Everything necessary to set economic policy for a nation can be summarized in a short list of first principles.
1. What is an (ideal) nation?
Read Beard’s “A History of the United States”. Note the importance of protective tariffs on the nascence and then subsequent explosion of industry, and for national security. Note the growth of socialist government intervention as the economy scaled and decadent rot set in – beginning with “trust busting” and even earlier at the crash of 1819.
2. What is a bank?
Read enough libertarian and Great Depression economics (including Vox Day’s book and arguments against free trade) to understand how banks create the credit cycle via the credit multiplier. Study the devaluation of the American dollar subsequent to the abandonment of the gold standard. Know that the maximum life span of a fiat currency is roughly 75 years (via Vox Day, could have the number a bit high).
Once one understands what banks are, one realizes that banking and finance are implacably opposed to a gold standard because it prevents them from taxing everyone by creating money out of thin air that is on par with the money of savers. In a real money economy, no one would take the insane deal of exchanging hard currency certificates for numbers on a bank ledger. At least, not at current interest rates.
Rather, hard currency would favor savers as economic growth outstripped gold production.
Soft currency creates a permanent ability for the finance sector to tax everyone tomorrow to pay themselves today. (Except during crashes, when they are busy advocating bailouts and incumbent-favoring regulation.) Government gets a similar ability. Hence the popularity of “Keynesian” economics.
3. What is (ideal) currency?
The ideal currency is gold bearer bonds issued by a government at a 1-1 ratio with gold in vaults, in free competition with private currencies. Under this regime, credit bubbles will always wind up chasing printed gold notes when they pop, and be self-correcting.
Wars would then be difficult to finance, particularly those not fought to defend home soil. Ditto “New Deal” and “Great Society” type programs. That is a good thing.
4. What drives modern economic growth?
Rule of law, economic liberty, and the smart fraction – which is the % of population with verbal IQ above 106 (via La Griffe du Lion).
** Conclusion
Points 1-4 allow us to answer the essential question: What is the (ideal) tariff?
A tariff serves two legitimate objectives:
1. National security
2. Protect the dumb majority against living standard erosion from competition with low-income foreign labor
The way to achieve 1 is well understood by any student of history. One simply protects the industries necessary for projection of modern military power. Detroit made the tanks for WWII. Assume a world war and ensure domestic industries to support it are in place.
Objective 2 has not been properly understood to date. This is my contribution, achievable only by proper understanding of all of the above.
By what formula should one set the general tariff to protect the dumb majority?
Answer:
First calculate male full time per capita income in gold for home country (H) and foreign country (F).
The effect of the tariff should be to render the two per capita incomes equal. Thus if H = 100 oz and F = 50 oz, then H’s tariff on goods from F should be at most 100%.
This number can be adjusted downwards depending on various factors. The above assumes that the labor of H and F is equally productive, that labor composes the entire cost of the product, etc. In general, err on the side of protecting H’s dumb majority from low-cost competition.
Consider a few cases:
1. Revolutionary America (H) vs Great Britain (F). National security dictates tariffs to protect shipyards and military-relevant manufacturing. Otherwise, no tariffs, since smart fractions are identical. Assume a war will include an effective naval blockade when deciding which industries are militarily relevant.
2. Pre-industrial independent Singapore (H) vs US (F). Throw open the doors to foreign investment. Identify opportunities to build domestic industrial clusters, and protect those to nurture them through infancy until they are ready to compete globally. But mostly, emphasize free trade with F, since the smart fraction % is the same, F’s per capita income is higher, and the only military threat is Malaysia, which won’t have the juice to threaten an economy significant to F.
3. Kenya (H) vs US (F). Zero tariffs. Throw open the doors to foreign investment. Auction off natural resources for exploitation by MNC’s. Hope and pray for outright economically-motivated colonialism to generate rule of law. Rule by local elites over a modern economy will be a kleptocratic disaster. Hope the colonials will whiten up the countryside by interbreeding to at least South American standards. Win the Olympics and try to score a white chick.
4. China (H) vs US (F). Dangle your massive domestic market as bait to sucker all the foreign investors in, then pick their bones clean of human and intellectual capital, while heavily favoring local competitors. Erect tariffs to ensure F has no choice but to play the game anyway. Enjoy the massive jump start to your economy. Once you get close to parity, switch to a more normal strategy.
China is a special case, because she has the massive domestic market suddenly made extremely attractive by rapid economic liberalization, high IQ, fully developed dense population, but was starting from near zero. Also, she needs to prepare for world war with the US.