For two years international trade and tariffs have been primary in international politics and in the media. Custom duties have been enacted on a large range of products.
In the process, all impacted economies will be harmed. Beyond this, it raises the dreadful specter of repeating the 1930 Smoot-Hawley Tariffs, which imposed massive custom duties on zillions of items. International trade dried up. What would most likely have been a brief and self-correcting recession was transformed into a Great Depression when severe deflationary monetary policies added more fuel to the ratcheting downward spiral.
Surely, no one familiar with the causes of the Great Depression would want to repeat any of its major contributing causes. In spite of this, the world gives the appearance of moving into this direction.
Economic nationalism, though it may provide some benefits up to a point, may emerge again as it did after 1931 unless less-damaging alternative policies are pursued.
In a larger context, this complex issue reflects in the final analysis how bureaucracies are:
1. Guided by governmental leaders, and
2. How they fulfill their assigned functions to serve the people.
Though it may sound strange, our bureaucracies behave in substantially different ways than their equivalents in most advanced economies. Surprisingly, no major study has ever focused intensely on comparing our bureaucracies with others. This failure is all the more crucial in view of the fact — to put it simply — things are done the way bureaucracies will do them or they will not be done at all.
A few examples are revealing:
1. To elect our political bureaucracy takes far, far longer and costs 10 to 20 times more per politician than in nearly all advanced societies.
2. Probate takes hundreds of percent longer and is also far more costly than equivalent procedures in foreign nations.
3. The educational bureaucracies are intensely costly and inefficient. They accumulate wealth while indebting students.
Harvard’s Foundation had $1.5 billion in assets in 1975, yet by 2000 that had exploded to $43 billion, sufficient to become almost self-sustaining without charging huge tuition. In too many universities, the coaches earn millions, often five to eight times the annual salary of university presidents. No such foolish patterns exist in any foreign economy.
Beyond this, all advanced societies have a tough high school exit exam, which we do not have.
Decades ago, famous MIT economist Lester Thurow, speaking to the National Press Club, told its members that they would all flunk the European high school exit exam, which tests calculus and proficiencies in two foreign languages, among other elements!
4. Our military is so intensely anchored in our society in a highly organic and decentralized way that no foreign advanced nation can match it. Thousands of numbered veterans clubs and their
ladies auxiliaries are spread across the U.S. No one would or should deny veterans their promised benefits which they too often either fail to get or obtain them inefficiently. No surprise that many wind up homeless.
Veteran problems are primarily caused by powerful lobbies pushing the U.S. into unnecessary and futile wars just to serve their ulterior agendas or their favorite top politicians. Had we avoided most of our wars in the last 70 years, tens of trillions could have been used to remove slum houses, marginal trailer homes and prevent a rusty infrastructure.
One of the greatest ironies is that the U.S. has the most protective geo-political equation, with two protective oceans and two weak neighbors and thus had the least cause to spend itself militarily into relative poverty. Our military budget is larger than the combined total of Russia, China and dozens of other countries.
All of this highlights the fact that tariffs and trade, while important, cannot match the sum-total how bureaucracies perform their assigned functions.
Even if tariffs have some temporary benefits, bureaucracies still should serve — and not enserf — Americans. Once we institutionalize merit up and down bureaucratic hierarchies as successful foreign economies tend to do, and once we direct bureaucracies to positive objectives, we will see immediate upspikes in our living standard.