves well informed -- although he is unusual in regarding the rising number of working women as a key barometer of America's decline, and perhaps also in concluding that imports, by driving down wages and thus forcing women into the labor force, have directly caused "broken homes . . . delinquency, vandalism, crime."</br></br>Let's get the economics over with quickly. Buchanan believes that thanks to free trade America is squandering its capital abroad; that thanks to imports, bank loans, foreign aid, and U.S. defense expenditures overseas, "too much of the seed corn of the U.S. economy is now being exported all over the world." Never mind the details (though he gets many of them wrong): Underlying this whole worldview is an almost ridiculous conceptual confusion. Apparently neither Buchanan nor his fairly extensive brain trust has noticed that the United States is a net importer, not exporter, of capital -- that we are able to run a trade deficit precisely because foreigners are investing more in the United States than we are investing abroad. (This is not abstract theory: It is a matter of unarguable arithmetic.) Once you realize that capital is flowing into the United States, not out of it, just about everything else in Buchanan's argument falls apart -- unless you somehow think that when an American company builds a factory in Mexico, that counts, but when a German company builds a factory here it doesn't.</br></br>Anyway, it is clear that Buchanan has little patience for close economic analysis: His chapters on the subject have a dutiful feel, and one suspects that if he wrote them at all he did little more than transcribe extensive notes prepared by other people. What Buchanan loves -- and I think this is genuine -- is political history. Most of the book is, in fact, not about modern economics but about 19th-century political debates over U.S. trade policy. It has often been said that Buchanan wants to turn the clock back; this book certainly reveals him as a man who loves our past, with a passion that verges on the -- gulp! -- scholarly.</br></br>But he does not love all of America's past. In fact, reading the book I found myself wondering where a rather large chunk of our history went -- namely, the great postwar boom. His book skips without a pause from the Trade Agreements Act of 1934, which he correctly identifies as the beginning of our long move toward free trade, to the economic difficulties of the later 1970s. Yet his own chart of U.S. tariff history shows that the great bulk of America's move from protectionism to free trade took place between 1934 and 1960, even though he chooses inexplicably to consider the relatively small tariff reductions since 1967 as defining the "free trade era." And surely the prolonged era of unprecedented growth that took place as tariffs declined should at the very least count as evidence that liberalizing trade does not always produce evil effects. Indeed, most people who bemoan the current state of the nation look to the economy of the '50s and '60s as exemplifying the kind of broadly spread prosperity we would like to recapture.</br></br>Yet Buchanan prefers to pretend that the whole period never happened. What he wants to restore, instead, is the pre-New Deal American economy -- an economy that achieved impressive growth (although he may have forgotten that this growth was fueled in large part by massive immigration!) but also produced widespread misery and vast inequality. Perhaps he loves the distant past too much to find any virtue in times within living memory, or perhaps he dislikes the welfare state too much to acknowledge that Franklin Roosevelt's legacy could have had any positive side. Or perhaps, just perhaps, Buchanan is less populist than he claims to be: He may put "social justice" in his subtitle, but he actually seems to long for the good old days when the gap between rich and poor was even wider than it is today.