Capitalism, Conservatism, and Free Trade

Chaos Manor View, Wednesday, July 27, 2016

If a foreign government had imposed this system of education on the United States, we would rightfully consider it an act of war.

Glenn T. Seaborg, National Commission on Education, 1983



It has been a comedy of errors getting my fallen brick wall restored, but I think we’re getting it, and work will start tomorrow.




The contractor we chose to do it, rewrote their contracts for them (they had been recommended by USAA insurance and their contracts thought USAA was going to pay them), went through several iterations of that, then an inspection by their estimator, then signed a contract and gave them a check which they cashed – they were supposed to start Monday. Then Tuesday, but when they came out Tuesday they decided they had underbid. The job was going to cost more. How much more, we asked. I thought the question reasonable, but they had no answer. They’d get back to us.

So today I asked for my money back, and we’ve found another mason, recommended by the wife of an executive producer friend as very reliable, and he says he’ll start removing old bricks tomorrow and get a new wall up by the weekend. So we’ll see, but I have confidence in the people recommending him. But all of this took time. A lot of time.

I’ve also been generating scenes and characters for the interstellar colonization novel. It’s a sequel to The Legacy of Heorot and Beowulf’s Children, and I’m doing a pass through Mamelukes.


image             image

If you haven’t read these yet, you’ll like them. The first two books haven’t looked so much at the problems facing interstellar colony designers. The first Colony was put together by wealthy private members of the National Geographic Society, and they named the ship Geographic. We told some of the story of unexpected problems they faced in the first two books, but they brought all of those problems with them or found them on the planet they chose. Now another ship is coming from Earth. It wasn’t invited or expected, and it will turn out to have been built by a very different wealthy group. Meanwhile, discoveries of biological marvels continue… I think you’ll like the new book, but anyway working on it has absorbed much of my time that wasn’t taken up by plumbing problems, family weekend guests, and the usual chaos of Chaos Manor..


It’s the silly season.

The Conventions haven’t produced any great surprises. Democrats continue to be plagued by hacked emails, and to fear a November Surprise leak of emails from Mrs. Clinton’s destroyed private server; as more than one intelligence officer has noted, it would be hard to respect any intelligence organization that doesn’t have them…

Mr. Trump asked the Russians to give us the 33,000 (according to Mrs. Clinton) emails that the Secretary of State erased from the private server she kept in the basement.  The media exploded. How dare he invite the Russians to hack us? Treason! Treason! But everyone knows that server has been destroyed.  Mrs. Clinton say so.  Thus it can’t be hacked.  If the Russians have these 33,000 erased emails, they did it long ago – a not unreasonable assumption, of course.  Any intelligence service would have had a go at it.  I’m sure the Brits did. It cannot be treason to invite the Russians to give us a copy of whatever they have already stolen.  The fact that grown people, presumably competent, would think Trumps remarks treason says more about them than him.  Hardly unexpected; more like a confirming instance.


Republicans continue to worry about whether Trump can keep the conservative vote. Is he a Conservative? But that question can be answered only if you know the answers to many other questions, because Conservative has become a name for a very large number of competing movements. They have some common goals, but we have no real definition any longer; in particular, we are not at all agreed on what, precisely, is to be conserved.


Capitalism and Conservatism

There seems to be a notion that conservatives must be for capitalism, and anyone not for capitalism cannot be a conservative. Actually, as a few minutes reflection will show nearly anyone, this cannot be true. Capitalism is a tool, and like fire, it is a vital tool but a dangerous master. The purpose of capitalism, and its major effect, is to guide the allocation of resources to produce the stuff the society wants. It does that splendidly; nothing else like it. Socialism tries to allocate resources to produce, if not quality, then at least a “fair” distribution. It succeeds wildly so long as there are plenty of resources. When an army sacks a conquered city, wise officers will try to see that every soldier receives a fair share, and no one hogs all the loot – particularly that the officers do not visibly get a lot more than the men, since the goal is to have an obedient and disciplined army when the looting is finished.

