NFU’s Robert G. Lewis article, published in 1954: Revolution from the Right

-courtesy of Tom Giessel

Corporate Socialism Emerges as the Chief Threat to American Democracy

by Robert G. Lewis, NUF Washington Correspondent

A TOTALITARIAN revolutionary movement is being developed in the United States. It seeks far-reaching and fundamental changes in the American way of life, in the laws of the land, and even in the form of our government through drastic alterations in the Constitution. Yet many Americans are only dimly aware of its presence and its aims.

  • Some American’s and many people in other countries see ominous parallels between what is happening here and what happened in many countries of Europe after World War I. The totalitarian movement being developed here has many distinctive characteristics. But in all important respects, it closely parallels the totalitarian movements of Naziism, Fascism, and Communism.

Parallels Hitler

The contemporary American totalitarianism is being led and developed primarily by wealthy business interests for the purpose of solidifying and extending their economic and political power. In this respect it closely follows the example of Hitler’s Nazi movement, which won support from the masses for the ambitions of German cartels and financial institutions. It is even more similar to the Corporate State of Mussolini’s Fascism. It is similar also to Communism, which seeks mass support for increasing the power and privileges of the Communist bosses.

For lack of a better name, the contemporary American totalitarianism might be called “Corporate Socialism”-which is fairly descriptive of its nature. It has not yet developed to the point of naming itself.

How It Develops

Totalitarian movements have four distinctive aspects. First, the movement itself-the people who lead and are “in the know,” and those who follow blindly. Second, they have definite and far-reaching aims to increase the privileges and power of the leaders, although they are never stated forthrightly. Third, distinctively immoral methods are used to reach the movement’s aims. And fourth, they erect a radical ideology, a doctrine to which all must subscribe with-out deviation and with fanatical devotion.

  • ”Corporate Socialism,” is developing in all four aspects, and in a characteristically totalitarian pattern. The movement has not yet jelled into a political party as Communism, Nazism, and Fascism did. It may never do so, because the two-party system is deeply imbedded in United States politics while multiple parties come and go repeatedly in most other countries. But Corporate Socialism is moving unmistakably in the direction of a cohesive movement, with recognized leaders, increasing agreement on ideology, and a widening pattern of immoral political methods.

The basic method used by all totalitarian movements is the creation in the public imagination of a “devil” or a “scapegoat” upon whom the ills of society can be blamed and against whom the hatred of the masses can be directed while, behind the scenes, the movement’s leaders carry out their ambitions.

  • The Nazis blamed a “stab in the back” by a “Marxist-Jewish conspiracy” for Germany’s defeat in World War I. Although Germany was outnumbered and outgunned after the U.S. entered World War I, German militarist welcomed Hitler’s face-saving explanation for their defeat. Once the German people were brain-washed into accepting the idea, it became possible once again to lead them on a course of reckless military adventure.

The Communists likewise create “devils” against whom they in-flame their followers. Generally their scapegoats are “Capitalist war mongers,” with many variations to suit the local situation.

The Corporate Socialists are trying to use the fear of Communism as a material out of which to create their scapegoats. Communism is a genuine menace to Americans, through sabotage and espionage at home, and through military and political aggression abroad. So was defeat in World War I and its economic consequences a painful humiliation to proud Germans. And so are colonialism, unfair working conditions, and grinding exploitation by absentee landlords legitimate grievances of the poverty-stricken people to whom the Communist appeal.

Agitation Without Honesty

But in no case do the totalitarian agitators deal honestly with the legitimate fears and grievances of the masses. They simply exploit them and enlarge them to further their own ambition for power and privilege.

The development of an ideology is another basic aspect of all totalitarian movements. They must have a “faith” which both fits in with the aims of the leaders and attracts a fanatical following.

A method universally followed by totalitarians seeking to fasten their new ideology upon the public’s mind might be called a “hypnotic switch.” The basic values and practices of the traditional social order are subjected to extreme but insidious attacks. The exaggeration, repetition, and sheer lung-power of the attacks gives them spurious plausibility. At the same time, the radical new doctrines of the totalitarians are infiltrated into the public consciousness as substitutes for the traditional way of looking at things.

