Fredric Bastiat & Economic Sanctions – December 16th

Both today and yesterday Jason had a golden opportunity to share Fredric Bastiat with his listeners. Yesterday it was during his coverage of the Council for Obsolete Industries. I guess it was little more than a passing comment about a group of people in Australia making the satirical argument wagon builders and candlestick makers should be bailed out too if the government bails out the taxi cab industry. It’s brilliant, but not quite original. Fredric Bastiat made essentially the same arguments over a hundred and fifty years ago titled, “The Candle Maker’s Petition.” And it is a riot.  Bastiat was a very clever and clear thinker and a forerunner to the Austrian School of Economics. He was the first to hit upon the notion of a subjective theory of value, though it was left largely undeveloped until Carl Menger, Eugene Bohm Baverk, and Ludwig von Mises came along.

Before Bastiat, the Labor Theory of Value held sway thanks to Adam Smith. And it is, by the way, the Labor Theory of Value that gives credence to the theories later developed by Karl Marx. Without the labor theory of value, Marx’s theory of exploitation has no base on which it can be built, and without that, the whole thing comes crumbling down.

Bastiat asked the question, “Do men dive for pearls because they are valuable? Or are pearls valuable because men dive for them?” The answer should be obvious. In appraising a pearl no one cares how much time the diver spent searching or to what depths he had to go in order to find it.  The pearl is valued only according to the subjective value scale of the buyer or potential buyers.  You can read some of Bastiat’s work here for free. Or here. At the second link you’ll find another link where you can buy his work in hard copy, though not necessarily hard back.

And then today, Jason actually quoted Bastiat, “Where goods don’t cross boarders, armies will.” I do not attribute any intellectual dishonesty to Jason, he might not remember where he read this, or maybe he forgot, and it is possible he didn’t know that Bastiat had uncovered this truth.

Now there are a few questions concerning sanctions when it comes to trading with slave camp states such as N. Korea. Certainly trading with them is preferable to merely giving aid in exchange for nothing. Kasparov’s book has chipped away at my steadfast resoluteness in opposing sanctions. He points out the people of Russia don’t benefit from selling oil and gas to Europe, only Putin and his close circle of friends and supporters. Thus he argues oil should be shut off until they start behaving. I’m still highly skeptical of this, but maybe this is a possibility, if an embargo was put into place for one winter, maybe that would hit their pocketbook at get them to turn around.

In the case of N. Korea, a truly slave state, let’s think of how we respond to a man who had slaves and sought to trade with us. We want him to emancipate his slaves, but we are unwilling to use force. What should our trade policy be? If we trade, are we supporting slavery? If we do not trade are we contributing to the starvation and misery of the slaves?

Some would say if we don’t trade we should at least give food to the slaves for their sake. Others would argue we should not give any support, and hope the misery of the people incites them to rebellion and revolution. This latter view seems somewhat plausible. However, if we give them food, why not take something in return? Why not trade?

I should digress for just a minute to raise the question of where this food comes from; the U.S. government doesn’t grow food. They have to get it from somewhere. The answer, as far as I know, is they buy it on the market. But with what? Again, the Government doesn’t have their own money, they take it by way of taxes. So now we’ve entered into a moral dilemma with serious questions at both ends. Feeding starving children in N. Korea is a noble and honorable venture, but doing so through such means raises serious concerns.  Suppose a thief broke into your mother’s home, stole all of her jewelry, sold it to a pawnshop, and then gave the money to a battered women’s shelter. Would he be any less guilty, any less a criminal, any less a thief because of what he did after the fact?

What about the hypothetical slaveholding neighbor of ours. Might we steal food from the farmer next door to feed those held in chains across the street? I don’t think anyone would advocate this. We might take up a voluntary collection at the church meeting, but stealing from one person, even if it is to give to another, is still unethical and immoral.

So then, the question has been breached but it still stands. We can trade, we can isolate them entirely, or we can take up collections to send food. Taxation to feed the N. Koreans is off the table.

Those in power are mostly concerned with stability on a fulcrum. they want the regime in power to either be stable enough they do not start a war in the region, or if they become unstable, to do so to the extent and in a quick enough time frame the regime can be toppled before those in power cause too much damage.

