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  • Some Thoughts on Trump, Free Trade, and Horses

    Posted by Lexington Green on February 28th, 2017 (All posts by )

    A friend sent a link to a leaked, recorded conversation between Trump and Wilbur Ross, his nominee for Commerce Secretary. There is nothing particularly troubling in the conversation. Trump is talking like Trump. He is the same person in public and in private, which is nice.

    I responded:

    Sounds good to me.  A tariff is a consumption tax collected at the port of entry.  The American founders expected to fund the operations of the national government with revenue from a tariff, and it worked.  He is also right that the Japanese and other countries use safety regulations as non-tariff import barriers.  There is nothing bad on here at all.  

    He wrote back saying that that a tariff is not a pure consumption tax because the producer may end up eating some of the tax.

    I responded:

    If the producer eats some or all of the tariff, Trump does not care and most of his voters don’t either.  Foreigners don’t vote here — not counting 11 million illegal aliens.  

    Bottom line, a moderate tariff was in the past and could be again a substantial revenue source.  Charging an entrance fee to participate in the massive American market is not a terrible idea.  America boomed in the past during high tariff periods.  We cut tariffs to the bone after World War II as a way to encourage foreign economies to get going again and to tie them to the USA.  It was a specifically security driven move, and we recognized that it would hurt producers in the USA.  I see no reason we need to do anything like that now.  

    I had the following comments in the course of the conversation which may be of interest:

    I am generally a free trader.  I don’t like the government telling me or anybody what they can buy or who they can buy from.  However, the shrillness of the opposition to Trump on this is over the top.  It is not some violation of sacred American principle to impose a tax on imports as opposed to taxing other activities. Moreover, it is not the end of the world that we are using trade policy to protect industries or workers facing foreign competition, when we have a massive industry in Washington which exists to use the regulatory machinery to protect everyone who can afford a lobbyist.  This is just the unprotected demanding some of the same protection for a change.  They have gotten clobbered and that could not go on forever without out some demand that someone else bear the burden of facing the hurricane of creative destruction for a while.  Further, our so-called trading partners especially China do cheat and do use subsidized trade to try to destroy whole sectors of the US economy, including to obtain military advantages.  

    Funnily enough, the original free traders, the Anti-Corn Law League, led by William Cobden and John Bright, were much more realistic than free trade idealists.  They wanted grain prices in England to come down, and they wanted the Lords who were the landholders in England to face foreign competition to drive down grain prices.  People were poor back then to a degree we cannot fathom, and food was a significant part of their total income. So if bread prices came down, it made a big difference.  But, if I recall correctly, and I need to go back and look at this, Cobden and Bright also favored other liberal reforms, including expansion of the franchise.  And they wanted the Lords to be impoverished by having their revenue crushed due to cheap imported grain.  In other words they wanted free trade knowing that one major sector of the economy would get clobbered, there was no pretense that “everyone would be better off”.  Of course not.  No policy change or policy change, even one that increases aggregate wealth, makes “everyone better off.”  There are winners and losers.  You want a policy that pushing increased and increasing aggregate wealth that makes some provision for the losers so that the entire process can continue without generating too much political opposition.  If there had been a wide franchise at the beginning of the industrial revolution, it probably would have been stopped by popular vote!  

    Related:  I have a book called Americans and Horses by Phil Stong, written in 1939, at the very end of the era when horses were a big part of the economy.  It is hard for us to imagine how major horses were. The entire physical infrastructure of the country was structured around horses for transport and traction.  Horses were literally everywhere.  The USA was the world leader in horse breeding for all purposes and for export.  That part of the economy was annihilated, and quickly, in one generation.  When my parents were children there were still horse drawn carts in Boston delivering milk and ice and coal, and there were knife grinders and tinkers who did metal repairs, and others.  This is as late as the early 1940s.  That is yesterday in historical terms.  

    My friend wrote back suggesting that it would be good if we used horses more, even at the cost of some GDP.

    I responded:

    Don’t romanticize horses, man.