The Nazis, for example, sought to overcome habits engendered by more than a thousand years of Christianity in Germany by preaching that the ancient, war-like Pagan religion was the “genuine” German tradition. Similar in method and purpose are the propaganda attacks that are made in American today against religious authorities, particularly those who seek to apply the moral precepts of civilized religion to human relationships on earth instead of limiting their concern to life after death.

Hearings Aim Low

The hearings of a Congressional committee investigating educational institutions and non-profit scientific foundations are one example of this form of Corporate Socialistic propaganda. The entire investigation was set up so as to reflect unfavorably upon the schools and foundations financed by such men as John D. Rockefeller, Henry Ford, and Andrew Carnegie. The aim is identical with those of Communism or Nazism-to discredit the nation’s time-honored institutions and its religious and intellectual authorities.

The “investigation,” headed by Re. Reese (R-Tenn.), was led into a revealing trap by Rep. Hays (R-O.), one of the Committee’s minority members. Rep. Hays read the following statements, and asked one of the investigation’s “experts” on subversion to evaluate them:

“But all agree (said the statement read by Re. Hays) and there can be no question whatever that some remedy must be found, and quickly found, for the misery and wretchedness which press so heavily at the moment on the large majority of the very poor… By degrees it has come to pass that working men have been given over, isolated and defenseless, to the callousness of employers and the greed of unrestrained competition… (By) concentration of trade in the hands of a few individuals… a small number of very rich men have been able to lay upon the masses of the poor a yoke little better than slavery itself.”

’Expert’ Testimony

The Committee “expert” on subversion declared this statement tends toward “collectivism,” and he termed it an “emotional product without one word of truth.” Rep. Hays then read another passage, as follows:

”The effect of civil change and revolution has been to divide society into two widely different castes. On the one side, there is the party which holds the power because it holds the wealth… on the other side there is the needy and powerless multitudes… If working people can look forward to obtaining a share in the land, the result will be that the gulf between vast wealth and deep poverty will be bridged over, and the two orders will be brought nearer together.”

When the Committee “expert” on subversion was asked for his opinion of these statements by Rep. Hays, he charged that all are closely comparable to Communistic literature propaganda!

At this point, Rep. Hays dropped his bombshell. He revealed that the statements he had read were quoted verbatim from Papal Encyclicals, written by Pope Leo XIII in 1891 and by Pope Pius XI in 1931.

The Reese Committee’s propaganda generators could not, of course, make anyone believe that the two Roman Catholic Popes were “soft on Communism.” But many educators, clergymen, and writers have been branded publicly as suspect for uttering identical views, thus helping to discredit religious and philosophical standards which stand in the way of the immoral methods of the totalitarians. The truth is that the quoted statements are not “communistic” whether spoken by a minister, teacher, farmer, brick-layer, or politician. And when it takes a Pope of the Roman Catholic Church to get away with saying them, it indicates how far the Corporate Socialist totalitarians have proceeded on the road to imposing thought control in America.

The slogan “creeping socialism,” coined by the electric utility lobby, has a very similar purpose-to substitute a new, un-American item of doctrine for the time-honored standard that has prevailed. Public power has a venerable place in American life; among the very first power systems in American were publicly-owned as well as private plants, and public ownership of utilities was common throughout the country half a century ago. The utility propaganda seeks to establish a false image of history in the public mind, to make it seem that public power is an alien un-American development sponsored by subversive elements.

For or Against

The simplest form taken by the Corporate Socialists’ “hypnotic switch” technique to implant their new ideology is plain un-Communism-being against everything the Communists say they’re for, and being for everything the Reds say they’re against. This suits the purpose of the agitators for two reasons: (1) It lends itself to exploiting the prevailing fear and dislike of Communism, and (2) It happens to provide many opportunities for attacking the traditional American way of life. There are two obvious frauds in this route to a new ideology.

  • In the first place, it makes the mistake of taking the Communists at their word. Communists have developed the art of lying to its highest degree. They are clever and cynical politicians, and probably have less intention of ever keeping their campaign promises than anyone in the business if they come to power

In the second place, and partly for the same reason, “un-Communism” is not necessarily effective “anti-Communism.” When the Communists are campaigning for power in Indo-China by promising to give land to the poor farmers, their enemies aren’t likely to get very far by promising the exact reverse-to keep the land in the hands of a few rich landlords. In such a situation, a political platform in line with the “communistic” sentiments expressed by the two Catholic Popes quoted above-which expresses the humane and slowly-evolved ideals of Western civilization and Christianity, is by far a more effective program for opposing Communism.

