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Reclaiming control of U.S. trade policy

On this special episode of the American Compass podcast, Senator Marco Rubio joins Oren Cass for a wide-ranging discussion of conservative economics and the common good.

Levy a tariff on all imports that rises until trade is balanced

Make American goods more attractive to foreigners than American assets

Balance trade by requiring importers to purchase credits from exporters.

On this episode of Policy in Brief, Oren Cass is joined by American Compass policy director Chris Griswold to discuss how U.S. trade fell so far out of balance—and some ideas for how to rebalance it.

“Bad competitiveness” results in weakening demand, which either reduces global production or requires surging debt to maintain demand and production at its existing level. Perhaps that rings a bell, because it is the world we live in.

President Reagan negotiated a quota on Japanese imports that bought Detroit time to retool and spurred massive foreign investment in a new manufacturing base in the South.

American Compass executive director Oren Cass makes the case that revitalizing the American industrial base requires moving beyond globalization.

The basic quandary for economists in this debate is that they stake their claims to expertise and deference on their field’s purported rigor, but they can uphold their own standards only under artificial conditions inapplicable to policymaking. As a result, their work’s defensibility bears an inverse relationship to its relevance.

It is hard, nay impossible, to find a more sophisticated conservative critique of globalization than that articulated by Oren Cass. Perhaps because Cass was once a card-carrying member of the economic establishment himself, he has an exceptionally clear sense of some of the problematic assumptions that have underpinned that establishment’s high level of support for globalization over the past three decades.

When the former high priests of globalization admit it’s not working, the time has come not only to ask why they’ve changed their minds, but also why they were so wrong for so long. Oren Cass’s exposé of the abuses of classical economic theory offers a valuable starting point. But the problems lie even deeper and extend much further.

In his essay, Oren Cass correctly argues that a well-functioning capitalist system requires a “bounded market” within a nation-state that imposes interdependence on labor, capital, and consumers. Frictionless capital mobility across borders, in contrast, decouples the interests of investors from their country and their workers.

Analyzing the effects of any long-run macroeconomic trend is admittedly a difficult affair. After all, typically more than one big trend is happening at a time, which means that isolating the impact of any particular force requires careful and thoughtful empirical analysis.

Oren Cass is right to note that modern economists largely misunderstand Adam Smith. But the misunderstanding runs deeper and traces even further back than editorializing in 20th-century textbooks. For more than two centuries, scholars have ignored the relationship between Smith’s political philosophy and economic analysis.

Oren Cass’s essay demonstrates how the advantages of industrial policy, apparent to some of the founders of economics and foundational to the success of the United States, were carefully airbrushed out by advocates of free trade in the 20th century.