© 2020 by Capital Frontiers

Would Abraham Lincoln Support America's Trade War Against China?

 

 

Before he led the country across a five-year struggle that freed the slaves and reunited the union, and before he was even elected President, Abraham Lincoln helped fuel the growth of the heartland. He also helped bridge an economic divide that closed a cultural chasm, offering lessons for the present day about how to re-unite the country amid a dark and cold modern-day cultural civil cold war.

 

 

Our War Today

 

Amid all of America’s prosperity, one couldn’t be faulted for mistaking the bitter divide that’s driving our politics today for a modern-day sequel to the Hunger Games. While many of our coastal cities are thriving, driven by a robust white collar service industry and explosive tech startup scene, the interior of the country is crumbling under the weight of depleted manufacturing and midwestern flight. The dichotomy is palpable: in the middle of the country shrinking cities, stagnant wages, and an increasing sense of desperation that prosperity can only be found by leaving. By contrast, on the coast cities are growing, brimming with white collar talent, leading the world in technological innovation, fueled by free-flowing public and private investment dollars. The contrasting trajectories of Youngstown and Silicon Valley hardly seem the cuts of a single national cloth, and yet they are.

 

The responses ginned up for electioneering purposes have spanned a wide range of adversarial resentment, most of which has been populist from the inside-out. On the right, many in the middle feel their communities have been callously left behind by an out-of-touch coastal “globalist” elite who no longer care about them. This resentment berthed Trump and a 2016 campaign lamenting “carnage” in America. The message was cut deep into the souls of lost cities and towns, turning the Rust Belt red, including many communities for the first time in years. But the populism has taken many forms. On the left, it has also berthed a surge in socialist sentiment, a variation on the narrative suggesting America’s economy is rigged against the poor, with big corporations, rather than globalist politics, the primary culprit.

 

Those in Washington who have ignored the fiery populism as merely the symptom of surface-level bigotry have paid dearly at the polls. Dismissal of the challenges as a “basket of deplorables” by a leading presidential candidate only inflamed animosity during the 2016 election, even as general disdain toward the overall issue has been the default setting for a plurality of politicians in the nation’s capital.

 

For those who have taken the issue seriously, the struggles of the Rust Belt – and the inequalities it has borne – has spawned a national debate about free trade versus tariffs, the role of manufacturing in America’s future, and how to propel the country’s aggregate bottom line forward while also bringing up its lagging industrial middle. While often shrouded in political noise, two competing economic philosophies dominate American political thought today.

 

On the one hand there is a yearning to push forward with progress driven from the coasts, capturing the competitive advantages borne by free trade, with the acknowledged downside that trade can drive progress via international markets at the expense of American industries. This is a subsidy-friendly approach under which it is argued that a literal cash transfer – a “universal basic income” – can restore a quality of life to parts of the country whose economic offerings can no longer compete in an international marketplace.

 

And on the other hand there is a yearning to restore a bastion of competitiveness to the heartland via self-containment, to punish or intentionally disadvantage international players in the economy to create an easier playing field to help lost American industries get back on their feet. This is an approach under which there is a heavy role for tariffs, with the inherent acknowledgement that putting “America first” may lead to higher prices for goods as companies are squeezed to pursue more American production and international competitors are intentionally hampered in the American marketplace. American companies which produce goods overseas will struggle under this approach. The hope, of course, is that such struggle will be a growing pain in the quest to re-energize production in America. Corporate adaptation always bends toward advantageous conditions.

 

Under the current president, America is playing the second game, though the first has plenty of advocates. Under the second, America has pushed to void free trade agreements, and instead to craft individual trade deals with partner nations. At the heart of those agreements has been an uptick in tariffs designed to punish companies that import good from overseas while reducing the impact of competition on American industry. It’s a gamble played with the fortunes of the Heartland in mind.

 

The president has not explained the intent of such measures well, but they are not new to America and in many respects bear striking resemblance to the policies which built the Heartland in the first place, and are the ideas of which Abraham Lincoln was once one of America’s fiercest advocates.

 

 

Our War Yesterday

 

A nation of mutual resentment around inequitable economic growth is hardly a new concept for America. Those battles trace their roots to the competing philosophies – and fears – of Thomas Jefferson and Alexander Hamilton. But it was the pushback of Andrew Jackson that set the stage for the moderation of Abraham Lincoln to win the day in the Rust Belt.

 

Jefferson believed in America as a nation of small farmers and lamented the idea of a nation ruled by debts and bankers. To Jefferson stability as a nation meant stability in one’s own affairs, and to Jefferson anything other than personal stability – such as loans or debts – was but instability, in contrast to Hamilton’s vision that such investments were essential to national growth.

 

Jefferson’s vision was stronger in its ideal than in practice, and even Jefferson himself came around, by the end of his tenure as president, that America would need banking in order to thrive as a nation. As it turned out, a purely agricultural nation of self-contained farm families was not possible: as families expanded, children inevitably moved out. While the westward land was for the taking, it was not without a need for money, loans, and debts, lest all individuals be constricted to where they grew up.

