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Mercantilism: The theory that explains Trump’s trade war
Mercantilism, the oldest thing in economics, is back in a big way.
- The use of tariffs by the Trump administration has confused more than a few leading economists.
- The policy and the motivations behind them do reflect an economic theory with a long tradition: mercantilism.
- Understanding mercantilism can help us understand why there is a call for more tariffs, and what might happen to the economy as a result of them.
What is mercantilism?
Those of you who didn't sleep through history class might remember that the early modern period was shaped in part by an economic theory called mercantilism. Not so much an ideology as it was a rationalization for policies that countries were implementing, it drove colonization and imperialism for much of the 17th and 18th centuries before being replaced by capitalism.
The idea was to maximize the value of your exports and minimize the value of your imports in order to increase the amount of wealth your country had. This was accomplished by preventing imports of finished products by means of tariffs, the promotion of domestic manufacturing, and strict control over the money supply. These policies were best expressed in France under Jean-Baptiste Colbert, who reorganized the entire French economy to follow mercantilist theories, and in England and during the 17th century.
There was also a significant national security element to mercantilism, since a bad trade deal would reduce your economic standing compared to another country and potentially place you at a military disadvantage over the long run. This reinforced the idea that every country was out for themselves and motivated countries to try and maximize the amount of wealth they had; preferably at the expense of everybody else.
How is this different from the economics that came afterward?
There are several differences, not only in the policies each philosophy endorses but how Mercantilism views trade and economic interactions compared to how we see them now.
While today most economists view trade as a win-win interaction, with each trading partner focusing on making a lot of something they can make well and then trading for what they lack, mercantilists viewed trade as a zero-sum game. In every trade, there was a winner and a loser. Each country strove to export only finished products and import as little as possible.
Mercantilists also wanted to make a country as close to self-sufficient as possible, as part of their goal to minimize imports. This runs counter to modern economic theories that suggest a country should produce what it is best at making and import what it cannot make cheaply.
Lastly, while modern economic theories argue that increasing productivity will lead to economic growth, Mercantilists argued that an endlessly positive balance of trade alone was the key. This point was so important that nobody even realized this was impossible until David Hume came along.
How does Donald Trump follow this?
The rhetoric he uses when he tries to rationalize the tariffs hits all of the mercantilist concerns on the head. Tariffs against the industries of American allies are framed as issues of national security, free trade agreements are viewed as bad deals, trade surpluses are emphasized as a sign of economic progress.
Even his love of tariffs as a tool harkens back to old-timey economic theories, even economists who call themselves neo-mercantilists don't advise the use of tariffs.
However, he isn't exactly doing it right. Mercantilists like Colbert tried to get raw materials as cheaply as possible while placing tariffs on finished products to encourage domestic production. Currently, the United States is putting tariffs on things like steel that are used to make other products. This, while potentially having economic or political payoffs, is nonsensical from a mercantilist perspective. They would place the tariffs on cars and washing machines, not steel.
What does this mean for the future?
There is a reason that Mercantilism went out with the 18th century.
At the scale of the entire economy, tariffs tend to increase prices and lower employment. They can, however, preserve jobs and profits in the protected industries as intended. The Trade Partnership, a trade and economic consulting firm, estimated that the steel and aluminum tariffs will cost 100,000 jobs while only 30,000 are gained.
Former Chairman of the Federal Reserve Alan Greenspan called the tariffs "insane" and compared them to excise taxes, which are taxes on production. He further questioned the ability of anybody to win a trade war, saying "There are victors and there are losers in a tariff fight. But that doesn't say that a more important issue is both are losing, it's just the winner loses less."
On the other hand, they are doing the job they are supposed to be doing. The prices of the tariffed goods are rising to a point where some consumers to choosing to buy from American producers again. If these purchases will be enough to stave off the job losses predicted in other sectors of the economy is another question.
The global tendency towards free trade is unlikely to end anytime soon, for the reasons mentioned above. However, the current trend of closing markets and starting trade wars is not without some precedent in history. The final effect of these tariffs on the global economy remains to be seen, but history and economic theory suggest we should be in for a bit of excitement.
Trade, diplomacy, culture: How America can lead the world
Emotional intelligence is a skill sought by many employers. Here's how to raise yours.
- Daniel Goleman's 1995 book Emotional Intelligence catapulted the term into widespread use in the business world.
- One study found that EQ (emotional intelligence) is the top predictor of performance and accounts for 58% of success across all job types.
- EQ has been found to increase annual pay by around $29,000 and be present in 90% of top performers.
Researchers hope the technology will further our understanding of the brain, but lawmakers may not be ready for the ethical challenges.
- Researchers at the Yale School of Medicine successfully restored some functions to pig brains that had been dead for hours.
