True Protectionism vs Crony Capitalism, Parts 1 and 2 of 3

Part 1: Reasons for Embracing Protectionism

Nothing destroys a good idea so efficiently as success—not so much the success of the idea itself as much as the success of those, politicians mostly, who claim to be implementing it. This is why in Russia advocating privatization is more likely to get you punched in the face than listened to  “privatization”[i] having been neoliberalspeak for moving away from Communism by having Russian Communist Jews invite their Western co-ethnics to come and help them loot the nation’s wealth via crooked inside dealing.[ii] Truly moral privatization, on the other hand, would have involved forcefully but gradually dissolving the Communist system by allowing private citizens to begin trading amongst themselves in the open (they had been doing so clandestinely since the beginning of Communism, of course) and without state interference, allowing them to accumulate the experience needed to take the reins of Russia’s economy themselves. Too often sound and noble concepts are like beautiful women born among bourgeois intellectuals and initially admired until given flattering attention by the elites who then rape and whore them until they’re despised and rejected by the masses who have no idea what they were originally like.

Since Trump’s recent ascendance, the same could happen to protectionism, a concept which long before Trump was divided into many different forms, some far less sound than others. Indeed it might be said that protectionism divides the dissident right the way that immigration once divided and is again beginning to divide the Left (the split being mostly between those who want to restrict immigration to help the working classes and those who want to open the floodgates out of misplaced pity for nonwhites and/or outright malice for whites): those who enter the dissident right via libertarianism and retain a (mostly healthy) distrust of the state tend to distrust or outright despise protectionist measures, while those who did not come that route, or who did but have fully burned those bridges are more likely to be willing to give it a go, perhaps even with enthusiasm.

Coming down on the pro-protectionist (though critical of Trump’s variety) side, I hope to explain and defend my position in this essay, which was given impetus by a recent comment by longtime, erudite commenter Lord Shang: Lord Shang’s having worked, by his telling (which I have no reason to doubt), on Pat Buchanan’s election campaign in some capacity back in the ‘90s reminded me of my own journey to the dissident right, which in a slightly uncommon turn passed through protectionism (by way of Buchanan’s The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy) before moving into Austrian School libertarianism and ultimately settling in the dissident right proper. As a nationalist by temperament, I always found Pat Buchanan’s general stance and rationale for it far more congenial than Austrian School free trade, though from familiarity with the latter’s economics in general, I could see perfectly well the shortcomings and flaws of Buchanan’s specific policies. Because of this, I spent some time developing, from the ground up, an Austrian-/axiomatic-/deductive-style of my own, parts of which touch on the nature of protectionism and free trade. With that in mind, let me now lay out what I consider to be true protectionism, following which I’ll contrast it with the nature of the kind of crony capitalism which many politicians tout as protectionism.

To begin, let’s note the major reasons that a nation might want to engage in protectionism—whether protectionism can actually fulfill those goals is another matter, and we’ll deal with that in a minute. But for now, let’s simply lay out the major ostensible reasons for using it. Basically, there are three: economic power, military power, and cultural preservation. Let’s cover the third one, which is kind of the odd one out, first.

Although it was a severe (and self-serving) exaggeration on Karl Marx’s part that “the hand-mill gives you society with a feudal lord; the steam-mill, society with the industrial capitalist,”[iii] there is no doubt that economics and technology exert strong effects on a nation’s culture, for good and evil. The biggest example of this in our own nation and time (though both the effect and notice of it go back to the early United States) might be the rural/city divide with regard to politics and culture, as was starkly on display during all of Trump’s presidential runs: as an anonymously authored article on Identity Dixie has pointed out, if during the 2020 election, carrying a state depended on winning counties rather than the popular vote, Trump would have overwhelmingly won both Texas and Georgia (unlike the actual election outcome, which saw Georgia go to Biden and Trump take Texas by a far-slimmer margin); whether you love it or hate it, the ability of blue-hive cities to inculcate hive-mind thinking is undeniable, as is the tendency of rural folks to lean conservative (in a true sense). And, of course, it’s not simply that those of a leftist temperament migrate to the cities while those of an opposite temperament either stay behind or flee the cities (though that does play a part in it); we all know the stories about kids who had no natural inclination towards the former changing once they became immersed in big city/liberal academic culture during their stint in college. There is a collective cultural pressure in various locales, the magnification or diminution of which will be based on economic policies of the nation that, intentionally or accidentally, tilt the scales in favor of one or the other. As I said, this phenomenon is so old that even Thomas Jefferson commented on it, attempting to explain it in a chapter of his Notes on the State of Virginia:

