Medical-Supply Nationalism vs Free-Market Capitalism

by | Mar 20, 2020

When there is a shortage of medical supplies, going out of our way through nationalism, mercantilism, and "protectionism" to make them more expensive will hurt people. Free-market capitalism and free-trade amongst nations is the rational solution.

The interconnectedness of virtually every person on the planet, more than any other change, defines the modern world. In relatively normal times the meetings of billions of minds have brought prosperity beyond what virtually all our ancestors could comprehend.

That prosperity is hard for anyone to debate, which is likely why economists who are often perplexingly able to disagree on almost any issue form an almost united front on questions like international trade and immigration. Those same forces have also created confusion and fear that we can’t ignore.

That fear and confusion are a core part of what allowed President Donald Trump to win the office in no small part by opposing the near-consensus among economists. In a somewhat cruel twist of fate, the global COVID-19 pandemic that escalates these fears from populist rallying cry to frenzied power grab has happened under his watch.

Given the opportunity, an administration that exploited a turn against modernity all the way to the White House was sure to reach again for those levers of fear and misunderstanding. Mirroring concerns of a backslide into authoritarianism around the globe, the past several days have seen the Trump administration put its cynical tariffs-first trade policy into fast forward.

Of the two economists most prominently in the President’s corner on trade, former advisor Stephen Moore emerged as an apologist to polite society, able to ruminate on how the President’s tariffs would discipline the bad actors in China and allow us to have it both ways with prosperous trade and intoxicating national pride.

Even if Moore was still clocking in at the White House, this unique moment likely still would have fallen into the hands of trade advisor Peter Navarro, perhaps more realistic than Moore in accepting the tension between trade and nationalism, but more than happy to sacrifice the former for the latter.

As confusion and tension from COVID-19 ratchet upward, he’s found a button to push in advocating an “America First” approach to medicine and essential hospital supplies. We needn’t overthink our response–we must reject this harmful and ugly piece of politics without hesitation.

Party of One

Navarro is a truly distinct specimen in the modern economics profession–before Trump’s election I was not aware that something called neo-mercantilism existed–it still may not after Navarro retires. Economists on all sides will understand the oddity of a modern take on the idea that the world’s nation-states are locked in battle over already-maxed out wealth. Adam Smith slaying the dragon of mercantilism in The Wealth of Nations is of course an oversimplification but its status as the origin myth of modern economics underscores how central the shift was from wars over gold to gains from trade.

This all may seem arcane to those who’ve spent less time buried in economics books, and it may seem like common sense to look out for one’s neighbors before the rest of the world. Fortunately Navarro’s own analysis of the spectre of depending on foreigners for hospital masks provides the perfect teachable moment.

One of the few emerging ideas where feuding camps seem to find consensus is the strain that a large number of cases of COVID-19, even if usually not deadly, could put on the resources of hospitals. Surgical masks have become emblematic of this problem–less protection for the medical professionals that wear them and more prevention of those treating others becoming points of contagion themselves.

Navarro looks into the interconnected modern world that’s brought so much prosperity and knowledge, and sees non-Americans who might take our masks. “This is not just about public health and safety. It’s about our very national defense.” He goes on to explain what we must do in “Trump time,” which means really fast:

In terms of tackling the problem, it’s a three-pronged Trumpian strategy consistent with everything the president has done — a synergistic combo of ‘Buy American,’ regulatory streamlining at the FDA and EPA, and competitive advanced manufacturing supremacy through technological innovation.

Perhaps I haven’t spent enough time with the literature on international trade, but I assume “competitive advanced manufacturing supremacy,” which sounds like the words of an authoritarian propagandist if that authoritarian propagandist was eleven years old, is Navarro’s invention.

Navarro correctly worries about a shortage–we do have one now. His solution is to tie a hand behind our back by mandating that all federal agencies, and Navarro hopes contractors too, must Buy American for a list of medical supplies. The reason reveals logic every bit as circular as the old diagrams explaining the mercantilist system–we need to create demand for our new American medical supplies factories.

When there is a shortage of medical supplies, going out of our way to make them more expensive will hurt people. These are also not perishable goods – stockpiling them from efficient sources to be deployed in a future crisis seems like a safer bet than shiny new idle factories waiting to ramp up production when the next virus hits.

Even the rest of the President’s trade bureaucracy sees through this nonsense – they’ve been granting exemptions for medical supplies among the tariffs Trump and others put in place.

Protectionists, or those profiteering from its appeal, inevitably fall back on the aging trope that we might go to war with the rival nation du jour who also might have the factories. That’s an increasingly obsolete worst case scenario, but by all means let’s discuss it – just not in “Trump time” under pandemic conditions.

Send Navarro Packing

I’ve personalized this deep disagreement with Navarro’s idea, something I usually try not to do. But libertarians, progressives, plenty of Wall Street conservatives, and likely a surprising number of democratic socialists – groups all more suspicious of each other right now than likely in my whole lifetime – can all reject these unequivocally bad ideas.

International trade, in which the decency and inclusiveness of free markets is impossible to ignore, might give us a moment to ever so briefly exhale and establish that there are limits to our admittedly profound disagreements.

Henry George, the Gilded Age economist who somehow inspired both libertarians and socialists, is worth quoting at length, now more than ever:

“Religion and experience alike teach us that the highest good of each is to be sought in the good of others; that the true interests of men are harmonious, not antagonistic; that prosperity is the daughter of good will and peace; and that want and destruction follow enmity and strife. The protective theory, on the other hand, implies the opposition of national interests; that the gain of one people is the loss of others; that each must seek its own good by constant efforts to get advantage over others and to prevent others from getting advantage over it.”

Maybe we can let the ugliest of responses to a moment of understandable fear draw a couple of lines in the sand even while other seemingly endless debates about our politics and economics push on.

Made available by the American Institute for Economic Research.

Max Gulker is an economist and writer who joined AIER in 2015. His research often focuses on free markets and technology, including blockchain and cryptocurrencies, the sharing economy, and internet commerce. He is a frequent speaker at industry conferences, especially on blockchain technology. Max’s research and writing also touch on other economic topics, including governance, competition, and small businesses. Max holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Prior to AIER, Max spent time in the private sector, consulting with large technology and financial firms on antitrust and other litigation. Follow @maxgAIER.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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