- They hope the technology will advance our understanding of the brain, potentially developing new treatments for debilitating diseases and disorders.
- The research raises many ethical questions and puts to the test our current understanding of death.
What's dead may never die, it seems<p>The researchers did not hail from House Greyjoy — "What is dead may never die" — but came largely from the Yale School of Medicine. They connected 32 pig brains to a system called Brain<em>Ex</em>. Brain<em>Ex </em>is an artificial perfusion system — that is, a system that takes over the functions normally regulated by the organ. The pigs had been killed four hours earlier at a U.S. Department of Agriculture slaughterhouse; their brains completely removed from the skulls.</p><p>Brain<em>Ex</em> pumped an experiment solution into the brain that essentially mimic blood flow. It brought oxygen and nutrients to the tissues, giving brain cells the resources to begin many normal functions. The cells began consuming and metabolizing sugars. The brains' immune systems kicked in. Neuron samples could carry an electrical signal. Some brain cells even responded to drugs.</p><p>The researchers have managed to keep some brains alive for up to 36 hours, and currently do not know if Brain<em>Ex</em> can have sustained the brains longer. "It is conceivable we are just preventing the inevitable, and the brain won't be able to recover," said Nenad Sestan, Yale neuroscientist and the lead researcher.</p><p>As a control, other brains received either a fake solution or no solution at all. None revived brain activity and deteriorated as normal.</p><p>The researchers hope the technology can enhance our ability to study the brain and its cellular functions. One of the main avenues of such studies would be brain disorders and diseases. This could point the way to developing new of treatments for the likes of brain injuries, Alzheimer's, Huntington's, and neurodegenerative conditions.</p><p>"This is an extraordinary and very promising breakthrough for neuroscience. It immediately offers a much better model for studying the human brain, which is extraordinarily important, given the vast amount of human suffering from diseases of the mind [and] brain," Nita Farahany, the bioethicists at the Duke University School of Law who wrote the study's commentary, told <em><a href="https://www.nationalgeographic.com/science/2019/04/pig-brains-partially-revived-what-it-means-for-medicine-death-ethics/" target="_blank">National Geographic</a>.</em></p>
An ethical gray matter<p>Before anyone gets an <em>Island of Dr. Moreau</em> vibe, it's worth noting that the brains did not approach neural activity anywhere near consciousness.</p><p>The Brain<em>Ex</em> solution contained chemicals that prevented neurons from firing. To be extra cautious, the researchers also monitored the brains for any such activity and were prepared to administer an anesthetic should they have seen signs of consciousness. </p><p>Even so, the research signals a massive debate to come regarding medical ethics and our definition of death. </p><p>Most countries define death, clinically speaking, as the irreversible loss of brain or circulatory function. This definition was already at odds with some folk- and value-centric understandings, but where do we go if it becomes possible to reverse clinical death with artificial perfusion?</p><p>"This is wild," Jonathan Moreno, a bioethicist at the University of Pennsylvania, told <a href="https://www.nytimes.com/2019/04/17/science/brain-dead-pigs.html" target="_blank">the <em>New York Times</em></a>. "If ever there was an issue that merited big public deliberation on the ethics of science and medicine, this is one."</p><p>One possible consequence involves organ donations. Some European countries require emergency responders to use a process that preserves organs when they cannot resuscitate a person. They continue to pump blood throughout the body, but use a "thoracic aortic occlusion balloon" to prevent that blood from reaching the brain.</p><p>The system is already controversial because it raises concerns about what caused the patient's death. But what happens when brain death becomes readily reversible? Stuart Younger, a bioethicist at Case Western Reserve University, <a href="https://www.nature.com/articles/d41586-019-01216-4#ref-CR2" target="_blank">told <em>Nature</em></a> that if Brain<em>Ex</em> were to become widely available, it could shrink the pool of eligible donors.</p><p>"There's a potential conflict here between the interests of potential donors — who might not even be donors — and people who are waiting for organs," he said.</p><p>It will be a while before such experiments go anywhere near human subjects. A more immediate ethical question relates to how such experiments harm animal subjects.</p><p>Ethical review boards evaluate research protocols and can reject any that causes undue pain, suffering, or distress. Since dead animals feel no pain, suffer no trauma, they are typically approved as subjects. But how do such boards make a judgement regarding the suffering of a "cellularly active" brain? <a href="https://bigthink.com/philip-perry/after-death-youre-aware-that-youve-died-scientists-claim" target="_blank">The distress of a partially alive brain</a>? </p><p>The dilemma is unprecedented.</p>
Setting new boundaries<p>Another science fiction story that comes to mind when discussing this story is, of course, <em>Frankenstein</em>. As Farahany told <em>National Geographic</em>: "It is definitely has [sic] a good science-fiction element to it, and it is restoring cellular function where we previously thought impossible. But to have <em>Frankenstein</em>, you need some degree of consciousness, some 'there' there. [The researchers] did not recover any form of consciousness in this study, and it is still unclear if we ever could. But we are one step closer to that possibility."</p><p>She's right. The researchers undertook their research for the betterment of humanity, and we may one day reap some unimaginable medical benefits from it. The ethical questions, however, remain as unsettling as the stories they remind us of.</p>
A study published Friday tested how well 14 commonly available face masks blocked the emission of respiratory droplets as people were speaking.