The political oeconomists of Europe have established it as a principle that every state should endeavour to manufacture for itself: and this principle, like many others, we transfer to America, without calculating the difference of circumstance which should often produce a difference of result. In Europe the lands are either cultivated or locked up against the cultivator. Manufacture must therefore be resorted to of necessity not of choice, to support the surplus of their people. But we have an immensity of land courting the industry of the husbandman. Is it best then that all our citizens should be employed in its improvement, or that one half should be called off from that to exercise manufactures and handicraft arts for the other? Those who labour in the earth are the chosen people of God, if ever he had a chosen people, whose breasts he has made his peculiar deposite for substantial and genuine virtue. It is the focus in which he keeps alive that sacred fire, which otherwise might escape from the face of the earth.

Corruption of morals in the mass of cultivators is a phaenomenon of which no age nor nation has furnished an example. It is the mark set on those, who not looking up to heaven, to their own soil and industry, as does the husbandman, for their subsistence, depend for it on casualties and caprice of customers. Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition. This, the natural progress and consequence of the arts, has sometimes perhaps been retarded by accidental circumstances: but, generally speaking, the proportion which the aggregate of the other classes of citizens bears in any state to that of its husbandmen, is the proportion of its unsound to its healthy parts, and is a good enough barometer whereby to measure its degree of corruption. While we have land to labour then, let us never wish to see our citizens occupied at a work-bench, or twirling a distaff. Carpenters, masons, smiths, are wanting in husbandry: but, for the general operations of manufacture, let our workshops remain in Europe. It is better to carry provisions and materials to workmen there, than bring them to the provisions and materials, and with them their manners and principles. The loss by the transportation of commodities across the Atlantic will be made up in happiness and permanence of government. The mobs of great cities add just so much to the support of pure government, as sores do to the strength of the human body. It is the manners and spirit of a people which preserve a republic in vigour. A degeneracy in these is a canker which soon eats to the heart of its laws and constitution.

The famous running intellectual feud between Jefferson and Alexander Hamilton about what economic path the early republic should tread featured heavily such concerns; and indeed, our present debates may be said to be the (currently) furthest end of a philosophical and economic debate that has been flaring and receding since the founders’ time. Part of the debate, of course, involved purely economic issues, though all the greatest minds (such as Jefferson and Hamilton) taking part in the debate acknowledged that cultural issues are certainly at stake as well and must be addressed—though addressing them is an act of playing with fire and must be undertaken with extreme circumspection.

The reason it’s playing with fire is that, unlike the purely economic ones, cultural issues are not very amenable to straightforward empirical analysis, leaving far more ambiguity and gray areas for conniving politicians to exploit for their own ends, which they will relentlessly pursue, and in the process transform a true protectionist policy into a crony capitalist one. Because of that, we won’t even attempt to address cultural issues in this essay beyond making the reader aware of them and instead focus on purely economic concerns which are amenable to cut-and-dried quantitative analysis. (In a later essay, we’ll be dealing with those thorny cultural issues.)

