Orren Boyle Smiles

I just cannot understand how politicians can be called "populist" for favoring a few hundred thousand domestic steel workers and steel company equity holders over 300 million domestic consumers who depend on low-cost steel for their jobs or buy steel products.  But there seems to be something about the steel industry that causes folks who normally would scream about corporate welfare to just roll over.

At noon, Donald Trump will sign an executive order calling for a probe whether imports of foreign-made steel are hurting U.S. national security. The order will revive a decades-old, rarely used law to explore imposing new barriers on steel imports, in this case aimed loosely at China.

Trump will sign the memorandum related to section 232 of the Trade Expansion Act of 1962 at an event in the White House that will include leadersd of several U.S. steel companies; the law will allow the president to impose restrictions on imports for reasons of national security. Trump’s directive will ask Ross to conduct the probe “with all deliberate speed and deliver the results to the president with his recommendations."

An official cited by Reuters sad that there are national security implications from imports of steel alloys that are used in products such as the armor plating of ships and require a lot of expertise to create and produce.

Why do I suspect the national defense argument is a total sham?

Update:  “For every steelworker, there are 60 workers in steel-using industries,” said Lewis Leibowitz, a Washington attorney who has worked on trade cases involving steel in the past. “You need competitive steel prices for those industries to be competitive and to export.”  source:  WSJ


  1. kidmugsy:

    "Why do I suspect the national defense argument is a total sham?" Because

    (1) Almost all protectionist arguments are sham, and

    (2) Almost all national defence arguments are sham.

    So it's a double shammy.

  2. DirtyJobsGuy:

    If you read Churchill's history of the second world war he ranked the prospective combatants by their steel producing capacity. In the 1930's this was a fair way of assessing the ability of heavy industry to produce tanks, warships and guns. Today it is nowhere near as important as more general measures of GNP. The Japanese were always capable of producing steel, but oil and other key material shortages (including food) proved their downfall.

    Trump's view of the US economy is frozen in 1972 so he is fixated on autos, steel and heavy manufacturing. In the day when the big industrial unions carried a lot of clout this mattered, but not today.

  3. SamWah:

    It's a double almost-shammy. So, an almost-almost-shammy.

  4. ErikTheRed:

    Does double shammy = one Sham-Wow?

    Any issues with women are purely coincidental.


  5. Jim Collins:

    So if we do something about North Korea that China doesn't like and they decide to stop trade with the US, how long would it take to ramp up steel production to current levels?

  6. PaulS:

    Maybe this is easier to grasp if one avoids getting all technical about the meaning of "populist", and likewise avoids worrying about bogus national security arguments. Leaving all the nonsense aside, the auto plant that used to employ 11,000 now only needs 700 and has been relocated, and much the same is true for the steel plant - and there's no longer much economic use for the millions of folks who used to work in such places. By 'not much use', I mean nothing that pays much of anything, never mind paying enough to cover the often fantastically astronomical cost of living in those places where new jobs can actually be found (e.g. $4000/month to rent a skanky broom closet, or $2.5 million to purchase a decayed fixer-upper.) After all, the Orren Boyles and Hank Reardons of the world want to live in prestigious places, not in Podunk, and they want their servants nearby for the sake of control.

    That's what causes a lot of the upset. Surely it helped put Trump just barely over the top (even if for some it was a desperate European-style protest vote), even while some liberals remain convinced it "should" have favored Sanders or maybe Warren instead.

    Whatever, trying to understand politicians in a technical and rational way is probably an exercise in futility. It's about emotion and "connecting". The core issue is that "Average is Over", which is simply a book-title way of acknowledging that the scale on which jobs tend to be done has been relentlessly increasing for a very long time now. That is, "mechanical reproduction", to use a legal term of art, is ever more dominant everywhere, not just in the performing arts anymore. The worker-bee armies of old are obsolescent. Sooner or later there will be what amounts to a "phase change" in physics. It will be a bit like steadily heating a liquid and supposing that its temperature will just rise gradually forever, but discovering that it explodes into a boil instead.