- The study tested the efficacy of popular types of face masks, including N95 respirators, bandanas, cotton-polypropylene masks, gaiters, and others.
- The results showed that N95 respirators were most effective, while wearing a neck fleece (aka gaiter) actually produced more respiratory droplets than wearing no mask at all.
- Certain types of homemade masks seem to be effective at blocking the spread of COVID-19.
Fischer et al.<p>A smartphone camera recorded video of the participants, and a computer algorithm counted the number of droplets they emitted. To establish a control trial, the participants spoke into the box both with and without a mask. And to make sure that the droplets weren't in fact dust from the masks, the team conducted more tests by "repeatedly puffing air from a bulb through the masks."</p>
Fischer et al.<p>The results, published Friday in <a href="https://advances.sciencemag.org/content/early/2020/08/07/sciadv.abd3083" target="_blank">Science Advances</a>, showed that some masks are pretty much useless. In particular, neck fleeces (also called gaiters) actually produced more respiratory droplets compared to the control trial — likely because the fabric breaks down big droplets into smaller ones.</p><p>The top three most effective masks were N95 respirators, surgical masks, and polypropylene-cotton masks. Bandanas performed the worst, but were slightly better than wearing no mask at all.</p>
Fischer et al.<p>Research on mask efficacy is still emerging. But the new results seem to generally align with <a href="https://newsroom.wakehealth.edu/News-Releases/2020/04/Testing-Shows-Type-of-Cloth-Used-in-Homemade-Masks-Makes-a-Difference" target="_blank" rel="noopener noreferrer dofollow">prior tests</a>. For example, a study from June published in <a href="https://aip.scitation.org/doi/10.1063/5.0016018" target="_blank" rel="noopener noreferrer dofollow">Physics of Fluid</a> found that bandanas (followed by folded handkerchiefs) were least effective at blocking respiratory droplets. That same study also found, as <a href="https://newsroom.wakehealth.edu/News-Releases/2020/04/Testing-Shows-Type-of-Cloth-Used-in-Homemade-Masks-Makes-a-Difference" target="_blank" rel="noopener noreferrer dofollow">others have</a>, that masks made from multiple layers of quilter's fabric were especially effective at blocking droplets.</p><p>The researchers hope other institutions will conduct similar experiments so the public can see how well different masks can block the spread of COVID-19.</p><p style="margin-left: 20px;">"This is a very powerful visual tool to raise awareness that a very simple masks, like these homemade cotton masks, do really well to stop the majority of these respiratory droplets," Fischer told CNN. "Companies and manufacturers can set this up and test their mask designs before producing them, which would also be very useful."</p>
Sharing QAnon disinformation is harming the children devotees purport to help.
- The conspiracy theory, QAnon, is doing more harm than good in the battle to end child trafficking.
- Foster youth expert, Regan Williams, says there are 25-29k missing children every year, not 800k, as marketed by QAnon.
- Real ways to help abused children include donating to nonprofits, taking educational workshops, and becoming a foster parent.
Real ways you can help stop child trafficking<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="21fc2dc85391501eec28c4bf46d7db15"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/AXL0q9jNZGU?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>Williams is the founder and CEO of <a href="http://www.seenandheard.org/" target="_blank">Seen and Heard</a>, a Los Angeles-based nonprofit that helps foster youth develop character through the performing arts. She's been involved with foster youth for years; I <a href="https://bigthink.com/politics-current-affairs/child-sex-trafficking" target="_self">wrote about her work</a> in child trafficking just over a year ago. Tragically, since that time, the situation for these children has only gotten worse, in large part because of QAnon.</p><p>Williams says child trafficking is an easy cause to rally people together. Fear is also a powerful unifying force, one that QAnon believers are already primed for via the news they consume. Almost every parent cares about their children, making them the ideal target to solidify groups. </p><p>The real problem, she says, is that the youth she works with are falling for these conspiracy theories. Trauma is a particularly powerful tool for indoctrination. If you're a teenager that's been abducted or abused, your trust level is already extremely low. Then you read about a global cabal of powerful men (and a few women) secretly abusing children, and the narrative seems ready-made for your personal history.</p><p>When Williams tried to "lovingly and kindly correct" the youth she was working with after learning about the Wayfair conspiracy, the girls' response was, "well, who owns the media?" </p><p style="margin-left: 20px;">"She goes from this small little thing to a QAnon talking point. I've been thinking about why she would believe such a preposterous idea—and there are others; it's not just one student, and they're in in deep. I think that when something horrific happens to you as a child, it's a lot easier to distance yourself from the immediate reality that it was an uncle or a parent or a sibling that hurt you. By detaching from that immediate person, they project it onto Bill Gates or Chrissy Teigen. Then it's not so personal, it's global." </p>
A man wear a shirt with the words Q Anon as he attends a rally for President Donald Trump at the Make America Great Again Rally being held in the Florida State Fair Grounds Expo Hall on July 31, 2018 in Tampa, Florida.