The other two reasons for embracing protectionism of some kind are, as I’ve said, much more clear-cut and provable or disprovable. The first is economic prosperity, whether we measure that in terms of a nation’s share of the world economy or an individual’s share of his national economy: other things being equal, most people outside of fanatical liberals (and they often adopt their counterposition only hypocritically as a virtue signal) want to see their nation’s share of the world pie as big as possible and the same for their own share of the nation’s. And while such economic prosperity does not necessarily lead individually to happiness or collectively to a culturally and spiritually high civilization capable of weathering the ages, it definitely does translate, but for the gross incompetence of politicians, into military might (whether to be used purely defensively as a republic or offensively as an empire is a separate issue). Part of this is direct, as was the case with the U.S. in World War II when the factories that once churned out tractors began churning out Sherman tanks; part of this is indirect, as with Saudi Arabia, which manufactures almost nothing of its own but instead uses petrodollars from the sale of its vast oil reserves to purchase the latest and best military hardware. The case of 19th- and early 20-th century Britain is an example of both: being the first nation to strongly industrialize allowed the British to create and sustain an army and navy capable of holding together a worldwide empire, while their embrace of free trade in both agricultural and manufactured goods both increased their economic well-being (undeniably with regard to food and agricultural products available to ordinary Britons) and increased their dependence on imported goods such that by the time of World War I, protectionist Germany rivaled them in terms of manufacturing while its submarine warfare threatened the British Isles with potential war famine as they no longer grew enough at home to feed their population. Had Britain been able to keep its Victorian-era share of world manufacturing up to the eve of World War I, it is unlikely that it would have needed the United States’s help to overcome Germany, and to be sure, given the vast resources of the United States and the human capital of both the U.S. and Germany, even had the British embraced true protectionism, it would not have been enough to maintain that level of economic dominance for itself, but it likely would have slowed the industrial rise of its rivals and sped up its own; and the same is most definitely true with regard to the economic decline of the U.S. and concomitant rise (largely via the same mechanism) of China. At least, that is my contention; the Austrians and even mainstream economists would likely argue otherwise, and it is the purpose of part 2 of this essay to show why they are mistaken.

Part 2: The Nature of True Protectionism and How It Works

In part 1 we discussed the goals of true protectionists; now our task becomes defining true protectionism and proving that it is a correct means to those ends. With that mind, let me start out by answering the question what is true protectionism and how does it work? To answer both parts at once, true protectionism is an economic nationalist policy designed to maximize capital accumulation (and thus wealth) per capita by using tariffs to equalize labor costs between the economies of your country and those you trade with.

First, we ought to ask, what is an economy?

To put it briefly, it is nothing more and nothing less than the sum of the activities of those who engage in or otherwise effect (for good or ill) economic activity at any level—hence, you can talk about the local economy, the state economy, the national economy, or the world economy.

What determines the strength or prosperity of an economy at any level? Basically, three things: the amount of natural resources commanded by those who make up the economy; the amount of economically useful capital per capita (that is, the amount of useful machines, tools etc., that make labor more productive which are available for workers in the economy to use) that they command; and the state of technology. I say command rather than own, as an imperial economy (such as that of Ancient Rome) or quasi-imperial one (such as, unfortunately, the US under the petrodollar, if not earlier) can strengthen itself by making other economic zones (be those nations, tribal areas, or other types) offers they can’t refuse. I specify economically useful since an asset may not always be a positive economic contribution: for example, an old steam shovel might increase a person’s productivity relative to using a spade, but if it uses three times as much fuel to move one-fourth the earth as a newer model that’s readily available for about the same price as it would cost to keep the old model running, it’s not an asset to the economy; and I say “the state of technology” since technology can be an economic force multiplier, allowing for superior capital designs that allow the same amount of resources to be made even more productive.

The last two, in turn, are heavily dependent on three more factors, those being the economy’s rate of savings, its level of human capital, and its cultural institutions: that is, how many resources (including human labor) its participants are willing to forgo as consumers’ goods so that they can be transferred to the production of producers’ goods (i.e., capital); the average intelligence, drive, sociability, and conscientiousness of those participants (for which average IQ/STEM numbers per capita can serve as a proxy); and the cultural, legal, and political institutions and the degree to which they allow the population to unleash its natural potential or hamper it from doing so. So, other things being equal, the smarter and more honest and frugal a nation’s population is, the more powerful its economy is going to be, especially if it has beneficial barriers to keep it from diluting that power by harmfully mixing with another, lesser economy.

I know that sounds a bit odd so let me explain. At any level of economic activity there are greater and lesser degrees of integration of that economy’s parts, be those natural resources, human capital, or technology, with prices of things which economic actors consider the same usually converging to some degree. The degree of convergence, in turn, depends on the barriers or obstacles to such convergence: these can be anything from natural barriers born of nature or human nature (so physical distance and hard-to-cross terrain, or the imperfect nature of human knowledge) to man-made barriers such as borders, tariffs, laws, etc.

