What's conservative or libertarian about Trump?

When I shared a recent op-ed column from the National Review about Sarah Palin's endorsement of Trump's candidacy, which was not particularly kind to either of those public figures, a friend of mine made the suggestion that the National Review seemed to have abandoned its tradition of supporting conservatives and libertarians in their fight against the Republican establishment.

I conceded that he may have been right about the National Review's change but I had to ask my friend what was so conservative or libertarian about Trump. After all, whenever I listened to his stump speeches or debate performances, it mostly seemed to be about how he, through the apparent sheer force of his will, would ban Muslims from entering the US or about how he would get the Mexican government to pay for a giant wall separating the two countries or how he got a lot of flak for talking about these problems and how he's going to continue talking about them.

Everyone loves to pretend/believe that "president" is another word for "emperor," especially during election seasons and no one loves to indulge in that fantasy more than the political candidates themselves. As far as I am concerned, however, Trump and Sanders take the cake. My thoughts on Sanders are well known; as are my thoughts on Trump. As for Trump, I am almost convinced that he is a clown who has somehow accidentally misplaced his makeup kit.

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My friend persisted, however, and told me that I ought to visit Trump's official website and read his campaign position papers so that I may judge him more objectively. 

I have to admit that I had never bothered to read his campaign position papers. As someone who has often had to tell Ayn Rand-bashers that they ought to actually read Rand's works as opposed to what Salon has to say about her work, I realized that it was hypocritical of me to pass such judgments on Trump without getting the goods straight from the horse's mouth.

After all, considering the grueling nature of cable news cycles and the even more unforgiving beast that is the Twitterverse, it is easy to magnify one moment of stupidity to paint a person as something entirely that he may not be. Can anyone imagine how much more Howard Dean's scream would have damaged him had Twitter existed at the time of his candidacy?

So I went on Trump's website and I saw that there were a total of five campaign position papers. I did not have the time to read all five of them. The topic that I chose to read was the one that matters to me most among the available topics -- the one titled "Reforming the US-China Trade Relationship to Make America Great Again."

And, folks, it was a doozy!

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Right from the bat, the paper claims that since China's entry into the WTO in 2001, "Americans have witnessed the closure of more than 50,000 factories and the loss of tens of millions of jobs."

Aside from the fact that there is no data to back up that claim, even if that number were true, this is yet another example of post hoc ergo propter hoc. That is because that claim conveniently neglects to mention the effects of the dotcom bubble burst or the Great Recession or the battering effects of high oil prices on the construction industry in the mid-2000s.

So almost from the moment I started reading, I couldn't help but frown and shake my head.

The other theme that Trump's paper continually hammers on is that America needs leadership and strength at the negotiating table with China.

The moment people hear this sort of talk, anyone with any sense whatsoever should begin to ask themselves if that truly is an original thought that no one had before. It's not (see here, here, here, here, here, here, here, and here). Hell, Bill Clinton once called the Chinese government "the butchers of Beijing" before granting China "most-favored-nation" status after he became president.

Outside of the fantasyland called primaries season, neither the United States nor China can afford to be particularly difficult with one another because, whether they like it or not, the two countries share the largest trade relationship in the history of the world. A child might be able to take his toys and go home if he decides that he doesn't like his friend anymore, but that is not the way that effective international policy is made.

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Trump's other argument is that China's "Great Wall of Protectionism uses unlawful tariff and non-tariff barriers to keep American companies out of China and to tilt the playing field in their favor."

Trump says this unfair playing field puts American businesses and workers at a disadvantage -- that the game is rigged and that the outcome is for Americans to lose.

This is an old political chestnut and a dirty trick that is meant to distract people long enough to forget their own personal interests. This lie was exposed by Milton Friedman in his 1980 PBS documentary, Free to Choose. In the episode Tyranny of Control, Friedman said:

"When anyone complains about unfair competition, consumers beware. That is really a cry for special privilege always at the expense of the consumer. What we need in this country is free competition. As consumers buying in an international market, the more unfair the competition the better. That means lower prices and better quality for us. If foreign governments want to use their taxpayers' money to sell people in the United States goods below cost, why should we complain? Their own taxpayers will complain soon enough and it will not last for very long."