    There were huge externalities.  Disposing of horse waste, which was all over the place, disposing of horse carcasses, huge amounts of space devoted to horse fodder, which was not nearly as compact as fuel for vehicles, housing for horses, horses blocking the streets, horses deciding for themselves what they wanted to do, including panicking and bolting, then the huge amount of time that had to be spent caring for the horses when they were not in use.   

    People eagerly adopted motorized transport and traction because it was way, way better.  My Dad was a foster kid on a farm as a child in the 1930s.  He has zero sentimentality about working with horses, caring for horses, feeding them, etc.  He lived through the transition.  Motor vehicles are better.  

    I do think that if we have driverless vehicles and a more decentralized economy we may see more horses used for leisure as people disperse more. There should be more open space available and accessible.  That would be fine.  Going hiking with horses for example, would be good.  But horses as the only option for general daily personal and commercial use, that was a tough life.  

    My friend commented:

    “Driverless cars sounds bloody awful.”

    I responded:

    Men live about five years longer than they can drive, women live about ten years longer than they can drive. Tens of millions of baby boomers will lose their mobility unless we have true driverless cars. The baby boomers always get whatever they want. This will be no exception. Driverless cars will create a huge productivity boom, while annihilating a huge amount of low skill work. Very disruptive. Tens of thousands of fatal and life destroying accidents will not occur once the cars are all talking to each other. Driving will be like riding horses, a leisure activity for enthusiasts limited to areas set aside for it.

     

    20 Responses to “Some Thoughts on Trump, Free Trade, and Horses”

    1. Mike K Says:

      I remember horse drawn ice wagons during the war. It might have been related to gasoline rationing.

      I’m not sure if I remember horse drawn milk wagons. That might be something I learned about later but I definitely recall the ice man.

    2. David Foster Says:

      I see the argument increasingly being made that ‘unemployment & underemployment are caused by automation, not by imports & offshoring’ ‘offshoring doesn’t matter because robots will take all the jobs anyhow’ (interestingly, I’ve seen this argument made especially be people working in the artificial intelligence & robotics fields)

      But there are something like 90 million Chinese manufacturing workers, and while not all of them are producing for export, a lot of them are. There are also other export-intensive countries such as Mexico and Vietnam. Even considering the much higher productivity of American workers (and their capital equipment), it’s hard to imagine that there are less than 3-5 million manufacturing jobs that have been displaced by offshoring. The indirect impact is much larger.

      Also, there are a considerable number of service jobs that have been displaced by offshoring.

    3. Sgt. Mom Says:

      Oh, yes – read any … err, realistic social history of big cities about the problems with regard to horse transportation of everything. The noise, the dung, the necessity of stabling, feeding, caring for horses … the requirements were huge. Motor-powered transport – either as in individually powered units, or as cable-drawn (or electric-powered) were seen as a huge improvement.

      We had a back-yard horse for a couple of years, when I was growing up in a semi-rural dirt-road suburb on a half-acre lot. The amount of dung produced by a single, spoiled pet horse was mind-blowing. Lovely for Mom’s compost pile. Multiplied by … how many horses? Oh dear. There is a good account of the problems of horse-drawn urban streetcars in this book, BTW. https://www.amazon.com/Wet-Britches-Muddy-Boots-Victorian/dp/0253356962/ref=sr_1_8?s=books&ie=UTF8&qid=1488327569&sr=1-8

    4. Mike K Says:

      Horse manure was a worry for urban planners that did not anticipate the automobile.

      One of the most interesting stories is that of the owner of Seabiscuit the racehorse, Charles Howard, who was played by Jeff Bridges in the movie by the same name.

      Howard opened a Buick dealership in San Francisco in 1905, the year before the earthquake.

      He spent a lot of time teaching people to drive. It was a better way to sell automobiles then. In 1906, he used some of his autos to function as ambulances after the earthquake.

      In 1915, he really had a moment of inspiration.

      In 1915 Billy Durant, the head of General Motors, was in deep financial trouble, having overextended the company through acquisitions. It was Charles Howard who loaned him $3 million, in the process obtaining GM stock which would quickly lead to financial fortune. During the 1920s Howard was called “the world’s largest motorcar dealer.” Journalists were not referring to Howard’s weight and height.

      After this event, Howard owned a large share of GM after loaning the money to Billy Durant in 1915. His share eventually exceeded $200 million.