When two economies that had been separated for whatever reason have the barriers separating them removed, they begin to fuse as if they are one and their prices begin to converge. In some cases, this can be to the detriment of one of those economies. To see how, let me give you a concrete and realistic example of how this works. Say you have two formerly separate economies of two countries that begin to engage in free trade after being separated for some time. Let’s examine what will begin to happen on the micro level once trade is established or if there are no trade barriers for the first time and then pull back and see what kinds of macro trends occur as a result. Our example will contain two countries of roughly the same size, one with post-WWII conditions, i.e., large amounts of capital per capita, a high standard of living, and high labor costs; the other will be modeled on China at the beginning of its reform period when it first began opening itself up to major trade and started courting industries from abroad. To eliminate complications, we will assume that both countries are the same size and have the same sets of natural resources, as well as the same average IQ levels and rate of savings. Furthermore, we’re going to assume that the countries stand right next to each other such that transport costs are not a factor. Let us just assume, for the sake of convenience, that all other production costs are identical for the countries so that any difference in making a particular product in the first vs the second country is due solely to the difference in labor costs.

With that in mind, let’s take a look at the situation from a micro perspective. The question is, once the two economies fuse, what will come to the notice of the entrepreneurs, who in their quest for profits are one of two primary groups making changes to the economy’s structure of production—that is, the particular arrangement of all resources within it (including human capital) at any given time—in light of recent or anticipated changes in the natural world, in consumers’ buying patterns, and/or changes in governmental activity that impacts the economy (government being the other group making, sometimes for good but usually for ill, changes to the economy). Basically, our entrepreneurs will see a huge pool of cheap labor available and will begin shifting capital from the richer country to the poorer one to take advantage of it, as illustrated by the following graphic which shows the cost of producing the same product in either country.

As you can see, profits to be had are much higher in the more capital-poor country, to which the first country’s entrepreneurs begin offshoring their production facilities. How long this process will go on depends on many factors, but they all boil down to what parts of both economies are considered interchangeable by the market participants and thus will have their prices begin to converge, and what barriers exist to stop their convergence. This process of course includes real wages of workers in the two countries, and by examining them we can see the limits of the offshoring process; as I explain in another essay:

Of course, for that [profit] differential [between producing it in one country vs the other] to work, the company needs its [home country] buyers to have the same real income. The reason the company loves those Third-Worlders as workers is the same reason it hates them as customers: unless we’re talking about food and maybe something like a cell phone, there’s no way the man who puts in an entire day to earn what an American worker would make in an hour is going to buy the company’s product for the same price. But as offshoring continues apace and throws more and more American workers out of their manufacturing jobs and into wage competition with other US workers, both real and nominal incomes decline and those workers’ inability to buy the offshoring companies’ products reduces its sales and hence their profit margins from above at the same time that rising real wages of the Third World workers begin to reduce those profits from below. This will keep going until it seems as if the two economies fuse and all things interchangeable, including labor and incomes, are mixed and evened out, [in some cases] to the great detriment of the West’s middle and working classes.

Such an outcome is not the case in our above example, at least not in the long-run, since it assumes that both countries have equal average IQs, resources, etc. But consider an example where the first economy is the same as in the example above but the one it’s merging with is something like that of a sub-Saharan African nation or Haiti: in other words, an economy made up of people with such low average IQ that the exceptions are too few to be statistically significant, an entire population made up of what in an industrial economy would be considered unskilled or menial labor:

List of characteristics:

Country A:

Total population: 120,000 (100,000 working; 20,000 nonworking)

Total income: 100,000,000.00

Workers:

20,000 STEM-types (they earn collectively, 30,000,000.00)

30,000 semiskilled-types (they earn collectively 30,000,000.00)

50,000 unskilled (they earn collectively 40,000,000.00)

Country B:

Total population: 120,000 (100,000 working; 20,000 nonworking)

Total income: 10,000,000.00

Workers:

100,000 unskilled (they earn collectively 10,000,000.00)

Country A-B fused economy:

Total population: 240,000 (200,000 working; 40,000 nonworking)

Total income: 110,000,000.00

Workers:

20,000 STEM-types (they earn collectively, 30,000,000.00)

30,000 semiskilled-types (they earn collectively 30,000,000.00)

150,000 unskilled (they earn collectively 50,000,000.00)

Prefusion per capita earnings:

Country A:

STEM-type: $1,500.00

Semiskilled: $1,000.00

Unskilled: $800.00

Postfusion per capita earnings:

Country A:

STEM-type: $1,500.00

Semiskilled: $1,000.00

Unskilled: $333.33

*This example is also taken from my Occidental Observer essay, which I now notice contains an embarrassing math mistake: the semiskilled workers’ per capital earnings should be $1,000.00 (not the $1,500.00 shown).