Socialism works fine, but as Lady Thatcher observed, eventually you run out of other people’s money. You have to start taking in taxes, and that increases your costs of government. You try allocating resources through a bureaucracy of experts, and the iron law of bureaucracy soon takes over. If productivity is reasonably high, and the wants of your society are low. It all works like a charm, witness the success of many and many a medieval monastery. Over time the Abbots and Priors and other officials gained appreciable splendors not available to the more common member priests or brothers, but the monasteries were quite stable: the Venetian monastery of San Giorgio Majore endured with the abbots and priors in great splendor for centuries until Napoleon sacked Venice; and even to this day the Monastic buildings and art treasures, while belonging to the commune, are available to the Abbot were he of an inclination to enjoy them – or were when I was last in Venice, although the Monsignor in charge there was also the pastor of a congregation, and spent his time as most pastors do.

But capitalism is not conservative; indeed, to be successful, it must generate creative destruction. Inefficient firms go broke, and their resources are taken over by entrepreneurs who can make better use of them. Conservatives must endure this for the sake of production and efficiency, but the subsequent community destruction can only be deplored. You cannot have a free society without economic freedom, you cannot have economic freedom without a free market, and to that extent Conservatism is wedded to capitalism; but it must always be remembered, unrestricted free capitalism inevitably leads to the sale of human flesh in the market place. If you can’t buy baby parts in the market, someone is restricting your right to sell them. Why? And would it be conservative to end that restriction of your rights?

Enter now free trade. The theory of capitalism leads one inevitably to free trade; but the consequences of free trade can be devastating. Mills close. Jobs vanish. The means of production are shipped somewhere else, to people who will make more efficient use of them. What was made at home is now made elsewhere; when you buy it, the money is gone. It no longer remains in your community. That may be a good thing if goods are that much cheaper, but this is not always the case.

Before overseas competition, Detroit produced some cars that many intellectuals did not like. See The Insolent Chariots as an example. There were domestic competitors, and some of the then many car makers tried the rugged long lasting rather than stylish strategy. My first car was a Barracuda because I bought it for style and performance, but I had only one child at the time. My second was an International Harvester Scout. I loved that car, and my four boys learned to drive in it. I don’t think of a competitor to it: Land Rover from Britain was probably closest. Of course all the International Harvester plants, agencies, distributors, and dealers are long ago closed and dismantled. Eventually Ford made competitors, and I still drive an Explorer. I never bought an insolent chariot with tail fins.

I make no doubt that competition from overseas improved automobiles in the United States, and that various laws favoring unions and local governments ignoring union “organizing” practices had as much to do with turning Detroit from the industrial heart to a wasteland as ever did free trade – but free trade allowed manufacturers to move to Mexico where wages were much lower. Then Walmart pressured them to close their Mexican factories and move the whole mess to China, where wages were even lower, so they could sell stuff in Walmart at lower and lower prices.

Free trade, like capitalism, is a way of getting cheaper stuff; but surely there is more to life than cheaper stuff? Conservatives certainly used to think so.


Capitalism and free trade

Fingleton: ‘For all her alleged smarts and homework, nothing Hillary Clinton has said or done demonstrates that she understands that free-trade theory is based on a model with a highly flawed set of assumptions (full employment, no exchange rate cheating, no cross border investment flows, and so on).’


I highly recommend Eamonn Fingleton’s book In the Jaws of the Dragon


to anyone who wants to understand China’s imperatives, objectives, strategy, and tactics.


Roland Dobbins


Would 15% have saved Detroit?