    5. Douglas2 Says:

      An aside brought to mind as the discussion is on horses and driverless cars. I happened to drive into a shopping plaza behind an Amish horse-drawn carriage a week ago. As the carriage drew even with the first shop in the promenade, a fellow disembarked from the moving carriage and dashed into the store — and the horse carried on pulling the now-driverless carriage into a legal parking spot.

      I guess sometimes we get “horses deciding for themselves what they wanted to do”, and sometimes when left to their own devices they do just what we would like them to do anyway.

    6. Mike K Says:

      Many a drunk was gotten safely home by his horse in years gone by.

    7. Grurray Says:

      Studebaker was able to make the transition from horses to horseless. They made a fortune selling wagons in the Civil War and would’ve probably ridden that business into the sunset except when all the Studebaker brothers retired one of their son-in-laws, Fred Fish, took over. He was one of the first to see the potential and insist on building an electric motor to replace the horse.

      Another interesting figure in their story was John North Willys, who bought out Studebaker’s gasoline engine supplier. A true visionary, he made millions in the auto boom of the 1910s, only to lose it all in the 1920 bust, then made it all back in the roaring 20s, only to lose it again in the Crash. After that he didn’t make it out of the Depression alive, but his company eventually went on the make the Jeeps during the war.

      So many fortunes were made and destroyed, so many livelihoods created and extinguished. That’s what built this great nation. Misguided efforts to suppress or stabilize that will be the downfall of us all.

    8. dearieme Says:

      The driver of a London horse-drawn cab was allowed to urinate against a rear wheel. If there was a police constable in the vicinity he was to hold the horse until the driver had resumed his seat.

      So I read lately: can it be true? (You have to remember that we are less prudish than you chaps but more prudish than the frogs.)

    9. Joe Wooten Says:

      Both my grandfathers were farmers who started with horse/mule drawn farming equipment in West Texas and both told me they enthusiastically adopted gasoline powered tractors when they became affordable in the late 1920’s. They could get a lot more done without having to hire help and the amount of money/time they spent on feeding and caring for the horses and mules dwarfed what they spent on fuel and maintenance on the tractors.

    10. Remo Williams Says:

      There was a great book by Frank Tolbert (Which I loaned to a friend and never got back) talking about growing up in West Texas during the early part of the century (1910-20). He had a uncle who was used to reading in the saddle or grabbing a catnap as he rode his horse. Can’t do that with a car, so Tolbert would drive for him.

      (Although the uncle did try to sleep while driving. He explained that, if the road was straight and no one else was on it, you could lock the steering wheel and grab a few winks before you had to make any turns. His sister, Frank’s mother, didn’t appreciate the logic and that’s how Frank got recruited to be the driver.)

      Tolbert said that his uncle was a real education. He taught him how to gauge the bushel yield of a wheat field just by looking at it, how to quickly count the number of cattle in a herd and how to spot which fields are likely to have oil in them.

      He was also a source for pithy sayings. He said that: “You can’t trust a wall-eyed horse, a cow with white eyelashes or a woman who wears black underwear.”

    11. tomw Says:

      Right about the middle of the 1950’s there was a knife sharpener who drove a horse-drawn workshop around. He covered the suburbs west of Chicago, at least including LaGrange, where I was living at the time. Memory indicates he came round about once a year, and would sharpen scissors in addition to knives. He also repaired knives, scissors, and some cookware, and vended cutting utensils of all sorts.
      A late co-worker, born in 1940 in upstate New York, told stories about the plow-pulling draft horses he tended as a youth. They would allow him to get between the pair in the stall, doing whatever chore was required, and would then ‘lean’ into each other, him squeezed in between, until he’d respond, and get them to lay off, either by noise or slapping them a bit. He did not miss the farm. He also told of driving self-steering 18-wheelers full of beef on the hoof, where he’d cozy up to the the truck in front of him, and nod off, while his ‘tractor’ bumped against and pushed the trailer immediately ahead. Apparently, it would follow in its tracks while he slept. Self-driving indeed.
      Nicest man you’d ever meet.
      Horse power, on the hoof, did not disappear from the face of the USA as early as some have averred.

