Conservative critics of Trump's tariffs are WRONG

The received economic wisdom that has come down to us from David Ricardo onwards is that tariffs are uniformly impoverishing overall. And those who understand comparative advantage and the various theories involved can usually see only minor holes and exceptions in that theory. And it is true that in a fully free-trade world the theory would be 100% correct.  But we don't live in that world, nor are we likely to

Some critics allow that Trump's tariffs are reasonable as a temporary measure -- designed to coerce other nations to adopt freer trade policies.  That is certainly the headline aim of the tariffs and is sufficiently persuasive to most conservative commentators for them to adopt a "wait and see" posture.

But I believe that there is a warrant for tariffs of a PERMANENT nature.  And it is not a million miles away from popular thinking, as distinct from economists' thinking.

My hypothesis is that there is a trade-off between tariffs and unemployment such that as tariffs go up unemployment goes down. That sounds a crazy connection but it has been true since even before Trump's inauguration.  As soon as his election win was announced, Trump started to talk tariffs and almost immediately employment began to look up.  And what do we see now after more than 2 years of Trump? An almost unbelievable low of 3.6% unemployment.  Around the same time half way through the Obama administration, the figure was 8%.

You have to go back to the postwar boom under Ike to get much better than 3.6% --  and unemployment at that time was materially affected by the many workers who had been taken out of the workforce through death, disease and injury in WWII.  War is a heck of a bad way to maximize employment but it does have that effect.

So in the Trump administration, we do seem to have have a continuing demonstration that a tough tariff regime has led to reduced unemployment.

But is it all coincidence?  Obama diehards say that the low unemployment is a continuing effect of what Obama did -- though they can't name any mechanism for that.

One possible pointer to it not being a coincidence is the huge prospering of America behind the high tariff walls of the 19th century.  The tariffs were arguably the real cause of the civil war but despite that setback America developed rapidly from its primary-producing beginnings and was soon in a position not inferior to the major European powers.

So was unemployment low then?  We have no reliable figures to test that but the rate of industrial expansion strongly suggests that it was.  Millions of jobs were created.

So I think we now have two points of evidence in favour of my hypothesis.  But there is another example that is really stark.  What would you say to unemployment levels in an affluent society that stayed BELOW 2%?  Impossible?  It's not.  That is the situation that prevailed in Australia under Robert Menzies during the 1950s -- an era often remembered by those who were there (I was) as a golden age.

And guess what?  It was also an era of heavy protective tariffs.  There was a deliberate will to have everything possible made in Australia.  And if it could not reasonably be made in Australia, it could always be obtained from Britain.

That sounds all rather quaint to modern ears but the policy was underpinned by memories of wartime shortages.  During WWII, many things could simply NOT be imported.  Australia is a long way from anywhere else and so there was large scope for cargo-ships to be sunk by hostile powers.  So making as much as you could locally seemed not only obvious but urgent.

So the high tariff policy was not motivated  by an attack on unemployment but it did have that effect.

Now WHY would high tariffs cause minimal unemployment?  It's obvious psychologically.  If a businessman has a firm assurance that he will not be allowed to go broke by the sudden presence of cheaper goods from overseas, he will feel very easy in his mind about setting up shop.  He will feel confident that his investment in new manufacturing businesses will pay. And so all sorts of profitable businesses sprang up in Australia and searched for workers to staff them. There were jobs galore on offer and most people had a choice of what sort of job they wanted to do.  I remember myself the ease I had in finding jobs.

So that is the theory:  Tariffs stimulate business confidence and confident businessmen go on a hiring spree in their keenness to make money

It remains true that tariffs increase prices but the tradeoff of having most workers working is surely an at least equal compensation.  Dollars and cents are not the whole of personal or national welfare.