Admiral Ben Moreell

  • Perhaps the most extreme example of the un-Communism approach toward a radical new ideology for America has been promulgated by Admiral Ben Moreell, chairman of the board of Jones & Laughlin Steel corporation, and the man chosen by the Administration to head the Hoover Commission’s task force which is planning the reorganization of government activities in the fields of electric power and natural resources. Moreell condemns American institutions older than the Declaration of Independence as “communistic” – including public roads and free public schools!
  • As might be expected, Moreell views such institutions as income and inheritance taxes, government regulation of railroads and other utilities, government licensing of certain businesses, and public power projects with unmitigated horror.

Moreell set forth his un-Communism ideology in a widely-circulated speech to the American Petroleum Institute in 1952. After charging that a wide range of U.S. governmental activities fit into the Communist program, Moreell concluded:

”… since Marx (Karl Marx, founder of Communism) enunciated his doctrine slightly more than 100 years ago, we Americans have adopted in varying degrees-practically his entire program!”

Marx and the TVA

Moreell charged that acquisition of land “for public purposes” is “in strict accord with Marxist doctrine,” citing specifically that “The public purpose may be an irrigation or flood control district, a Tennessee Valley Authority, a Bonneville power project, forest land, an oil reserve, or any one of a number of others.”

He also attacked the income tax as a “communist plant,” declaring: “That iniquity was first imposed on Americans in 1913… To the federal income tax should be added the various state income taxes. This process of progressive confiscation of income is, of course, in complete accord with the communist plan of ‘wresting’ by degrees, all capital for the (owners of private property)’.”

Moreell called public electric power projects “a noteworthy case” of the communistic platform plank for government ownership of “instruments of production,” giving as other examples “Government planning for the improvement of deserts, swamps, and river valleys.” Noting that “atomic energy is now a complete government monopoly,” he remarked: “One can easily foresee what will happen when the production of power by atomic energy is economically feasible.”

“And the entire scheme of agricultural subsidies based on ‘parity’, or a percentage thereof, thus linking farm prices to industrial wages, is certainly part and parcel of that ‘combination of agriculture with manufacturing industries’ envisaged by this plank of the communist platform.”

Name Calling Denied

Moreell denied that he was “name calling,” or that he means to call any one of the specific measures he listed “communism” or a person who believes in them “a communist.”

“But the fact remains,” Moreell declared, “that according to the father of Communism, all of the measures I have listed are communistic ideas. And so long as I support any of them, I am-according to Marx-supporting the communist program…”

Moreell’s effort was to tear down and destroy faith in the American way of life and our form of government by smearing it as “practically his (Marx’s) entire program.” This is invariably the first mission of totalitarian agitators-the existing system must be destroyed to clear the way for imposing the new system.

It is extremely significant also that Moreell spoke with great contempt of our system of government. The income and inheritance tax “iniquity” transfers money from the wealthy to “political adventurers,” he sneered. He expressed great mistrust of majority rule and dislike for democracy. “Will any thinking persons say that a law is ‘right’ merely because a majority has voted for it?” he questioned. The whole theme of his speech-and the theme of practically all Corporate Socialist propaganda-is that the people can not be trusted. Communism pay sneak in “by a vote of the majority,” he charged. It is “ballots” and not “bullets” that he really fears, Moreell admitted.

In its fullest flowering so far, the ideology of Corporate Socialism has gone somewhat beyond the “tear down the old system” and the simple “un-Communism” stages. The movement’s brain trust, largely concentrated in its own endowed tax-free foundations and big advertising and public relations agencies, is working full time to coin suitable terminology and to refine the doctrines. Their most highly-polished product so far is identified by the term “free private enterprise.”

Each of those three words-“free,” “private,” and “enterprise”-is highly respected and valued by American’s The new label was coined a few years ago by public relations experts of the National Association of Manufacturers to substitute for the name “capitalistic system,” which the NAM felt had become identified in the public mind with too many past sins. Ironically, the new label appeared just at the time when rapid changes in the nature of capitalism were making it less accurate than ever before to describe it as either “free,” “private,” or “enterprising.”

