A new show popped up recently on the Fox News Channel. The title is “The Next Revolution” hosted by British immigrant Steve Hilton. I caught a bit of his show last night and was taken aback by the kind of language he used when talking about China, and even more flummoxed by the policies he called for.
Hilton insisted that China is not America’s partner, and is instead America’s enemy. He talked about the evil regime in China, its human rights abuses, its lack of political freedom, and its controlled economy. Over the years various trade deals have been made with China, and Hilton believes that the deals benefitted China, but hurt Americans. Americans saw their incomes decrease and their jobs go overseas.
In Hilton’s mind, the proper response to what has been happening with China is an all-out 100% boycott of anything with the “Made in China” stamp on it. On last nights episode he said,
“Here’s what has to happen. We need a total economic boycott of China. All U.S. companies should pull out of China immediately. If they don’t, they should face legal sanctions as well as consumer boycotts. All Chinese companies should be thrown out of America and we should use CFIUS, the Committee on Foreign Investment of the United States, to block any further investment by Chinese companies or the Chinese regime in our economy. At the same time, let’s get the best Chinese students and entrepreneurs over here so we suck the top talent out of their country and help cripple their bid for world domination. Let me repeat. China is our enemy.”
The absolute buffoonery was so intense that it needs to be addressed using a subject Hilton clearly knows little about – economics. The free market is not a zero sum game. It is not as though when one country does well, another is hurt or if one economy grows, another shrinks. This mistaken zero-sum notion is written about by economist Thomas Sowell in the first few pages of Economic Facts and Fallacies:
Many individual fallacies in economics are founded on the larger, and usually implicit, fallacious assumption that economic transactions are a zero-sum process, in which what is gained by someone is lost by someone else. But voluntary economic transactions – whether between employer and employee, tenant and landlord, or international trade – would not continue to take place unless both parties were better off making these transactions than not making them. Obvious as this may seem, its implications are not always obvious to those who advocate policies to help one party to these transactions.
Let’s simplify things. A man buys a pencil from a woman for $1. The ONLY way this transaction could have taken place voluntarily is if both parties benefit. The man wanted the pencil more than the dollar, and the woman wanted the dollar more than the pencil. Both parties saw a profit from this transaction. Both feel they are better off. No one lost, and both gained.
International trade is not much different. The vast majority of trade that happens between the United States and China is individuals buying and selling. It is not “China” that is sending goods to America. It is a Chinese person who is selling his goods to an American who is buying them. This is a voluntary transaction where both parties gain. The American gets goods he can use or sell to other Americans, and the Chinese man has money he can use for reinvesting in his business or just buying food for his family. Both parties saw a profit from this transactions. Both feel they are better off. No one lost, and both gained.
The last example is how most trade is done, not just between China and the United States, but around the world. When trade is voluntary, both parties benefit. Hilton bases his ideas about China being our enemy on the side effects of some of this trade, most notably the loss of jobs. This is yet another age old economic fallacy, and can easily be reinterpreted many ways. China “took” our jobs, he says. Well, technology also “took” our jobs, and left Americans unemployed, right?
In Economics in One Lesson, Henry Hazlitt discusses this in a chapter titled “The Curse of Machinery”.
Among the most viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever. Whenever there is long-continued mass unemployment, machines get the blame anew. This fallacy is still the basis of many labor union practices. The public tolerates these practices because it either believes at bottom that the unions are right, or is too confused to see just why they are wrong.
The belief that machines cause unemployment, when held with any logical consistency, leads to preposterous conclusions. Not only must we be causing unemployment with every technological improvement we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat.
Someone took my job! Now they do my job for me! How awful! I used to want to make a bunch of cheap crap, but now I sit on my butt while someone else does it. All I do is give them devaluing pieces of paper and they deliver it to my home. Poor me!
The purpose of business is not to create jobs. The purpose of life is not to work. In fact, since the dawn of man, we’ve done everything we can to minimize work and increase leisure. If a machine, or a foreign worker (it makes no difference) minimizes work for Americans, that’s a GOOD thing!
Hilton’s prescribed actions for America are foolish and lacking in economic understanding, but also lacking in respect for property. If an individual American owns a business and decides that it is in his interest to relocate his business in China, that should be his decision, not the government’s. Hilton treats business and economics as though individuals do not exist. It isn’t “business”, and “China”, and “companies”, that make the world run. It is the individual.
Hilton seems disinterested in the individual. He’s clearly more concerned about the collective. Well, then how would his policies effect the collective? A boycott of all Chinese goods would mean Americans pay more for virtually everything. The cost of living for Americans would increase, which is equivalent to Americans being poorer. This policy would hurt the poorest Americans most. Surely Hilton can afford to pay higher prices for everything, but millions of Americans are living paycheck to paycheck. This hits them the hardest.
Banning all Chinese investment in America would mean fewer buyers of land, fewer buyers of stocks, fewer buyers of labor. That means lower home values, a weaker stock market, and lower wages. When China invests in America, jobs are created. Hilton would not only force you to pay higher prices for everything, but then he’d kick your employer out of the country!
Finally, Hilton assumes America will be able to just pluck humans out of China and bring them to the United States. Why China would allow this, given the boycott of all goods and investments, is beyond me. Instead of retraining Americans, or giving them decent K-12 educations, he would just import labor from China. Wait! I thought he was against importing things from China! In Hilton’s world, you can’t import an iPhone from China, but you can import a human being.
Hilton’s policies will leave Americans with higher prices, no job (or at least lower wages), and now competing with the best Chinese students for work. Nice going, Steve!
Tim Preuss is the host of the Tim Preuss Podcast, available Monday-Friday on iTunes, the Liberty Radio Network, Talk America Radio, and everywhere else. More of his work is available at PreussPodcast.com.