    Since only fictional characters live in Lake Wobegon, it's simply impossible for everyone to be above average. However, nearly everyone has been made desperate to try, which has, among other things, reinforced runaway credentialism and absurd occupational licensing. But really, since "Average is Over", then so must be the paying careers of, ultimately, most people, no matter how many degrees they acquire. Just consider the status of adjunct professors these days.

    We're headed into "interesting times" since all of human history had been built (in part) around the economic utility of human beings, but that utility is headed towards zero for most (not least in the name of "safety" - we may become "safer" for example if all drivers are disemployed.) And I don't know that Rand or any other author could possibly have had a clue what those times will be like. Even settings like the Star Trek universe tacitly assume that people are economically useful - otherwise, for example, why would enough people to staff a starship put up with the many disadvantages of being in a military organization?

    Welcome to the brave new world of Captain Duns'l.

  7. MSO:

    There is nothing special about trade that it should be exempt from the bad government policies imposed on native companies. Our labor laws increase prices, our fuel taxes increase prices, our environmental laws increase prices and our income taxes and other regulations increase prices. Imported steel doesn’t share those expenses unless it is imposed upon importation.

    Bad government and crony capitalism makes everything more expensive, including imported goods. Punishing only native producers seems stupid to me. If we want less expensive products, then reduce the expenses imposed upon all producers, domestic and global.

  8. herdgadfly:

    Donald J. Boudreaux at Cafe Hayek says it all:

    Pres. Trump’s push to have Uncle Sam “buy American” is a slap in the face of the many people who voted for him because of his alleged business acumen.

    Good business executives ensure that their firms do not incur costs that are unnecessarily high. Well-run businesses do not produce for themselves inputs that they can acquire from others at lower costs. Profitable firms spend shareholders’ money only to create value and never to create jobs for the sake of creating jobs.

    And yet Trump is actively trying to force American taxpayers to spend more than is necessary on the provision of government services. This supposedly brilliant businessman fancies that he’ll somehow make us richer by draining more money from our pockets. Such an incompetent chief executive deserves to be fired.

  9. neal:

    God forbid that native steelworkers would get a break.
    The working class is so yesterday, and over.

    Probaby seeking to perform honest labor to strenghten the local conditions is a fools game.

    Only gets invoked when war or building is involved. Hell, are not there robots and compliant imports that will replace this fever?

  10. borepatch:

    I just cannot understand how politicians ...


    a) Politicians are motivated by votes, not economic growth. People who lose their jobs are motivated to vote.

    b) It's fine to say that "a rising tide raises all boats", but the last three decades have shown that this isn't true. There *are* winners and losers. Losers vote (see item (a) above).

    This may all be A Really Bad Thing for economic libertarians, but the question then is from where comes political legitimacy? Do the losers not get to vote? If they do, then is it a surprise that politicians court those votes? If the losers should not be able to vote against politicians, then what does political legitimacy mean?

  11. borepatch:

    Kidmugsy said:

    (1) Almost all protectionist arguments are sham, and

    (2) Almost all national defence arguments are sham.

    (1) So the losers from globalization should not be able to vote? Or they should only be allowed to vote if they lose?

    (2) Are they any industries that are critical to the defense of a nation? If not, why not? If so, which ones?

    These are serious questions. There may not be clear answers, and there may not be answers that you like, but to blithely dismiss them is frivolous.

  12. Guy:

    Clever title! I wonder how many readers get it, and what that says about the enduring relevance of its source.

  13. c_andrew:

    MSO wrote;

    If we want less expensive products, then reduce the expenses imposed upon all producers, domestic and global.



    Extract from above:

    Milton Magnus III, owner of one of the U.S. manufacturers that filed for the anti-dumping duties, argues that the costs to consumers are negligible—amounting to a penny or two per hanger. "If I pay $12.95 to have my suit cleaned and that hanger cost him a cent and a half more, that's $12.96 and a half. It's not a factor." Magnus's point partly explains why import-competing industries often succeed in their efforts to lobby government for the imposition of trade restrictions: the tariff offers concentrated benefits to a few domestic firms, while the costs of the tariff are spread out among millions of consumers—none of whom see a sharp increase in price. Of course, over millions of hangers, a penny or two per hanger can add up.