For one thing, business concentration has proceeded at a breath-taking pace in the years since World War II began. At present, domination of every important industry excepting agriculture is concentrated in the hands of one, two, or three big corporations. Some huge corporate business and financial institutions dominate big chunks of several entire industries. The tremendous scale of modern productive enterprise, together with the invulnerable economic advantage enjoyed by the giants, makes it impossible for anyone excepting another giant to be “free” to enter any important field.

In the traditional concept of capitalism, business is financed by its owners out of their earned savings and the profits they are able to make at prices set in a competitive market. But with the advent of gigantic oligopolistic financial-manufacturing-trading corporations, the nature of investment capital formation has been altered completely. Capital funds for modern corporate business are no longer contributed primarily by the private owners. In all respects except eventual ownership and control, the process of capital formation is primarily socialized.

The April, 1954, issue of Survey of Current Business, published by the Department of Commerce, bears out the degree to which the function of providing capital funds to corporate business has been socialized.

In the eight years, 1946 to 1953, corporations acquired a total of $249 billion in capital funds. Of this total, the owners (stock-holders) contributed only $15.3 billion-just 6 percent of the total-through investments in stocks. All of the balance was provided by two major institutions of private socialism, through which the costs of financing business are distributed broadly upon the people.

Largest Source

The largest of these socialized sources of capital funds is the customers of business. Profits “plowed back into the business” have, of course, been one source of capital since capitalism began. This source was originally thought of quite properly as part of the “fair return” or interest on invested money. But when the concentration of business reached the point that free competitive pricing was eliminated, the nature and the scale of retained profits took on a completely different nature. The authority of the market was replaced as the fixer of prices by the authority of the oligopoly. And the authority possessed by the oligopoly of a handful of companies dominating each field enables them to fix the price level of their commodity substantially at the monopoly price. If there were only one auto firm in the field, for example, the price of the new car you buy would be substantially the same, other factors being equal, as it is with three giants in the business.

Monopolies Tax Customers

The private authority of the oligopoly thus enables it to levy upon its customers a sales tax to provide the funds it wants for financing its growth, in addition to what it must have to pay its manufacturing and sales costs, all wages and salaries, and a suitable return (interest) to the owners both on money invested directly by them and money previously collected from the customers, and to the company’s lenders. The funds thus collected by the authority of the oligopoly become its own property, just as taxes collected by the authority of government become government property.

In the eight-year period, the customers provided 65 percent of all new corporate capital funds-$165 billion-about half of it (33 percent or $81.8 billion) in the form of retained profits. The other half was contributed in the form of depreciation reserves ($61.4 billion), and reserves (collected faster than they came due) for taxes and other liabilities. A small but important chunk of working capital was provided by one business to another in the form of sales on credit, accounting for $25 billion or 10 percent of the total.

The authority of government is used also to help the corporations obtain capital funds from the public. Tax-amortization subsidies, guaranteed profit clauses in defense contracts, government-financed factories, price support buying from mining companies, subsidies to shiplines, airlines, and publishers, the huge government interest subsidy to the banking system, and a host of other public contributions to the corporations have substantially eliminated the element of “risk” from modern corporate big business.

Socialized Bankers

The other socialized source of capital is lending institutions, which contributed $46 billion or 18 percent of the total new capital acquired by corporations in the eight year period. It was channeled into the corporations through bond subscriptions, bank loans, and mortgage loans. The origin of most of these funds is the savings of the people in banks, insurance policies, and trust funds. Unlike those who contribute capital when they buy at oligopolistic prices, the lenders are paid for the use of their capital. But they have practically no control over the use of their funds.

The achievement of this degree of concentrated control over the American economy is in fact a revolutionary accomplishment. This obviously revolutionary change in the nature of the American economy also has great political and social implications. Totalitarian movements are always a response to some kind of revolutionary situation-either profound changes already made or to profound changes being propelled by drastically altered economic, social, and political relationships.

Revolution’s End

The economic revolution of the American corporations is virtually completed. The totalitarian faction among those who control them, with their political, intellectual, and propaganda functionaries, is trying to stabilize the newly-achieved concentration of power. To do so, they realize that their economic domination must be extended into the political and intellectual fields. That is what furnishes the steam behind the growing movement of totalitarian Corporate Socialism.