I had to respond to your query on free trade. You said “Would a 15% tariff on cars have saved Detroit? It would mean that I would have had to pay about $5000 more for my 1988 Ford Eddie Bauer V8 Explorer I bought in 1999. I could have afforded that. And I suspect that I’ve paid more in income taxes sent to welfare recipients in Detroit than that. Is paying people not to work more Conservative than trying to keep their jobs and manufacturing capabilities and potential here, not dismantling it and leaving its former site to rust away Conservative?”
Free market forces seem to have worked against Detroit as it turned out genuine crap for 20+ years – my opinion and the results of the reliability surveys out there as well. By 1999 the tide was turning but the problem with a protectionist tariff is that it doesn’t incent the industry to get better, do things better or do things cheaper. You want quality you buy Honda or Toyota has been the standard setting groups. You want luxury go German or the luxury brands of the Japanese. I admit that for me I owned a US made car only recently and only recently have begun to lust after another American made car (Tesla). I usually buy quality and some luxury. I’ve done German. I’ve done Japanese. But rarely American.
My point – a 15% tariff will do more long term harm to the US auto industry than letting it be gutted for building crap.


So we have better cars, and we’re better off now. Perhaps so, although I suspect there are a lot who don’t agree.


Free Trade

Mr. Pournelle,
You wrote: “What was conserved by turning Detroit into a wasteland? How was that conservative?”
A good question. It seems to me that Ricardo’s argument would be most persuasive for people who are confident they themselves won’t be the ones to pay the cost. “We can all bear philosophically with other people’s misfortunes.”
On either side of the argument, I’d want to be alert to unintended consequences. On the one hand, the idea of an island of economic prosperity surrounded by failing states is disturbing; one odd consequence of “free trade” seems to be some transition of other countries out of a pre-industrial economy. Though what they seem to be transitioning *into* seems too much like Dickensian Victorian rapacity. Although, perhaps that’s a necessary stage in growing out of the abject poverty of most of human history. Though on the third hand, how do you keep the profits from being gobbled up by kleptocracies?
In other words, I find myself confused. This is a case in which I am not at all sure what is either just or constructive. I’ll follow your discussion with interest.
Allan E. Johnaon

What we did hasn’t worked too well: doubled the debt twice so that it is now over $50,000 per person (man, woman, and child, employed, unemployed, or just not working) while dismantling the “arsenal of democracy” that won WWI and II. Perhaps that’s it, and nothing could be done, but I doubt that. I do not think many predicted it in 1945.


r.e. “Free Trade”

Dear Jerry,

I’m in general agreement with your thoughts on “Free Trade”.  However,

“The advantages of Free Trade are lower prices for stuff.”

This is not at all clear.  My own inquiries on this matter have led me to conclude that “lower prices for stuff” is mainly a diligently promoted myth spread by the cheer leaders of “Free Trade”.   i.e. the various trade agreements struck by the Bushes and Clintons with one party Communist dictatorships and other institutionally corrupt foreign governments.

Let’s take one minor data point, tools.  PDF versions of Sears Tools Catalogs from the late 1950s and early 1960s are available online in various places.  And so are various US Government inflation calculators. Imported tools of equal quality to the US made tools Sears formerly sold appear to cost more, not less.

“That means they are more cheaply produced.”

If we include radically lowered quality in the definition of “more cheaply produced”, I agree.  Entry level Chinese machine tools are far more cheaply made than nominally equivalent Sears Craftsman products in the 1950s and 1960s.  Both material specifications and workmanship are both far below former standards.

“As the economist David Ricardo wrote, there is a principle of comparative advantage that coupled with free trade guarantees maximum profits for when there are no trade restrictions”

I agree this has certainly worked out for the “Free Traders”, meaning those actively engaged in the process of “buy low – sell high”.   And it certainly helps here to have ready access to almost interest free loans from the Federal Reserve System under the current Zero Interest Rate Policy regime.  I think this is self evidently a major cause of the rising domestic income inequality that various commentators denounce.

In any case the modern dominance of “Free Trade” as either a “Conservative” or “Republican” dogma is extremely recent.  The Republican Party was explicitly founded on protectionism in 1860.  “Free Trade” in those days was promoted by the Slave Power as necessary to their 3d World raw cotton commerce with David Ricardo’s already industrialized United Kingdom.