 

The inevitability of growth fueled the rise of banking, which in turn fueled large institutions and concentrations of wealth, and this in turn fueled greed and a resulting cultural clash of resentment against these central forces. Andrew Jackson, representing the interests of the old Jeffersonians, captured this populist sentiment, resenting more than anything else the accumulation of wealth in central places as a multi-pronged affront to the vision of a nation of modest farmers.

 

In those days America was still overwhelmingly agriculturally-based, but the slow emergence of factories and the like berthed the new phenomenon of “wage labor”, in which one’s earnings were determined by an invisible hand of the marketplace, rather than in exchange for a tangible output of crops or livestock. The Panic of 1837 enflamed the fury of wage laborers, who latched onto a populism agitated at the big banks, which in turn launched the movement toward labor unions.

 

These two groups of Jeffersonian and Jacksonian Democrats hated banking. While they viewed themselves as advocates of freedom, they emphasized freedom as the privilege to restrain large concentrations of wealth in power – a “zero sum” vision of economics. Their vision stressed the need for economic equality, even amid a country that was increasingly culturally diverse.

 

Within this environment, the light that ultimately saved America was not Jefferson and it was not Jackson. Rather it was the weaker party, the Whigs, who offered an alternative vision for America and whose alternate approach to freedom helped fuel the American System and propel the Rust Belt.

 

The Whigs, to their credit, viewed freedom differently from the Democrats. They did not resent centralized wealth, but rather they viewed freedom primarily as the liberty to free oneself from the constraints of what was known as “localism”, the Jeffersonian romantic ideal that in turn left many people trapped and unable to forge their own lives as wage laborers or even as independent farmers outside their place of birth. To them, localism was a rednecked concept.

 

To the Whigs, the concept of economic uniformity amid cultural diversity was anathema; they saw that economic diversity was the only way to empower people to build wealth and forge their own adventures. By contrast, this diversity of economic opportunity relied on cultural synergy to stitch together the threads of shared identity. Some could succeed and some could fail in America, but we would all share an American cultural commitment to modesty, charity, cooperation, and generosity, partnered with a strong American work ethic. “Self control” was their phrase of the day.

 

The shared culture of which they spoke primarily referred to a loss of resentment at others for accumulating wealth. In the Whig vision, capital and labor were aligned, not opposed, the former the key to realizing an economy built of the latter. It was a vision Jackson and others never shared.

 

Abraham Lincoln’s commitment to Whiggian economics grew steadily throughout his younger life. He believed strongly in the Whig platform of 1840, including its cornerstones of a sound and uniform national currency, internal improvements to be made by the government, the support of home manufacturing , and the distribution of profits from public lands back to the public.

 

But there was one other element of Whiggian economics that was at the core of Lincoln’s economic beliefs, and that was the belief in manipulating macro-economic conditions to ease the playing field. Lincoln recognized the difficulty people faced in setting out on their own, breaking the bonds of localism, and entering the wage economy. But he did not respond to this sentiment with the bitterness of the Jacksonians. Rather his was a commitment to the concept of “economic asphyxiation”: the belief that hurdles at the macro scale could in turn propel industries that otherwise would never have prospered. Economic asphyxiation was a term be believed could be used both to squeeze the plantation-based economy of the south to ultimately give up slavery, but perhaps even more importantly to give America’s nascent industrial economy a leg up against international competition, which at that time was further along in Europe than it was in America.

 

The bedrock of this last idea was the importance of tariffs. The program of tariffs that defined the American System of the 1800s fueled the rise in wage labor by creating a safe haven for American industry. This safety opened the door to higher-paying work, and it also helped to turn America’s scattered rural trading posts, in many instances, into thriving cities. The 1800s was a boom time for cities like Cincinnati, Cleveland, Toledo and Chicago. Tariffs were the key to building them.

 

Today, after 50 to 100 years of decline in most of these cities, America has committed, at least temporarily, to relaunching an economy of Whiggian economics. While some of this is to punish other counties, much of it is designed to help re-establish an advantage for American industry against international competition. To date other approaches have not re-enlivened the Rust Belt, but perhaps this one will. At the very least, it is a legitimate experiment.

 

American sentiment today looks a lot like it did in the late 1830s. Americans are distressed at a lack of economic equality, they are furious at the bankers concentrating wealth in single hands while wages fail to grow, and they are angry that the middle of the country, once its backbone, has lost so much of its luster while the coasts, fueled by the benefits of International trade, have flourished.

 

After today, America will face a choice for how to confront these resentments. It can either look to Jefferson and Jackson, who aspired to a romanticism of economic equality turned animosity toward central bankers. It can fiddle with debates around government-ordained punishments for bankers or government-ordained free income for those economically left behind. Or it can look, as America ultimately always has, to how we can use our work ethic to pull us out of our most recent mess while continuing to grow our country. The approach most conducive to this latter outcome may be not the one of Jefferson or Jackson, but the one driven by tariffs, that fueled the election of William Henry Harrison in 1840 and ignited the philosophical fire in the belly of the man who became our greatest president.

 

 

 

 

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