    Advocates of trade restrictions often argue that protection will save jobs. Since we can observe price and cost increases associated with trade restrictions, we can estimate how much it costs to save each job in a protected industry. According to the NPR story, there are roughly 30,000 dry cleaners in the U.S., and on average, each pays an additional $4,000 per year due to the hanger tariff. This indicates an average annual cost of 30,000 firms x $4,000 per firm = $120 million. According to the U.S. International Trade Commission's report, U.S. employment in wire hanger manufacturing was 564 workers in 2004 and fell to 236 workers by 2006. Let's assume that employment in this sector would have fallen to zero in the absence of the tariff, and that with the tariff, employment will recover to 2004 levels. In other words, assume the tariff "saves" 564 jobs. Dividing the cost of the tariff to U.S. dry cleaners ($120 million year) by the number of jobs saved (564 jobs) indicates that each job saved costs about $212,765 per year. Keep in mind that the typical full-time worker in this sector earns about $30,000 per year. Even if we assume that industry employment doubles, the cost of the tariff is still roughly $120,000 per job.

  14. Thane_Eichenauer:

    I was born in 1967. I don't get the reference. I consider myself better read than average, though I admit the average ain't so hot.

  15. BobSykes:

    The Ricardo fetish ignores many consequences of the globalist agenda. First, over the last 40 years or so the upper 10% of the population (by income) has captured literally all of the economic growth resulting from open borders, free trade, off-shoring, etc. Middle class income has stagnated, and the elites have actually clawed income away from the working class, resulting in a loss in real income for workers over that time period. Blacks have been driven out of traditional jobs and neighborhoods by legal and illegal immigrants, of by direct violence. You can add the current opioid abuse epidemic and falling White life expectancies to the Ricardo fetish.

    It is also the case that there are legitimate national defense issues here. The globalists actually don't care about national defense, because they don't care about nations. As a result of the systematic hollowing out of American industry and its transfer overseas, China now has a larger and more comprehensive manufacturing base than does the US. In WW II, American industrial might was essential to the defeat of both Japan and Germany, even on the Russian front. Today, we are essentially in the same position v.v. China as Japan and Germany were to us in 1940. Should a war break out in Korea, the US would be crushed, and the peninsula would be unified under a Chinese ally.

    A globalist economy functions like a thermodynamic system; it evolves towards a global equilibrium in which incomes in rich countries decline and incomes in poor countries rise until the whole world is on the level of Mexico or maybe Vietnam. If you insist on a global economy, then you have to deal with the distribution problem directly. The obvious solution (which the elites will prevent) is to tax elite incomes at very high rates and to impose a maximum income level. The tax revenues are then distributed downward. That economy is, of course, hard core socialist, but isn't that what Zuckerberg, Gates, Sanders, Brown, et al. are pushing for?

  16. Thane_Eichenauer:

    A lesson worthy of payment. Thank you.
    It is amazing how much a person can forget from a book last read 30 years ago.

  17. slocum:

    Democracy being what it is, voters have the right to vote to cut off their nose to spite their faces, but the national defense argument for steel protectionism is still a sham.

    And, slapping tariffs on steel will create more losers. If you use tariffs to make steel in the U.S. more expensive than elsewhere, then manufacturers of autos, appliances, heavy equipment and other products using steel will be at a disadvantage compared to their foreign competitors. And to escape that problem, they'll have a stronger incentive to move production offshore where products can be made with cheaper non-American steel.

    Do you think these kinds of harms are unlikely? Nope, they've happened before. Why, for example, are Lifesavers candies made in Canada now instead of Holland, MI?


  18. slocum:

    " First, over the last 40 years or so the upper 10% of the population (by income) has captured literally all of the economic growth resulting from open borders, free trade, off-shoring, etc."