“Free Enterprise” was much more commonly used and praised among most of the American Right as late as the 1950s – 1970s.   The fruits of these enterprises however were held to be the result of individual and family moral virtues, not government policies.

Best Wishes,


p.s. I also fail to see many – if any –  “Free Market Principles” at work in a “Free Trade” regime that depends on a) a government chartered central bank system and b) stock, financial and commodity exchanges that are functional monopolies thanks to government regulatory protection forming barriers to entry for would be competitors.

= =

As I will comment when I publish this, when I was in 5th grade we learned that “Democrats believe in tariff for revenue only, Republicans believe in protective tariff to keep the South from industrializing.” (There were huge tariffs on manufacturing and weaving equipment.)  Those were the days when the South always voted Democrat.

= =

We learned something similar in the 5th grade in northern Indiana in the 1960s.  This was that northern manufacturers wanted tariff protection from already established and lower cost British manufacturers.

I am unaware of any industrial economies that established themselves under anything other than mercantilist type tariff protections.  And this specifically includes the original example in England and Scotland in the early 19th Century.  David Ricardo’s work was generated as part of the Liberal political war against the Corn Laws and the Tory landowners in the 1840s.  These tariff laws on agricultural produce weren’t repealed until 1846.  This debate was entirely about the scale of the British manufacturing sector, not its kind or type.

I’ll go so far as to challenge any True Believers in free trade to cite just one example of a 19th Century scientific, technological and industrial advance that depended on “Free Trade”.  The William Shockley of the 19th Century was Henry Maudsley.  He and his apprentices launched the machine tool revolution during the Napoleonic era in a solidly mercantilist England.  His screw cutting metal lathe was working by 1800.  David Ricardo and his program didn’t come along until the 1840s when all the new industries were well established.

The traditional common understanding of the economics of the Victorian British Empire as taught as late as the 1960s was incomplete. The whole “workshop of the world” Free Trade idea of England never really existed.  This was the simple explanation that the United Kingdom imported food and raw materials and sent out finished industrial goods for a profit.

AJP Taylor in his History of England 1914 – 1945 cited a Royal economics commission of the late 1920s.  This showed that the “trading” account had only shown one annual surplus since the 1830s.  This industrial deficit at the ‘national’ level was always made up by profits from City of London financial activities in factoring this huge trade, interest and dividends on foreign investments and shipping services.   And as far as I can see fostering this vast expansion of City of London financial activities was always the intent of bond trader David Ricardo and those who promoted his theories.

Capitalists will always try to get government to regulate and impose compliance costs to keep the cost of entering that kind of business high, and thus cut down on competition.  That goes for conservatives who want to preserve the status quo.



Hello Jerry,

This from today’s post on free trade:

I could have afforded that. And I suspect that I’ve paid more in income taxes sent to welfare recipients in Detroit than that.

You have also paid far more to the people who are paid to pay the people not to work, those who are paid to take your money and give it to the people who in turn give it to the people who don’t work, those who are paid to examine every detail of your financial life to ensure that you actually ‘gave’ what they had unilaterally decided was the proper amount, and those who are paid to capture and punish you should your payments—or the paperwork that accompanied your payments—had in some way been in error.  And don’t forget the vacations, medical coverage, and retirement plans for all the above folks that you are paying to confiscate your money and give it to the non-workers.

And that, rather than paying the non-workers, is the point of the whole exercise.