    12. dearieme Says:

      I never saw horse-drawn farming in Britain but I saw some on my first visit to the Continent in 1960.

      What we still did have in Britain into the sixties was horse-drawn milk delivery in some places. I suspect, though, that it was really a form of advertising. The electric “milk float” was the ideal vehicle, not the horse and cart.

    13. Subotai Bahadur Says:

      Since we have functional and actual tariffs against American exports, I have no problem with reasonable [or in some cases punitive if in pursuit of our national interests and foreign policy] tariffs on imports. When you look around the table and cannot immediately see who is the mark, it is you.

      As far as externalities, they can go beyond sanitation with horses. My blog namesake led Mongol armies. Looking at the extent of Mongol conquests, one of the great factors limiting where they went was the terrain and availability of fodder. Northern Russia was not bothered with, because taiga forest would not support either Mongol horse herds, nor the style of warfare they used. Keeping in mind that every warrior had multiple spare horses and they had to be cared for. Similarly, they did not penetrate beyond Poland and Hungary into western Europe.

      Modern foreign policy has been in large part dictated by the use of petroleum, requiring either the conquest of petroleum resources or a foreign policy of staying on the good side of those countries who furnished those resources, regardless of other problems with them. That externality is disappearing as we become more and more energy independent with fracking. We don’t have to put up with a lot of the guff we have had to previously. We are in a period of paradigm change.

    14. Whitehall Says:

      Glad to read the recognition that free trade for the US after WWII has been driven by national security. It’s been one of long-standing talking points.

      As to Studebaker, a must-see is their museum in South Bend, Indiana. I can’t remember a museum I’ve enjoyed more. They even have the carriage that President and Mrs. Lincoln rode in to Ford’s Theatre on the night of his assassination.

    15. Steve Adams Says:

      There are lots of non tariff barriers to trade, including safety regulations. I think the biggest barrier is simple nationalism. I remember talking to a Japanese coworker about my Japanese auto. He couldn’t understand why an American wouldn’t buy an American car – that never happens in Japan.

    16. PenGun Says:

      I have a horse. Well we live in the same field, he’s not really mine, but we are good friends. I had never known a horse before and he is a great fun. He’s what’s know as a badly gelded horse, he’s not very docile.

      His owner is afraid of him. Not really scared but she does not trust him much. I’m not sure why, she did fall off him once, and hurt her shoulder. She claims he bites as well.

      He’s a good friend of mine though. I can put my hand in his mouth and he won’t hurt me. He is tired of winter and would like to get back in his field but now we’ll start the yearly freakout over founders, or laminitis.

    17. Bob Durtschi Says:

      Lynette’s grandma would tell of the time they went from horses to tractors on their farm. It was much harder on the farmer because they’d rest when the horses needed resting. Especially with headlights they no longer needed to “rest” and didn’t quit when the sun went down. One of Lynette’s early memories was sitting on a horse with her legs poking straight out, not reaching to the sides of the horse and hanging on for dear life to those two “prongs” as her dad moved the horse forward then back as they put hay in the loft.

      One of my early experiences age 12 – 16 in the mid 1960s was working on my grandpa’s cattle ranch in Montana and helping a neighbor who still used horses put hay up. The ranch used mechanical equipment. We still took a couple hour nap around noon after working 6 hours and having a big lunch.
      Bob Durtschi

    18. EdSieventen Says:

      Good piece. Live blogging the whole conversation would be an interesting read.

    19. Rich Rostrom Says:

      Steve Adams @ March 2nd, 2017 at 11:00 pm:
      There are lots of non tariff barriers to trade, including safety regulations. I think the biggest barrier is simple nationalism. I remember talking to a Japanese coworker about my Japanese auto. He couldn’t understand why an American wouldn’t buy an American car – that never happens in Japan.

      Maybe Japanese never buy American cars; but there are Japanese motorcycle clubs who all ride Harley-Davidsons. E.g. the Iwakuni Rising Sons.

    20. Dr. Weevil Says:

      I thought the Japanese never buy American cars because they drive on the left side of the road, and American automakers don’t make any cars with the steering-wheel on the right, while Japanese automakers do make plenty of cars suitable for American roads.