And the effect of the dollars and cents should not be exaggerated.  Despite its tariffs, Australia was in the '50s one of the most prosperous places in the world.  Australia is a major primary producer so there was often steak on the dinner table, most houses had a substantial backyard where you could grow most of your fruit and vegetables if you were so inclined, you could get on a steam train and go interstate to visit family and friends at vacation time, there was always the family car for local trips, the newspapers had lots of interesting news, particularly from overseas,  you could hear all the latest songs on the radio, the ladies all had pretty dresses and even in small towns there were several bars where one could drink cold beer after a hard day's work.  What else is there? -- JR

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Donald Trump trade deal high risk but hold promise of historic win

Donald Trump’s decision to suddenly ramp up pressure on China over a trade deal is high risk — just look at the plunges on Wall Street today — but it also holds the promise of an historic victory for his presidency.

This is a pivotal moment for Trump and for his prospects of re-election in 2020.

If Trump can pressure China in the coming weeks to sign a deal which substantially reduces its unfair trading practices he will have done an immense favour not just to the US but to Australia and the world.

It would be a signature foreign policy legacy that he could take to the polls next year and say he kept his word about securing a better long-term trade deal on China.

Trump’s crash or crash-through style is often criticised but it is hard to imagine another US president who would have the courage to take on China so boldly at this moment in its history.

Of course there is still a genuine risk that this could backfire badly.

In the short term it appears likely that the US will follow through on its threat to increase tariffs on $US200 billion of Chinese goods on Friday in a move which is likely to invoke retaliatory tariffs from China. This is what spooked the markets today with Wall Street’s Dow Jones Industrial Average falling by more than 500 points.

A long-term collapse in negotiations would lead to further escalation in the tariff wars between the superpowers at a high cost to China’s growth, to US consumers and farmers and also to skittish world markets which are watching this tussle nervously.

There is also a danger of an anaemic middle outcome, where Trump persuades China to purchase more US goods — and so reduce the trade deficit — but take little structural action on its unfair trading practices. That would be a poor return for the destabilisation caused by the year-long trade war and would expose Trump to criticism at home from Democrats and from US businesses.

But Trump’s actions this week — in suddenly and unexpectedly calling China out for what his chief trade negotiator Robert Lighthizer says was an attempt to renege on commitments made in previous talks — suggests that the president is pushing hard for a more meaningful trade deal.

The US wants China to stop stealing intellectual property, end cyber-theft of US technology, curtail subsidies to state-owned companies and end other forms of discrimination against foreign firms doing business with Beijing.

It was encouraging that the sticking point this week related to structural trade issues including the US push for China to stop compelling US companies to surrender their trade secrets to do business in China.

China’s pushback makes it clear that it is being driven hard by Trump’s negotiators to do something it does not want to do and has never done previously on trade.

But Trump was never going to extract meaningful trade reform from China by being an appeaser or making polite complaints. Yes tariffs have been a blunt instrument but there is no doubt that they have brought China to the table.

Trump is a gambler by nature but he appears to have made a key calculation that the US rather than China holds the stronger hand in this game right now.

Trump was buoyed by robust US economic data last week which showed GDP surging past forecasts, rising 3.2 per cent on an annualised basis while unemployment dropped to a 49 year low.

The president reportedly saw these figures as evidence that the trade war was having little overall impact on the US economy and that he could afford to leverage China further to secure a better long term deal.

By contrast, China’s growth is slowing and the slowdown has been made worse by US tariffs which hurt Chinese manufacturers and consumer confidence.

Economists estimate that an ongoing trade war with the US could cut China’s economic growth rate by between 1.6 to 2 percentage points over the next 12 months.

Under this scenario, there appears to be more pressure on China to seek a quick resolution to the trade dispute than there is on the White House.

Trump needs to be careful not to overplay this strong hand. China is unlikely to accept any final deal that makes president Xi lose face. But Xi appears to have misread the willingness of this populist president to take China on. This is a big moment and a big gamble but Trump deserves praise for putting the US into a position where an historic win is now possible.

SOURCE 

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Clever men are more fertile and have more children than others

This is very strong data and is more evidence that IQ is an index of general biological fitness

Clever men are more fertile and have more children than others, research has found.