Photo by Joe Raedle/Getty Images<p>As Williams mentions, there are over 30,000 kids in foster care in the Los Angeles area alone. It's easy to fall through the cracks. The systems in place aren't perfect; they're certainly underfunded. When you're in a system trying to support you yet isn't capable of doing so, viewing the world as imperfect, and even harmful, becomes the lens through which you see reality. Again, this makes for a perfect indoctrination tool.</p><p>One popular QAnon talking point is that 800,000 children are missing. As Williams says, child trafficking experts "don't buy this for a minute." The number makes for a good meme but a poor representation of the problem. </p><p>To source better data, Williams turns to the <a href="https://www.missingkids.org/" target="_blank">National Center for Missing and Exploited Children</a> (NCMEC) and the <a href="https://www.fbi.gov/services/cjis/ncic" target="_blank" rel="noopener noreferrer dofollow">National Crime Information Center</a> (NCIC). An important factor when reading data: if a teacher <em>and</em> a caregiver report a missing child to NCIC, that counts as two children, not one, which accounts for some of the fluctuations in numbers. In total, between 25,000 and 29,000 kids go missing every year. Importantly, 94 percent of those children are recovered within four to six weeks. </p><p style="margin-left: 20px;">"They're not documenting the recovery rate. It's not like these numbers are perpetually hanging out there. So this 800,000 number is just ludicrous." </p><p>Williams compares what's going on to Black Lives Matter. Blacking out your Instagram profile picture is performative. It signals that you actually care, which is great, but if you're not supporting Black-owned businesses, for example, there are no teeth to your activism. </p><p>Of course, blacking out your profile doesn't cause the real-world harm the QAnon virus does. Sharing misinformation is ultimately harmful to the children in need of help. Williams offers the resources below—ranging from donations to nonprofits to educational trainings to becoming a foster parent—for people that actually want to do something to help victims of sexual and physical abuse. They might not make a great Twitter meme, but in the actual world, this support makes all the difference. </p><p><strong>To report abuse/neglect, call the child abuse hotline: 800.540.4000 (LA county) / 800.422.4453 (National)</strong></p><ul><li>Support anti-trafficking organizations by donating to <a rel="noopener noreferrer dofollow" href="http://savinginnocence.org/" target="_blank">Saving Innocence</a>, which runs the continuum of care from rescue to recovery, <a href="http://gozoe.org/" target="_blank" rel="noopener noreferrer dofollow">Zoe</a>, a reputable faith-based organization, and <a rel="noopener noreferrer dofollow" href="https://withtwowings.org/" target="_blank">Two Wings</a>, which helps to rehabilitate female survivors</li><li><a rel="noopener noreferrer dofollow" href="http://www.nolabrantleyspeaks.org/" target="_blank">Nola Brantley</a> offers in-person and online trainings to help combat the commercial sexual exploitation of children</li><li><a rel="noopener noreferrer dofollow" href="http://instagram.com/imrebeccabender" target="_blank">Rebecca Bender</a> is a trafficking survivor that runs "Myth Busters," which combats conspiracy theory disinformation</li><li>The <a href="https://www.instagram.com/missingkids/" target="_blank" rel="noopener noreferrer dofollow">National Center</a> of Missing and Exploited Children</li><li>Operation <a href="https://www.instagram.com/ourrescue/" target="_blank" rel="noopener noreferrer dofollow">Underground Railroad </a></li><li><a href="https://www.instagram.com/defendinnocence/" target="_blank" rel="noopener noreferrer dofollow">Defend Innocence</a> offers tips for parents and caregivers to keep kids safe</li></ul><p><span></span>--</p><p><em>Stay in touch with Derek on <a href="http://www.twitter.com/derekberes" target="_blank">Twitter</a>, <a href="https://www.facebook.com/DerekBeresdotcom" target="_blank">Facebook</a> and <a href="https://derekberes.substack.com/" target="_blank">Substack</a>. His next book is</em> "<em>Hero's Dose: The Case For Psychedelics in Ritual and Therapy."</em></p>