FT on Malloch : https://www.ft.com/content/d1b0453a-fde0-11e6-8d8e-a5e3738f9ae4
Let me start out by explaining the title. The subject being discussed on the Daily Politics today was Trump and his steel protectionism. Defending Trump was an American introduced as an author and consultant Ted Malloch. I googled him because I wanted to find out if he was a Republican. I found it odd that a right-winger supported leftist ideas of protectionism.
What I did not expect to find as the number one article was a March 2017 Financial Times article about how this guy and his wife Beth declared bankruptcy in 2013 with assets of $152.000. They were trying to get debts to 2 banks for loans worth $5.9 million written off, borrowed on the back of false statements made to secure the loans. I was so surprised I looked over the picture in the FT and compared it to his image on Daily politics. What swung me wasn't simply the similarity (it was only a year ago) but also the fact he appears to be wearing the exact ring (looks like university job) on the right little finger. Apparently he is chummy with Trump, unsurprising really because I think he is a fellow golfer. [He did buy a six-bedroom Jack Nicklaus condo in Florida.] He failed to get the job of US ambassador to the EU he was trying to secure from Trump. Shame on you Jo Coburn! For purposes of my legal defense, let me say right here - If this isn't the same guy, OOPS SORRY!
But that is not what I want to discuss today. The Trump decision to slap tariffs on imported steel and aluminium has brought to the forefront the age old question of capitalism vs. socialism, or free-trade vs. protectionism or left vs. right wing politics. What has always been claimed is that free-trade is far more efficient and much more beneficial to society as a whole than protectionism. The theory is that free-trade encourages competition which lowers prices which see their way through to the consumer. This is true, and has been proven to be true time and again. But with it comes a cost, that is often quality. That said, rules and regulations have for the most part taken care of this, by laying down minimum quality levels for most products. Once you have ensured you have a level playing field on quality, you allow the free market to take over.
That said, there are a few spanners that keep getting caught up in the works, spanners that give unfair advantage. One such spanner is subsidies by government to some players, which was always the case with agriculture and big business that require massive amounts of capital. The EU knows this and has always tried to balance the benefit of its members with the need for competition.
Then there is and always will be the law (a natural law) of absolute and comparative advantage of International trade. For example, Third world countries, and the Far East have a natural labour cost advantage. I remember back in the 1980s when I first went back to Cyprus; when visiting the UK, I would go shopping in Marks and Spencer. I would see a great looking jacket or pair of shoes and when I looked inside it said "Made in Cyprus for Marks and Spencer" and I would think, hang on a minute why can't I find these items in Cyprus? Simple, since sowing is a labour intensive job, they just shipped over the material, made it in Cyprus and brought back the final product. It was never available for the Cyprus market.
A third spanner has to do with national security. After World War II when America had to ship millions of tons of food to feed Britain, the government of the day decided that it MUST have a minimum amount of home-grown produce in the event of war. For this it was even willing to subsidize inefficiency just so that some farmers at least would not abandon their trade and simply become shopkeepers. This is even reflected in the EU's directive that every member must have a minimum stock pile of fuel (e.g. for energy production) even though for many, like Cyprus it was far cheaper just to buy it straight off the nearest tanker passing by.
That I believe takes care of the benefits of free trade and capitalism. But as I already said, it takes regulation and laws to balance quality, and one such field that has always been ignored is the distribution of the profits and wealth created. Let's take a numerical example.
In a protected economy 500.000 consumers pay £2 each for their shoes. It keeps 1000 workers in employment and 10 entrepreneurs (factory owners) happy with say £1 mn. profit. Free trade allows these same entrepreneurs to shut their factory, employ 500 traders at 10% higher wage to locate and buy the same shoes from, say India at a quarter of the price £0.50 per pair, and sell them for £1.50 each making consumers happy, and even more, the entrepreneurs are making more profit at £2.5 mn. Everybody is happy. Or are they? What about the poor suckers that lost their factory job?
If the governments had any brains, and guts to tackle the real problem, they would go to the entrepreneurs, tax them £1.3 mn. (leaving them with £0.2 mn (20%) more than before. This tax could be ring-fenced and put to use retraining and creating new innovative jobs for the poor sods that lost their factory jobs. In fact this exact same policy could be used to tax those replacing people with robots in their factories. Instead they allow the entrepreneurs to take their profits for a drive round the world, and by the time it gets back there's nothing left to tax.
When will people wake up and learn for themselves that right-wing politics is about more profits for the rich - unless you regulate, from power and water, to the trains and air fares. To them that means that means 1% wealth owners get 99% of the profits and trickle-down economics means the 99% get to fight over the 1% left over!
Do the people who think Teresa May is doing a good and difficult job, but can't even negotiate a border with a hand full of her own supporters, is really going to be able to sit at a table with Trump and Xi Jinping and get a better deal than the EU? Grow up people and smell the coffee!