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Trump also thinks that declaring that China is a currency manipulator will somehow get the Chinese to think seriously about the United States. Currency manipulator! Then what the hell does that make the Federal Reserve?!

Also, the fact that people still believe in the myth of the Chinese government being "a currency manipulator" is a bad thing for the rest of the world just goes to show how desperately the vast majority of people in the world need to study basic economics. This entire myth can be punctured by just asking a few basic questions.

• How can Beijing artificially devalue the yuan without such devaluation causing the prices of Chinese exports eventually to rise?

• Even if Beijing could devalue the yuan for a long time, would that not raise Chinese producers’ costs of purchasing the many inputs that they buy on global markets? How could this possibly lead to economic growth?

• Just like the case with "unfair" subsidies, how does the artificial lowering of the prices of Chinese goods harm consumers from other countries? Don't people typically like it when prices of the goods they buy fall?

In other words, isn't Trump saying that he believes that consumers should be forcefully prevented from spending their money in ways that they judge to be best for them, and instead be forced to spend their money in ways that he judges to be best for the benefit of a select few American corporations?

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Now it is true that China requires foreign corporations such as Boeing and Intel to transfer proprietary technologies to their Chinese competitors as a condition of entry into the Chinese market. However, Trump goes on to say that this is intellectual property theft.

But one has to wonder -- if Boeing or Intel felt that they were being bamboozled by Beijing, that the costs of such technology transfers were greater than the benefits of being allowed entry into the Chinese market, wouldn't those corporations voluntarily decide to cease all of their operations in China?

In other words, isn't Trump saying that if he is elected president, he will use Big Government to forcefully prevent American corporations from entering into voluntary trade agreements?

And lastly, he says that he will "strengthen the U.S. military and deploy it appropriately in the East and South China Seas."

I believe that is called the Asia Pivot.

So let's recap. Even Trump's trade policy proposals, which are supposed to be the branier arguments that take place away from the camera, are vague and can only be called economically illiterate at best or deceptive at worst. Even if they weren't unrealistic, his policies would require great expansion in the powers of the government, which is decidedly not a conservative or libertarian position.

Republicans do remember this guy, right?
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I have not read the other four papers on the website. Frankly, reading this one and explaining why it is so horrible has been enough for me. So is he a conservative or a libertarian when it comes to other topics such as immigration or gun control? I can't say. And frankly, I can't bring myself to read any more and I don't give a damn. But if this paper was anything to go by, I have some serious doubts about the claim.

Leave the Beer Alone!

In December 2014, the Seoul High Court ruled that forcing large retail stores to close two Sundays every month was illegal because (1) the law limited consumers' right to choose where to shop and that (2) there was no evidence to suggest that the law actually helped small retailers or traditional markets.

For a while, I was hopeful that there might have been some sense in Korean courts. However, the Supreme Court made sure that common sense and critical thinking stayed dead and buried when they overruled the Seoul High Court and sided with local municipalities.

According to the Korea Times, one of the justices said,

"A regulation for the public good is not only important but also necessary. However, it can hardly be seen as depriving consumers of their right to choose as large retailers do not need protection."

Don't ask me how that makes any sense.

Of course, this is not the only instance of the government meddling in the economy that has screwed over consumers.

The Mobile Device Distribution Improvement Act has shackled all telecom companies to offer the same discounts to their customers, thus forcing people to pay more for their smartphones.

The Book Discount Law prevents retail bookstores from selling books at a discount any higher than 15%.

And a year ago, the Korean government was mulling the International Direct Purchase Law; a proposed law, which would have regulated how much, how, and what individual consumers would have been able to purchase from international websites such as Amazon or eBay.

But now someone has really messed up. Now there are rumors that the government plans to regulate discounts of imported beer.

Let's be frank. Shutting down large retail stores two Sundays out of a month is no big deal. People can plan ahead or just shop online. Making smartphones more expensive pissed off some people, but thankfully smartphones are becoming cheaper anyway. As for books, who reads books? And regulating online foreign purchases sound like it would be easy to skirt around.

But mess with beer? Do they not know what country they're governing? There has been debate about the accuracy of the claim that Koreans drink more than anyone else in the world. but it's without doubt that Koreans are heavy drinkers.