It explains also the specific targets at which the Corporate Socialists aim their shots. Their specific objective is to prevent the orderly processes of the democratic American political system from adjusting to the new situation in accordance with traditional American ideals of equity, justice, freedom, and most important of all, broad distribution of effective power among the citizens. The people, in time, would restore freedom and perhaps competition to the economy through such old-fashioned devices as anti-trust measures, government-sponsored “yard stick” competitions, cooperatives, tax policies, and others. In order to prevent that from happening, the Corporate Socialists feel that they must ga in centralized control of the government, too.

No Crackpots

The Corporate Socialist party is no collection of mere crackpots. It is endorsed with varying degrees of completeness by the Chamber of Commerce of the U.S., the National Association of Manufacturers, National Associated Businessmen, and the Farm Bureau. The Foundation for Economic Education, which is the movement’s chief ideology factory, has a board of trustees that reads like a stud book of the Wall Street fraternity. Men highly placed in the Eisenhower Administration, including ex-President Hoover, head of the planning commission for reorganizing the entire government, and Moreell, chairman of that commission’s main tasks force, are last-ditch advocates of fundamental aspects of its doctrine. President Eisenhower himself has accepted the label “creeping socialism” for TVA. A significant minority of U.S Senators and Representatives espouse even its most extreme dogmas.

In recent months, Corporate Socialistic political methods have begun to vear close to the violence and lawlessness so characteristic of Nazis and Communists. Mrs. Flanders, wife of the Vermont Republican who authored a resolution demanding that Sen. McCarthy (R-Wis.) answer questions under oath that were raised by a Senate Committee investigating irregularities in his taxes and other financial matters, was so besieged with telephone calls threatening violent harm that she moved out of her house. The Wisconsin weekly editor who headed the “Joe Must Go” recall petition drive was given bodyguard protection by his hotel while in New York because of threats on his life.

The late Sen. Hunt, according to published reports, was blackmailed by political foes to withdraw from the Wyoming Senatorial contest this fall; if true, that is a felony. Sen. McCarthy openly invited government employees to violate the law and their oath of office to give him confidential documents. These and many other incidents indicate an ominous trend toward the breakdown of law and order and the introduction of violence into American political methods.

Some Reassuring Signs

But despite the foreboding signs, there are many in the American scene that are reassuring. The Constitution of the United States has proved to be the most durable political document in the world-and the system of government that developed within its bounds has weathered many grave storms. In doing so, it has led the civilized world in the degree of liberty, equity, and justice that it provides to its citizens. Under the Constitutions, the people have succeeded in directing their economy so as to provide themselves with an unprecedented and fabulous standard of living. Its promise for the future-if the American people keep their eyes on the ball-offers boundless opportunities for the expanding welfare and freedom of its citizens. And it offers a brilliant example to a world which years today for the unparalleled combination of general welfare individual dignity in a democratic society, and personal freedom that is the real promise of the American way of life.

———

Note: This article was published in 1954, but could have easily have been this week. MC

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In honor of National Farmers Day

Still true today

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The Wichita Eagle: Kansas needs solutions that help farmers and keep our water clean

File photo The Wichita Eagle

by Mike Callicrate and Karen Stillerman | August 30, 2018

The Kansas town of Pretty Prairie has gained national attention for the wrong reason: as documented by Harper’s Magazine earlier this year, this community of 600 has a tap water crisis caused by decades of farm runoff. Its problem is particularly severe, with drinking water nitrate levels at twice the federal safe limit and no budget for cleanup. But in other ways, the town’s challenges are common. The confluence of pollution, low commodity prices, and natural disasters are putting the survival of many of the nation’s farms and rural communities at risk.

Across the Midwest, cities and towns must spend exorbitant sums of money on water treatment systems to remove the nutrients that have migrated from farms into drinking water supplies. Meanwhile, persistently low crop prices have shrunk farm incomes. Many farmers are just one tariff or natural disaster away from bankruptcy and loss of the farm.

But two members of Kansas’ congressional delegation—Sen. Pat Roberts and Rep. Roger Marshall, whose district includes Pretty Prairie—are in a position to help not only their own constituents, but farmers and farming towns across the country. They are serving on a conference committee hammering out a farm bill that, if crafted thoughtfully, will address many of the problems farmers are facing.