Bob Ludwick


‘Free’ trade and conservatives

Liked your recent posting on ‘free’ trade and conservatism, well said. (although how is giving big corporations the ‘freedom’ to restrict the ability of private citizens to import legal pharmaceuticals from Canada, so that the corporation can maximize their profits, ‘free’?)
There is another point here that I think people forget. The English economist John Stuart Mills once commented that if low prices are due to efficient production techniques, then this may temporarily hurt people with a vested interest in older, less efficient techniques, but in the long run we all benefit. However, if low prices are due to low wages, then it is impossible for the average person to benefit – people don’t become rich by becoming poor. Most of the US trade deficit is not with Japanese and German companies that produced superior goods – it is with American companies that moved American designs and production processes to low wage countries. In other words, the low prices from modern ‘free’ trade are mostly just due to low wages, not technical innovation. In the long run that’s just a race to the bottom for wages.
It also needs to be pointed out that the old mantra of ‘comparative advantage’ only applies to situations like agricultural and only when demand is higher than supply – which nowadays is mostly not true. Agricultural land is in fixed supply and it’s very hard (if even possible) to increase the supply of it. So if I maximize my profits by growing grapes, I will grow only grapes, and someone else could earn a living growing corn, even if in principle I could grow corn more efficiently. But that won’t work for manufactures. If Outer Nowhere has 50 cents an hour labor, ALL the factories can be moved there leaving me with no business at all. ‘Comparative advantage’ is an interesting intellectual exercise but as a guide to modern economics it should be consigned to the dustbin of economic history.
But then I remember the old joke: microeconomics is wrong about specific things, and macroeconomics is wrong about things in general…



Conserving unemployment

The following from your latest update struck a chord:
Quote: “And if you dropped out of the labor force “ no longer looking for a job “ you are no longer unemployed. The unemployment rate just went down. You stopped looking for a job. Of course you don’t have a job, you are certainly not employed, but you aren’t unemployed and don’t count toward the unemployment rate. I wouldn’t have thought that sort of lying to the people by government officials was a very Conservative thing to do at all.”
This is exactly what has happened under the previous two terms of the Conservative-led Coalition, and then the Conservative government, in the UK.
The mechanism that permitted it was the availability of Working Tax Credits which are available to anyone who goes self-employed (a broad definition that encompasses both the traditional definition of setting up in your own business, or working temporary, part-time, seasonal, zero-hours contracts for an employer).
The motive that drove many thousands to “go self-employed” was the horribly punitive and demeaning unemployment welfare system that worked to infantilise and punish job seekers, and often actively impaired their ability to get a job by interfering in a candidates availability to attend interviews, or mandating that they only apply for a limited range of occupations. As a victim of the recession (losing two jobs in quick succession) I went through this system.
I, too, took the chance to jump out of the unemployment welfare system and onto Working Tax Credits (which is administered by the HMRC, another department with a different budget). My “business”, like so many others, was always doomed to fail, but it was better than staying on the dole and being treated like scum for being there.
And the Tories crowed about how they had reduced unemployment. And how had they done it?
Quote: “Of course you don’t have a job, you are certainly not employed, but you aren’t unemployed and don’t count toward the unemployment rate.”
The UK is rife with unrealistic small-businesses that haven’t a hope of earning a living, while their owners subsist on temporary contracts plus some occasional meagre earnings that their businesses actually do generate, all so that they can stay off the horrible, horrible dole. This allows the government to boast of the lowest unemployment rate since records began, and to use this as an excuse to perpetuate a policy of austerity: of ideologically driven cuts and a lack of investment in infrastructure, while busily selling off all the state’s existing assets for low prices. The only things they throw money at are a few high profile projects like High Speed Rail and Nuclear power: projects that only benefit those already in work in highly specialised roles.
This approach solves nothing. I haven’t been able to plan my life, apply for debt, invest in a large purchase such as a house or a car or even take a single holiday of any description since 2007. I am a member of the silent majority of the British workforce, many of whom displayed their anger by making a protest vote in favour of Brexit. I have lost count of how many of those people have expressed remorse for this because they understand that now, with the economic down-turn that must inevitably result from Brexit as we move from being an economy of 508 million to just 65 million, our situation cannot realistically improve for at least a generation.
I see no prospect of the USA avoiding a similar fate, no matter who wins.