So dear Korean government, you done goofed. If you think the protests have been violent so far, wait until every single pissed off salaryman joins the fray. There will be hell to pay!

So if you know what's good for you, for God's sake, leave the beer alone!

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Did Korea's Economic Development Require State Protection?

A common argument that is often brought up to argue against free market capitalism is Korea's economic development. Many argue that despite the fact that President Park Chung-hee was a dictator, one thing that people cannot argue against is the economic development that Korea enjoyed under his 17-year-long rule.

Specifically, what those people are usually referring to is the series of protections, quotas, tariffs, and subsidies that President Park had given to what were then nascent chaebol companies.

One such defender of that point of view is Professor Ha-joon Chang, an economics professor at the University of Cambridge, and the author of such books as Bad Samaritans, Kicking Away The Ladder, and 23 Things They Don't Tell You About Capitalism.

Professor Ha-joon Chang
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Much can be said about his books, and I plan to do so in the future. For now, however, I will focus only on his defense of the infant industry argument, which is an idea that argues that emerging businesses and industries require government protection – in the form of tariffs, subsidies, and quotas – from their more entrenched competitors, particularly foreign competitors.

In that article that I linked earlier from The Independent, Professor Chang compares nascent industries to his six-year-old child. If this weren't a cringe-worthy moment of stupidity and/or academic dishonesty, I don't know what is.

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Moving on, in Bad Samaritans, Professor Chang makes the argument that Korea's economy did not develop because of neo-liberal economic policies, but rather due to heavy government involvement in the economy. There is no question that that is true.

There is also no question that Korea's rapid economic growth was nothing short of miraculous. There is a reason that it is often referred to as the Miracle on the Han River. But is that proof that protectionism was what allowed Korea's economy to develop so quickly? Well, that's quite hard to confirm considering the fact that Singapore and Hong Kong, which practised freer trade policies, went through much quicker and greater economic development.

“But they are city-states; they cannot be compared to a country that is so much bigger like Korea,” I often hear people say.

Fine, fair enough. Then one has to wonder about China and India. Both countries are much bigger than Korea and their economies grew much more quickly after they began to liberalize their respective economies (see here and here).

Of course, this is certainly not to say that government controls and economic programs are non-existent in Hong Kong or Singapore or China or India. They are not free market economies. But they have shown that freer markets do lead to greater growth.

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Another point that Professor Chang does not mention is that subsidization and other forms of government protections do not guarantee economic survival or development in any way, stretch, or form.

Yes, Korea is an example of an economic success story. However, we also have to look at other examples where protecting infant industries were not successful. For example, African cotton farmers want their governments to end the subsidies programs for their respective national industries so that they can finally compete in the international market; and which African country's economic development could ever compare with Korea's economic growth?

The problems of protecting infant industries are not limited to African countries. In the United States, despite the government's efforts to prop up Solyndra, a company that specialized in manufacturing solar cells, with up to US$535 million of taxpayers' money, the company still declared bankruptcy.

Similar examples can be found in Korea, too. Samsung was certainly one of the chaebol conglomerates that the Korean government helped to protect and nurture. However, Samsung is not the only business that got so much love from the government. Another industry that has gotten a lot of love from the Korean government is the rice industry. So why has Samsung become an internationally well-known name but there isn't a single Korean food-producing company that is as well-known outside of Korea?

In other words, no amount of subsidies or trade protections ever seems to be able to prevent what was always doomed to fail from failing.

So what does Korea owe its economic success to? That is a difficult question to answer; much more difficult than Professor Chang would like for his readers to believe. It's certainly not free market economics. As Professor Chang has shown, the Korean government has been heavily involved in Korea's economy. But as I have shown, freer markets like Hong Kong and Singapore have grown more quickly than Korea and subsidies do not guarantee success.

Though that specific question may be harder to answer, what is much easier to answer is that Korea's economy did not develop because of the government's protections, subsidies, and overall involvement in the economy, but rather in spite of them.

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Korea's Carbon Trading Market: Empty "Feel-Good" Politics

On January 12^th 2015, in an effort to curb carbon dioxide emissions, Korea established the world's second largest carbon trading market. The government has decreed that this year's total carbon dioxide emission quota would amount to 1.59 billion tons. The government has also announced that the carbon emission quota would be imposed on 502 Korea-based companies.