The origins of many of these problems date back decades. Since the 1970s, federal farm policies have created incentives that have led to a glut of a few crops, such as wheat, corn and soybeans, causing their prices to plummet. At the same time, this way of farming has eroded our soil and depleted and degraded our water. A different agriculture system could decrease Kansas’ dependence on commodity markets, buffer the state and its farmers from economic shocks, clean up drinking water sources, and pave the way for a brighter rural future.
What would it take? For starters, farmers need incentives to diversify their farms with more varieties of crops and livestock, and infrastructure is needed to help foster new local and regional markets for their products. Farmers also could use more financial assistance to boost soil health using practices based on agroecology. Scientists at Kansas State University and across the country are refining these practices, which slash nitrogen runoff, increase farms’ resilience to floods and droughts, and keep productivity high.

The bipartisan farm bill crafted by Sen. Roberts, which was passed overwhelmingly by the Senate in June, takes important steps in this direction.

But Sen. Roberts is leading conference committee negotiations with Rep. Marshall and other House members whose vision is different. The House farm bill is most controversial for its attack on the Supplemental Nutrition Assistance Program (formerly known as the food stamp program). But it also leaves farmers vulnerable to low-priced commodities, scraps conservation incentives, and does nothing to help create new local marketing opportunities.

The outcome of negotiations will determine whether agriculture stays on its current path or turns toward a new future. It’s striking to see bipartisan support for a new way forward. In the days ahead, Sen. Roberts and his Senate colleagues must stick to their guns and bring Rep. Marshall and other House negotiators to their side to ensure that Congress provides solutions that farmers want and that all of us—in Pretty Prairie and across the state—need.

Mike Callicrate is an independent cattle producer and business entrepreneur in St. Francis, Kansas, and a leader in addressing the rural, social, and cultural impacts of current economic trends in agriculture. Karen Stillerman is a senior analyst in the food and environment program at the Union of Concerned Scientists.

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Axioms, 1906

I hold these truths to be self-evident;
That a man was made to be happy.
That happiness is only attainable through useful effort.
That the best way to help ourselves is to help others, and often the best way to help others is to help ourselves.
That useful effort means the proper exercise of all our faculties.
That we grow only through this exercise.
That education should continue. Endeavor should be, especially, the solace of the old.
That where men alternately work, play and study in right proportion, the organs of the mind are the last to fail, and death for such has no terrors.
That the possession of wealth can never make a man exempt from useful manual labor.
That if all would work a little, none would be overworked.
That if no one wasted, all would have enough.
That if none were overfed, none would be underfed.
That the rich and “educated” need education quite as much as the poor and illiterate.
That the person who lives on the labor of others, not giving himself in return to the best of his ability, is really a consumer of human life, and therefore no better than a cannibal.
That each one living naturally will do the thing he can do best, but that in useful service there is no high nor low.
That all duties, offices and things which are useful and necessary are sacred, and that nothing else is or can be – Elbert Hubbard.

–courtesy of Tom Giessel

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Ruminations on Trade and Trade Wars: As of June 1, 2018

by Gilles Stockton

Gilles Stockton

Is this political grandstanding or is there an actual change in trade policy because It is hard to say if we are in a trade war with China or if it is just a lot of talk. We apparently imposed tariffs on Chinese steel and aluminum and China in turn has put tariffs on agricultural products. Now we learn that the tariffs will also apply on steel and aluminum from Canada, Mexico, and Europe. This talk of tariffs and trade war is not good news for producers of soybeans, corn, wheat, and pork, but so far, its seems to be more of a skirmish than a war.

Two weeks ago it was reported that China will not impose tariffs on US agricultural imports in return for our country allowing ZTE, a huge Chinese tele-communications firm, to purchase US produced components for which ZTE was previously banned because they violated sanctions on Iran and North Korea and spied on US customers. Apparently as part of this agreement, China will strive to import more agricultural products from the US in an effort to reduce its annual 376 billion dollar trade advantage over the United States.

