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OpEdNews Op Eds    H2'ed 8/22/15

Picking Apart One of the Biggest Lies in American Politics: "Free Trade"

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"'Tis for the United States to consider by what means they can render themselves least dependent," of other nation's manufactures, Hamilton wrote, "on the combinations, right or wrong, of foreign policy."

But there were many voices in 1791 -- the loudest being the young Secretary of State Thomas Jefferson -- who argued that instead of becoming an industrial power we should remain an agricultural nation.

Hamilton believed both were possible, and there would even be a desirable synergy between the two. He felt that if America wanted to be competitive, it couldn't just leave it to the so-called free market.

Government ought to play a role in fostering a strong industrial base, he argued: "To produce the desirable changes, as early as may be expedient, may therefore require the incitement and patronage of government."

In fact, Hamilton believed success was not possible without government. "To be enabled to contend with success, it is evident that the interference and aid of their own government are indispensable," he wrote.

His reasons were pretty straightforward: it would take government's power to set up a playing field for the game of business where investors who would otherwise be able to make more money overseas would keep their money in the United States.

"There are weighty inducements [in my plan] to prefer the employment of capital at home even at less profit, to an investment of it abroad, though with greater gain," he wrote.

Having provided this overview, Hamilton got right to the meat of the matter -- his 11-step plan (see end of article). It called for government to take an active role in developing its own industry, in discouraging imports through tariffs and prohibitions, in building transportation routes at home for internal trade, and in subsidizing manufacturing until companies become strong enough to compete on their own.

Consider the historical impact of Hamilton's plan, which was adopted in a series of piecemeal legislative and executive action steps mostly by 1793: Tariffs became so important that they constituted pretty much the only source of revenue for the federal government until the Civil War, were the single largest source of federal revenue from then until World War I. And even when government had grown exponentially as we led up to World War II, fully a third of all federal revenues came from tariffs.

It is only since the Reagan era and subsequently with Bush, Clinton, Bush, and now Obama, that we have forsaken tariffs and have been chanting the "free trade" mantra -- to our own detriment and destruction. A protectionist approach, including tariffs, is what the USA needs so it can get back in the game of manufacturing -- before it's too late.

How badly Reaganism and "free trade" have damaged us

When Ronald Reagan came into office, as the result of 190 years of Hamilton's plan, the United States was the world's largest importer of raw materials; the world's largest exporter of finished, manufactured goods; and the world's largest creditor.

After 34 years of Reaganomics, we've completely flipped this upside down. We've become the world's largest exporter of raw materials, the world's largest importer of finished goods, and the world's largest debtor. We now export raw materials to China, and buy from them manufactured goods. And we borrow from them to do it. Our trade debt right now stands at over $11 trillion, and it's the principle reason why one-seventh of all assets in the United States are foreign-owned.

China's 2009 "stimulus package" -- about the same size as ours at around $800 billion -- could explicitly only be spent on Chinese-made products from Chinese-owned companies employing only Chinese workers. Ditto for the 2009 Japanese version of "Cash for Clunkers," which mandated the purchase of exclusively Japanese-made cars.

Here's how we can unwind the damage Reagan and Clinton did to our nation:

First, go back to charging an import tax -- a tariff -- on goods made overseas that compete with domestic manufacturers, while keeping import taxes low on raw materials that domestic industries need.

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Thom Hartmann is a Project Censored Award-winning New York Times best-selling author, and host of a nationally syndicated daily progressive talk program on the Air America Radio Network, live noon-3 PM ET. His most recent books are "The Last Hours of Ancient Sunlight," "Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights," "We The People," "What Would Jefferson Do?," "Screwed: The Undeclared War Against the Middle (more...)

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