As you can see, in the long run as well as the short run such a union of opposite economies is a match made in hell for the US working and middle classes, who see their real wages decimated by being forced into competition with such low-tier human capital.

But the devastation goes even beyond that, given that, as I show in my other paper, while economic prosperity (whether absolute or relative) tends to fuel greater savings and capital formation among the White middle and, to a lesser extent, working classes, among the denizens of third world, it tends to fuel a population boom, meaning that in the future the white working classes will have even lower wages as they compete with even greater numbers of Third Worlders.

But the problem goes even deeper and the future it portends becomes even darker still when you take into account the effect of such a transfer of real wealth on the absolute number of STEM types in the world as a whole. This problem (which I hope to elaborate on in a future essay) is one which virtually the entire economics profession has either missed or ignored on purpose, but one with the greatest import for the future of world living standards, to say nothing of the living standard in the Western nations. The problem goes to the heart of genetics, specifically to the nature of dominant and recessive genes. Imagine two groups of rabbits, one in which half the population have black stripes in their fur that are missing in the phenotypes of the other half, and another group in which the black stripes occur in only about 1/100th of the population. Given the frequency of the stripes in such a high percentage of the first population as a whole, it is far, far more likely that the stripe-less members of the first group will have offspring with blacks stripes than it is that the stripe-less members of the second group will (that is, far greater numbers in the first groups are likely to have recessive genes that could contribute to producing the stripes than are members of the second group).

Now apply this to humans. High intelligence is so biologically complicated that scientists do not believe that any single gene or even small set of genes will be soon identified that could be thought to lead to it, at least not by themselves. While high (or low) intelligence is highly heritable, it’s not entirely so, and as Richard Lynn shows in his book Dysgenics: Genetic Deterioration in Modern Populations, about one-third of children leave the social class of their parents, either rising or falling from it.[iv] When your trade policies result in a loss of real income for Whites and a gain for races with far lower average IQ scores, you are reducing the number of children likely to have high IQs, and thus you are indirectly lowering the average IQ score of the entire earth! This is true even if the workers of both races have the same IQ rates as individuals since even a low-IQ White is more likely to possess the recessive genes that in the next generation could lead to high intelligence than is a Black or Brown with the same individual IQ. To see how this must be the case, consider how much more likely higher-IQ Blacks are to become involved in criminal activity than Whites of the same IQ: while a Black with an IQ of 100 is equal to the average White in that respect, he’s likely far closer to the Black average in terms of temperament, impulse control, and future orientation. IQ is not the center of a genetic universe which all other genes revolve around and calibrate themselves by, but rather one part of a potential package that is more likely to resemble the average of its race in more ways than not.

And since world living standards per capita are largely the product of the total amount of capital in the world, and since the amount of capital worldwide is highly dependent on the number of STEM workers relative to the world population, the higher the percentage of the world total that Whites and East Asians make up, the higher world living standards will be, even for the non-white, non-East Asian nations. Hence economic nationalist policies by the White and Yellow nations are at once self-protective and altruistic—the best of both worlds, for the entire world.

In part 3 (the final part of this series) we’ll go into how to put such an economic nationalism system in place in some detail.

[i] For a fairly accurate discussion of why many of Mikhail Gorbachev’s so-called reforms were mostly ineffective window dressing for an attempt to save the Communist system, see the introduction to Requiem for Marx by Yuri Maltsev.

[ii] Although the author wouldn’t have dared describe the situation in quite so unflattering of terms, Amy Chua’s World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability gives a decent summary of just how predominant in the Russian economy Jews became during the ‘90s looting binge. There’s actually a humorous anecdote by her in which, upon learning that six out of the seven top Russian oligarchs are Jews, her Jewish husband responded, “Only six? So who’s the seventh guy?”

[iii] Marx, Karl. “The Poverty of Philosophy.” Translated by Institute of Marxism Leninism, The Poverty of Philosophy – Chapter 2.1, 1993, www.marxists.org/archive/marx/works/1847/poverty-philosophy/ch02.htm.

[iv] Lynn, Richard. Dysgenics: Genetic Deterioration in Modern Populations. Second Revised ed., Ulster Institute for Social Research, 1930, 190, 193.