But everything is up in the air again as the White Houses announced last week that we will impose 25% tariffs on a number of high tech Chinese imports. It is really not clear if we are in a “trade war” with China or not but there are underlying issues that need to be resolved. We, as a nation, have never had a substantive debate over the pros and cons of the trade agreements. Public debate has been difficult because the partisans of laissez-faire free trade refuse to debate. They brand anyone questioning the trade agreements as naïve moronic protectionists not worthy of consideration. But now after 24 years of experience with NAFTA (North American Free Trade Agreement) people have a lot of questions. Especially questions about how the trade agreements are structured and who wins and who loses.

Trade Deficit

According to the Free Traders, a half a trillion in annual trade deficits does not matter because trade is always good. They say that if China, or another even lower wage country such as Bangladesh, is willing to sell us stuff for less than we can manufacture it at home, it is like they are giving us free money. We should jump on the bargains and tell ourselves that the Chinese and/or Bangladeshis are chumps for selling things so cheap.

This misses something important because not everything one buys is actually useful. Much is simply “stuff,” purchased because it is in fact very cheap, but has no “intrinsic” productive value. Buying “stuff” you don’t really need can make you feel good but it is like throwing your money away.

“Productive” purchases on the other hand are an investment. A new truck, or tractor, or machine tool, or household appliance can potentially make you money or save you valuable time. If you habitually throw your money away, eventually you will have less money. If, on the other hand, you systematically invest your money in productive purchases, in the end, you will have more money. This is true for both individuals and for countries.

Unfortunately, our culture is addicted to shopping and this explains much of the trade deficit – we see this both in record levels of personal indebtedness and the ballooning national debt. Our political leadership structured the trade agreements to favor imports over exports.

We were repeatably promised that the outsourcing of our manufacturing capability would not matter because we will be the leaders of the “the new global economy.” That of course has proven to be not true. Our country and our people are steadily falling behind because we failed to make the educational investments needed to prepare our younger generation, or make sure that there were good jobs waiting for them.

A big problem with our government’s approach to the trade treaties is that we make no distinction about strategically important industries. We have simply outsourced the whole lot on the premise that the market will sort it out. China, however, is very strategic in its approach to trade. The term for this predatory capitalism is neo-mercantilist. If they can’t steal the technological advances outright, they insist that technology transfers be part of the cost of being granted access to the Chinese labor force and markets.

Meanwhile our wholesale embrace of outsourcing has resulted upon the US becoming dependent upon global supply chains, which when disrupted, cause wide spread economic harm. And, of course, we totally abandoned the people who once worked in those industries. By some accounts the net effect is 2 to 3.5 million jobs lost to China and another million to Mexico. The actual total is way more and hard to count because imports also creates jobs. The problem is that the “new American economy” does not pay as well as the “old.”

Strategic Industries.

This is still a dangerous world. War and environmental disasters are too common, and any country that becomes too dependent upon global supply chains is risking the lives and wellbeing of its population. There are such things as strategic industries, and our country should protect those industries from excessive and predatory competition.

Our national defense capability should of course be a protected. The viability of steel, aluminum, copper, and other metals industries is obviously important because metal is needed in so many manufactured products. It would be foolish to allow one’s entire metal refining industry be undermined by imports. Energy, electronics, aviation, robotics, artificial intelligence, and pharmaceutical production are candidates for protection. Food – any country that allows its food production capability to wither in favor of less expensive imports is putting its citizens at risk.

Sovereignty

Our sovereignty, and by extension our Constitution, has also been circumvented by the inclusion of “Investor-State Dispute Settlement” mechanisms in the trade agreements. Foreign governments and global corporations were given the right to challenge and overturn laws and regulations that the citizens of this country democratically enact. We have not even been allowed the opportunity to object.

What happened over Country of Origin Labeling (COOL) is an egregious example of how foreign governments and global corporations are allowed to interfere on our sovereign right to govern ourselves. In order to distinguish domestically raised beef, pork, and lamb, Congress, in 2002 passed a law requiring a label stating the country of origin.

The governments of Canada and Mexico, on behalf of the global meat packing cartel, challenged COOL. The issue was adjudicated by an international panel of three trade judges (one judge previously served as a trade official for Mexico). Since only government officials can address the essentially secret proceedings, representatives of the US cattle industry could not attend these hearings. Ultimately, the World Trade Organization tribunal ruled against COOL and Congress dutifully rescinded the right of US consumers to know the country of origin of their meat purchases.