    No, it hasn't. Compare the size of houses lived in by the middle class now as compared to the mid-70s as well as the differences in amenities. Compare the cars of 1977 with those of 2017. Today's cars are far more safe, comfortable, reliable, fuel-efficient. They also perform much better -- today's ordinary passenger cars are faster than 1970s sports cars. Clothing? Can I interest you in a 1977 polyester leisure suit? No? And that's before we even get to computers, cameras, mobile phones, flat-screen TVs and entertainment options? I remember 1977. Ubiquitous VCRs and video rental stores were still almost a decade away. In 1977, you watched what was on. Which usually wasn't much. In 1976, NBC paid an enormous sum for a one-time broadcast of 'Gone With The Wind', and it was a massive cultural event (and the highest rated show ever). Which gives you an idea of how truly lousy entertainment options were then.

    If economic statistics claim that the material well-being of most Americans hasn't improved since 1975, there are *serious* problems with those stats (chiefly, the inability of inflation measures to capture all the improvements in quality and introduction of incredible new products). For a little more of the vast differences between well being now vs 1975, check out Don Boudreaux's 'Working for Sears Goods':


  19. slocum:

    You seem to be making a bizarre response to an argument nobody's making. NOBODY is suggesting any people or groups should be disenfranchised. What we're arguing is that politicians shouldn't pursue bad, destructive policies that will make nearly all us worse off.

    Steel tariffs aren't going to help the working class as a whole, they're going to help steel workers, managers and stock-holders at the expense of workers, managers, and stock-holders of other companies -- other companies that use steel to make their products. It will also hurt consumers as products containing steel become more expensive (not just consumer goods, but also buildings, roads, bridges, etc). This will raise the cost of doing infrastructure projects. All for the benefit of a small number of people only who have managed to get the government fleece everybody else and send the money to them.

  20. ErikTheRed:

    Why blame globalization? What magic thing happened 40 (actually closer to 45) years ago to create an inflection point in the purchasing power curve?

    Number one is that this is when currency manipulation "went mainstream" in the US economy- the US left the gold standard and began more aggressively deflating the value of the dollar (and inflating the value of good and services). Wages have not kept up with this, and this problem has been exacerbated further with the 2008 crisis. Increases in productivity (as mentioned by slocum below) have helped the poor and middle class to almost tread water.

    I semi-jokingly refer to this as part of "cokehead economics." If you've ever known a cokehead, you know how it works. They start off doing just a little to keep them going. That wears off quickly so they do a bit more. Then their body is tired but they want to keep the party going so they start doing larger and larger quantities, until they pass out, run out of cocaine (and/or money), or die. Expanding the currency base is a form of cokehead economics. Stimulus programs are another form of cokehead economics. All of these things benefit certain financially- and politically-connected groups far more than they do any of the masses. Both parties are completely up to their necks in these practices. Neither side has even the slightest interest in backing off the coke habit - they just fight over who gets to snort the next line.

  21. StillAnOptimist:

    And when they pass 10-289, we will know how relevant it remains (I _do_ expect a form of 10-289 to pass with Trump - he may discover that automation/innovation is primarily responsible for the loss of manufacturing jobs - so what better way to "save" those jobs than a 10-289?)

  22. ErikTheRed:

    Are you implying that political legitimacy comes from voting? Where do we draw the line on that?

    Ummmm... dude... we took a vote. Sucks to be you:

  23. JoseM:

    You forgot about the waiters in restaurants that the newly re-hired steel workers are going to eat in. Oh, yeah, and the road builders who get to build a road with the taxes the newly re-hired steel workers pay. Oh, yeah, ...

    You forgot about the engineers who will get a new job figuring out how to use steel more efficiently. And the stores they buy their liquor in.

    You forgot about the spur to innovation that having internal manufacturing present in a country leads to, and how that will pay off handsomely in the future.

    You forgot about a lot of other stuff too.

  24. rst1317:

    a) not all that steel is needed for security
    b) Why would China - at risk of the unemployed going for a long walk a la Mao - cut off it's nose and ban steel exports?

  25. May Xu:

    Protectionism, often refuted and seemingly abandoned, has returned, and with a vengeance.