According to the same article from The Korea Times, analysts estimated that the affected companies will have to spend nearly ₩12.7 trillion (US$11.71 billion) over the next three years to buy extra emission rights or to install carbon emission-reducing facilities.

Now the question is whether or not this will work. I, for one, have serious doubts.

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Politics

The world's largest carbon trading market was stared in 2005 and it is located in the European Union. The first phase of the carbon market, which lasted from 2005 to 2007, did not reduce carbon dioxide emissions. Instead, overall emissions increased 1.9 percent over that period.

But why would that be the case? It was because was “a surplus of allowances and international credits compared to emissions.” If this were a “natural” market, it would be easy to say that this oversupply of emission allowances was a result of market failure, which could be easily remedied by lowered prices. However, this is not a natural market. It was a market that was artificially created by the EU Emission Trading System (EU ETS), an intra-governmental agency.

So what happened? Politics happened. European politicians knew that cap-and-trade can be economically harmful. Especially due to the worldwide economic slowdown that began in 2008, no European politician wanted to go down in history as the one who deliberately exacerbated his or her country's unemployment woes. Case in point, even “good” European leaders like German Chancellor Angela Merkel thought that climate change politics must not trump jobs. Considering the economic gloom that has besieged Europe for the past few years, it should not come as a surprise that Chancellor Merkel was not alone in her opposition to stringent rules that dictated her country's economic productivity.

If a market that is imposed on the private sector is run by the government, there is always the possibility, nay assurance, that it will not be dictated by market forces, but rather by government diktats. Political convenience will always trump principles.

It was politics that failed the world's largest carbon trading market. There seems to be no reason whatsoever to suggest that Korean politicians will be any better than their European counterparts.

The irony! It BURNS!
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Subsidizing the Bad

Politics, of course, is not the exclusive domain of politicians. It goes without saying that corporate leaders also take part in it quite regularly through the form of lobbying.

The theory behind cap-and-trade has always been that that eventually, the government will reduce the availability of carbon permits, which will ensure scarcity. That way, the market will retain its value while at the same time forcing a reduction in the overall level of pollution. Then those businesses will further trade those permits with each other, thus forcing each actor to innovate and find new ways to produce less carbon dioxide emissions.

At least that's the theory.

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As mentioned earlier, a combination of industrial lobbying efforts and political impracticality have ensured that the the EU ETS granted more pollution rights to private firms than the polluters needed to cover their existing level of emissions. However, what makes it worse is that even before the rights were granted, the amount of pollution rights that the government considered to be allowable was calculated based on existing levels of pollution.

What that means is that those who have polluted the most in the past have been rewarded with the greatest subsidy. If that is not a backward way of doing things, not to mention unjust, then I do not know what is.

Will Korea avoid the mistakes that were made in Europe? I will always hope for the best, but I shall not bet the jeonse on it.

The Regulation of Everything

One of the most successful government acts that actually helped to reduce air pollution occurred in the United States. The Environmental Protection Agency began to regulate sulfur dioxide emissions, the gas that was most responsible for increased acid rain, in 1971. The world's first large scale cap-and-trade system was born in 1990 when the Clean Air Act was amended to create an allowance-trading program for sulfur dioxide.

By all measures, the creation of the sulfur dioxide cap-and-trade market has been viewed as a great success. As a result, many people who champion carbon cap-and-trade markets often point to the former as a way for the latter to go forward.

However, what people often don't realize is that that is like comparing apples and oranges.

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The most important difference is that when the American government tried to regulate sulfur dioxide emissions via its cap-and-trade system, only 110 coal-fired power plants were included in the system, which later expanded to 445 plants.

Then there is also the fact that long before the Environmental Protection Agency came around to creating the world's first cap-and-trade market, coal-fired power plants already had many low-cost options to reduce sulfur dioxide emissions without reducing electricity production. In other words, the technology that was needed to reduce sulfur dioxide already existed and was already underway in the private sector even before the Johnny-come-lately government entered the market. On the other hand, unlike sulfur dioxide emissions, an economically viable technology that helps to reduce carbon dioxide emissions does not yet exist.