When we don’t trade and we don’t send aid, the misery is palpable. Nevertheless, the leaders, or slave masters, can say, “Ah, look, we are all in this together, the other nations are conspiring against us and they seek to have us undone, but through my leadership we will get through.” When we give food aid, the people eat because of Kim Jung Il’s (now Kim Jung Un’s) masterful diplomacy at the negotiating table. In both of those cases, the leader has some benefit to himself he can magnify through his propaganda.

But what about trade? Even in a slave camp, if the people are able to eat by the sweat of their own brow, it gives them some semblance of independence. They know they vanquish hunger through their own efforts; is it possible the idea might creep in they are also able to vanquish their oppressors by their own efforts?

As far as the leadership goes, it takes rifles out of the hands of the guards and puts them to work in industry. If no trade is taking place, the most effective place to put 200,000 restless men is in a disciplined army as a police state, to keep the rest of the population under control. Whatever industry there is, is to produce tanks, missiles and submarines (N. Korea has more submarines than any other country by the way). But if the market is opened up to them, maybe instead of 1.2 million men in the military there might only be half a million in the military and the rest allowed to work. Instead of building tanks and subs, they might start building shoes, skateboards, tennis rackets and fishing poles.

If markets are opened up, it is the market directing production within N. Korea. Not quite the same as it does in South Korea but the market will have an influence. If there is no market for N. Korean goods, then the dictator is in total control of everything that happens in the country.

By changing our policy towards N. Korea, we would transform the country from a military dictatorship to a multi corporation conglomerate with the dictator as the C.E.O.

And it would fail. There’s no doubt about it. There would be shortages of inputs, and misallocations of resources. But the fact they would be trying to produce for the rest of the world would change the mindset of the leadership. And this would lead to reforms. A rudimentary market might emerge, the labor market would be redefined, the role of party status would decrease, and the role of ability and leadership would increase in determining who ran the plants.

Overtime the command and control economy would break down, the same way it did in China.  Not to say China is a “free” country by any means, but people in China live exponentially better than N. Koreans. Every year thousands of Koreans are killed or sent to labor camps for attempting to cross into China.

So. Do we trade or not? If the people of N. Korea were in any position to overthrow the regime, it might be feasible to cut off all support and wait for a revolution. Sadly, there is no hope of this in the foreseeable future. Therefore, unless you’re willing to advocate for 5, 10, maybe 15 years of isolating the N. Koreans, and see millions and millions starve in the meantime, we should open up trade with them. It is the best chance at liberty in our time for the Koreans and it is the only ethical and humane option available.

Sanctions on our allies.

I’m glad I got to cover that, but sadly this isn’t what was brought up in the show. During last night’s debate, some bonehead said we ought to impose economic sanctions on our allies if they are unwilling to carry the military burden in the Middle East. Can we even impose sanctions that would be more expensive than the cost of fighting a war? I won’t use any precise numbers here because I have no idea what allies we are talking about, but let’s just suppose it takes a billion dollars to engage in the conflict for 1 year. So, we put sanctions on them costing 900 million a year. That won’t make them move. What if it’s 1.2 billion worth of sanctions? No. And the higher the sanctions go the more it hurts U.S. interests and business. I’m not sure there is an ally besides Canada so heavily dependent on the U.S. economy we could unilaterally pressure them into such an expensive endeavor as war. Unless we are calling China an Ally now?

It isn’t just wrong, it’s impossible. And it’s stupid.

Of course, Jason covered many more subjects, and as always, I urge you to listen to his show. But I’m going to wrap it up with this one. I’ve decided it might be best to only pick one subject and stick with it. This makes it easier for folks who haven’t heard the show to follow along, and gives them more incentive to listen.

1 thought on “Fredric Bastiat & Economic Sanctions – December 16th”

  1. Generally, it isn’t the business of the US government to ‘fight evil’ or to bring about misfortune to social systems it disapproves of, nor is it its job to monitor and regulate the behaviour of US civilians abroad, thus any abrogation of trade is a purely moralizing campaign and beyond any authority of the US government to regulate. Neither to police nor to protect, either foreigners or Americans, is any business of the US government anywhere abroad.

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