Mike Ranson


What is Conservative

Your recent post brought to mind this essay from several months ago:



The models are better than history

Dr. Pournelle,
I am citing the popular article because of the headline: NASA/Jet Propulsion Laboratory. “Historical records miss a fifth of global warming: NASA.” ScienceDaily. ScienceDaily, 21 July 2016. .
The synopsis says pretty much the same thing:
“We show that there is no evidence that climate models overestimate TCR [transient climate response] when their output is processed in the same way as the HadCRUT4 observation-based temperature record.”
What I’m getting out of this is an attempt to discredit the historical record by processing it using the model that was created, from the historical record, to show that temperatures are going up. Guess I’ll have to read the study to see if they decided to rewrite history or discredit the model.
My money is on the butler…


“At the quantum level, reality does not exist if you are not looking at it.”



Roland Dobbins

So Samuel Johnson should have refuted Berkeley by closing his eyes as he kicked the rock ?


Dr. Pournelle,
Unfortunately I think Dr. Ball is right.  Universities have had a long time for your Iron Law to work.   I wonder why it has got so much worse in recent years.  I loved his quote:
Intelligence appears to be the thing that enables man to get along without education. Education appears to be the thing that enables a man to get along without the use of his intelligence.
You may be interested in this recent summary of Andrea Rossi’s efforts in LENR.  The QuarkX appears to be something very different.  1 mm dia x 30 mm long – produces 100 Watts output for 0.5 W input.  Can produce half the output as electricity and light.  (At above 1300C)    I know he has many critics but the facts continue to build up that he has what he claims.  We should know for sure in about six months.
Adrian Ashfield


‘The history of American close air support is a tale of learn, master and forget.’



Roland Dobbins



I think I agree with something I heard Glenn Loury say a month ago. Totally paraphrased, my own version:

There is a way for Trump to turn this election into a rout. And it’s something that maybe no one could do but him. He should be spending 25% of his time from now till the election talking to black audiences. He should be telling them, “You’ve heard I’m a racist. Well, I’m here to talk to you and listen. And I want to tell you that you’ve been voting for Democrats for more than fifty years now. What have they done for you that actually works? Do you know what they’ve done to your schools? How is going to help to give inner city kids a free college education (isn’t going to happen) when the elementary schools didn’t teach them to read, or do math? Do you know that every school in the country, fifty years ago, spent maybe half as much money per student in today’s dollars, and taught pretty much every kid to read? How long are you going to keep voting for people who don’t care if schools can fire teachers who don’t teach? How long are you going to keep voting for people who have agencies in Washington who give orders to every school in the country how they should arrange their bathrooms?  How long are you going to keep voting for people who don’t care if what they’ve promising will actually help? I’m not that much of a conservative; I don’t mind spending money. But I’m not going to spend it on agencies in DC and state governments; I am going to find ways that work.”

Etc. He could do it; he could turn the black community. They don’t care about his “bigoted views” on immigration; they probably agree with him.

(It would help if he would come out strongly in favor of fixing relationships between the police and the inner city. Doesn’t need to endorse BLM; that too could be presented the way Newt Gingrich seems to do it: There’s a serious problem here in many cities, and we need to find a way to really fix it. Picking sides isn’t going to help; none of us wants police that can’t do their jobs, none of us wants police shooting people who didn’t do anything at all. Let’s find a way that works; that ends the war.)


I have never understood why the black community sticks with the Democrats, who are the remnants of the slaveholders and then the authors of Jim Crow.  When I grew up in the segregated Old South, Republicans were so rare there were jokes about it. Lyndon Johnson won them over, and they have stayed with the Democrats. And so long as the media make Al Sharpton and his kind their “Leaders” and consult him when they want a quote on how Blacks think I see no change coming. Trump would do more for the blacks because he needs them; Hillary doesn’t have to worry about their vote.






Freedom is not free. Free men are not equal. Equal men are not free.



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