Furthermore, unlike sulfur dioxide, which is industry-specific, carbon dioxide is emitted by everything and everyone. The biggest producers of carbon dioxide may be easy to point to – automobiles, electricity production, oil processing plants, and farms just to name a few. Unfortunately, however, that list includes millions of businesses, non-profit organizations, and even just ordinary individuals.

The Korean government may have picked out the largest 500 companies to impose its cap-and-trade system. However, there is no way that it can succeed in achieving its goals if it does not regulate everyone. Of course, the real problem with it is that it cannot regulate everyone. The government is neither omnipotent nor omniscient. Regulating everyone is simply impossible.

That's why I can sleep at night - the knowledge that as much as the government can try, it can't regulate everything
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Minimal Impact

For the sake of argument, however, let us presume that Korea's carbon trading market does work the way it is advertized and it does become successful. Then the question that has to be asked is how that success would be measured.

It is estimated that Korea produces approximately 630,000 kilo-tonnes of carbon dioxide per year, or about 1.69% of the world's total carbon dioxide emissions. On the other hand, China produces 10,330,000 kilo-tonnes and Russia produces 1,800,000 kilo-tonnes. Japan produces 1,360,000 kilo-tonnes and the United States produces 5,300,000 kilo-tonnes.

Korea is truly a shrimp that is surrounded by whales. The following link provides a “carbon atlas” of the world.

Even if Korea somehow manages to successfully stop using fossil fuels completely, it will not change the fact that other countries around the world will pick up Korea's slack in no time. After all, the world's largest consumers of fossil fuels are developing economies.

In other words, Korea's domestic cap-and-trade system will most likely have a virtually unnoticeable effect on global warming while imposing substantial costs on all Korean businesses and households.

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The Tragedy of Unintended Consequences

Again, for the sake of argument, we have to assume that the carbon trading market will be successful.

It is no secret that coal is one of the dirtiest ways to produce energy. However, as coal is relatively cheaper than other fuel sources, much of Korea's businesses rely on coal for their electrical needs. In fact, Korea is the fourth largest net-importer of coal in the world. Though this might not occur immediately, as natural gas is a cleaner alternative to coal, and especially considering the recent tumble in oil prices, it will only be a matter of time before Korean businesses will begin to rely on natural gas as a substitute for coal.

Oil prices have fallen in recent months and Saudi Prince Alwaleed bin Talal recently said that the world will never again see the price of oil rise to US$100-a-barrel. That might offer some comfort for Korean manufacturers. However, even if the prince is right, the law of supply-and-demand states that when demand goes up, ceteris paribus, the price will also go up.

As the price of natural gas goes up and coal remains undesirable due to its high carbon dioxide emission rates, Korean businesses will become less competitive. Seeing how Korea is already facing an uphill battle in maintaining its edge in the manufacturing industry vis-à-vis China, Japan, India, and other emerging Southeast Asian economies; not to mention Korea's aging population and low birth rate, this new cap-and-trade system will hurt Korean manufacturers' profit margins even further.

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And when a business' profit margins start to shrink, one of the first things that a business usually tends to do is lay off workers.

The rise in the price of natural gas, which is coupled by a decrease in demand for coal, will do more than hurt manufacturers, unfortunately. It will also affect average citizens as it will become increasingly expensive to cool and heat people's homes or to fuel their cars. It goes without saying that this will hurt the most vulnerable members of society, the elderly and the poor, more than it will affect anyone else.

Furthermore, as regulations will force businesses to be more mindful of carbon emissions, businesses will have no choice but to spend more money on carbon trapping technologies, which will lead to higher prices. And when prices go up, consumers buy less. It is a vicious cycle. It is also common sense, which many policymakers seem to lack.

Conclusion

The cap-and-trade system for carbon dioxide emissions has been a miserable failure in Europe and has been a political non-starter in the United States. There were good reasons for this.

Cap-and-trade may have been started with the best of intentions. In practice, however, it has turned out to be little more than empty feel-good politics. It is a noble failure that succeeds in doing only one thing – showing the rest of the world that people care, and are willing to do something about protecting Mother Earth. Never mind that the something that they are doing is, to use an understatement, counterproductive.

If only feeling good about oneself could solve all of the world's problems...
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