The findings suggest that those with higher IQs are considered more attractive by women. In addition, being intelligent leads to status in society and more wealth - extra factors as to why eggheads are considered ‘a catch’.

The research overturns previous findings - that larger families are the preserve of people who are not blessed with higher IQs.

University of Stockholm scientists looked at a database of IQ scores of all Swedish men born between 1951 and 1967.

The IQ tests were used for conscription to the army’s national service and covered more than 779,000 men.

They then followed up how many children each man went on to have.

The scientists writing in the Royal Society Journal Proceedings B said: ‘We find a positive relationship between intelligence scores and fertility, and this pattern is consistent across the cohorts we study.’ They added: ‘Men with the lowest categories of IQ scores have the fewest children.’

The researchers said they controlled for additional factors such as levels of education and parental background. They said: ‘After such adjustments we find a stronger positive relationship between IQ and fertility.’

To assess the impact of family background, the researchers compared how many children brothers had.

They found that a brother with the lowest category of cognitive ability would have 0.58 fewer children compared to a brother with an IQ of 100, the average IQ level, while men with the highest category had 0.14 more children than someone of the average ability.

While it may sound comical to talk about an extra child’ or ‘14 per cent of a child’, across a whole population, this would mean thousands of extra children born to more intelligent people thousands fewer to the less intelligent.

The researchers said that earlier research on the subject had been flawed as, unlike the Swedish survey, they were not based on a whole population, but instead school classes or samples.

The authors say that possible explanations are that having a low IQ score is closely linked to poor health in childhood, which may be the reason why people with lower scores have fewer children.

They added: ‘The positive relationship between intelligence and fertility is probably explained by men with higher cognitive ability having higher status and more resources, and the fact that high cognitive ability is an attractive trait in the partner market.’

They said the trend emerging in Sweden is likely to be seen elsewhere: ‘We think that a plausible future scenario is that many societies will see the re-emergence of a positive association between high intelligence as well as other dimensions and correlates of status-and fertility.’

SOURCE 

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Trump Pardons Former Army First Lieutenant Convicted Of Murdering A Suspected Al-Qaeda Terrorist

Another excellent pardon

President Donald Trump issued a full pardon Monday to former Army First Lieutenant Michael Behenna, who served five years in prison after being convicted of murdering a suspected Al-Qaeda terrorist.

In May 2008, Behenna was questioning Ali Mansur Mohamed, a suspected terrorist who had allegedly been involved in an IED attack that killed two U.S. soldiers. The interrogation ended when Behenna fired two rounds into the terrorist — which the 1st Lt. claimed was in self-defense after Mansur lunged for his pistol.

A military court convicted Behenna of unpremeditated murder in a combat zone in 2009. The prosecution said Behenna was not acting in self-defense, but in retaliation for the deaths of his fellow soldiers, and killed Mansur while returning him to his hometown.

In a statement released Monday announcing the pardon, the White House noted that Behenna’s 25-year sentence was greatly reduced following certain concerns about the case. Behenna was released from prison on parole in 2014.

“After judgment, however, the U.S. Army’s highest appellate court noted concern about how the trial court had handled Mr. Behenna’s claim of self-defense. Additionally, the Army Clemency and Parole Board reduced his sentence to 15 years and paroled him as soon as he was eligible in 2014—just 5 years into his sentence.”

Oklahoma Attorney General Mike Hunter has repeatedly petitioned the White House for clemency, writing to Attorney General Bill Barr last month that Behenna’s conviction was predicated on improper procedure by prosecutors.

The White House cited Hunter’s support in its announcement, adding, “while serving his sentence, Mr. Behenna was a model prisoner. In light of these facts, Mr. Behenna is entirely deserving of this Grant of Executive Clemency.”

Some of Trump’s other high-profile pardons include Scooter Libby, the former chief of staff to Vice President Dick Cheney, and Joe Arpaio, the former Maricopa County, Arizona sheriff.

In March 2018, the president pardoned Kristian Saucier, a Navy sailor who served a year in prison for taking photos of classified areas of a submarine.

SOURCE 

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