This is obviously disturbing but given the secrecy in how the trade agreements were and continue to be negotiated – inevitable. The interests of the American public have been systematically excluded from participation in the trade negotiations. However, international investors and representatives of global corporations are at the negotiation table. Once a trade treaty has been negotiated, Congress is not allowed to debate the individual provisions but pass the entire treaty in an up or down vote. The process guarantees that the international trading system always favors the investor class, while undermining the rights of labor, and ignoring the environmental side-effects.

Equivalency

The laissez-faire free traders also dismiss the trade deficit on the grounds that a third to half of the total is created by domestic US companies who manufacture abroad but sell their products in America. If you are not an owner of that now global company, it cannot befit you. Most Americans, in fact, do not own stocks and therefore receive no benefit from outsourced production. A global corporation is beholding to its global investors – not to its employees, or to its customers, or to the country that initially gave it the opportunity to create its wealth.

All of the trade agreements were signed with our President at the time making lavish promises of immediate increases in exports. Time and again that proved not true because the treaties are clearly structured to favor imports. We grant trading partners favorable terms with little regard to equal access to their markets. We unilaterally dropped tariffs to nothing but still face both tariffs and non-tariff barriers for our exports. Currency manipulation to discourage imports and make exports more attractive is technically not allowed, but in practice nothing has been done to stop China from doing just that. In addition, China will not allow foreign investors to own more than 50% of a corporation. Chinese investors, however, face no restrictions when buying US corporations, including high tech companies in Silicon Valley. Equivalency, in terms of trade has not been a consideration for our government.

The VAT

Then there is an aspect that is almost totally ignored but effects everyday Americans directly – the Value Added Tax (VAT). A VAT is a national level sales tax that most countries in the world rely upon for funding their investments in infrastructure, education, and healthcare. The global average is about seventeen percent (17%). The United States is the only notable country in the world to not have a VAT. We, instead pay for infrastructure and public education through locally imposed sales and property taxes. Health care, for those fortunate enough to have health insurance, comes mostly from one’s employer.

The problem is that under the trade agreements, the VAT is refunded to the manufacturer for everything they export and imposed on all imports. For instance, a car that costs $25,000 in a foreign country of manufacture will have a net cost of 17% less ($20,750) on the US market. On the other hand, a $25000 car manufactured in the US will sell for $29,250 when exported to this same country.

Infrastructure, education, and health care must still be paid for, and if a US brand name global corporation has outsourced its manufacturing to foreign shores, that company is no longer contributing to the tax base of the US community it has abandoned. The people left behind are still on the hook, paying higher property and sales taxes for the maintenance of the infrastructure and the costs of public education. And since the “new American economy” often does not include health insurance, people struggle to pay their own health care costs.

Agriculture and the Promise of Exports

For the last half century, agricultural policy has been premised that if a farmer tilled more acres, used larger equipment, and employed the latest bio-technology, that this “efficient” farmer would prosper because of export demand. This policy worked as planned, the number of farmers since 1980 has decreased by two-thirds. Yet the surviving so-called “efficient” farmers of today find themselves perhaps even more vulnerable than farmers ever were. More land, more machinery, and astronomical operating costs translates to untenable debt.

Bigger farms of course also mean fewer farmers, and as a result the communities where farmers live and where their children attend school, are now hollowed out repositories for some of the poorest people in the nation. Rural America no longer resembles a picture by Norman Rockwell and is instead a widely disbursed slum. Too many living in Rural America are in a perpetual economic depression and anything that threatens to disrupt agricultural exports makes conditions even worse.

Unlike corn and soybeans, this country does not raise enough cattle to meet the domestic demand. As a result of the trade agreements we get high levels of beef and live cattle imports which in turn depresses domestic cattle prices. Agriculture, therefore, is not united in its opinion of laissez faire free trade. Cattle producer’s experiences with NAFTA, and the WTO are revelatory of the issues at stake.

For cow/calf producers and independent feedlot operators, NAFTA has been nothing but a disaster. Upon signing that trade agreement, all of Canada’s and Mexico’s cattle instantly became “captive supplies” controlled by the three major packers. A source of feeder and fat cattle that was invisible to the domestic market, making US cattle prices much easier to manipulate. To counter the negative effects of imports, American producers convinced Congress to pass COOL. The hope was that consumers would elect to purchased US produced product. In retaliation, the packers enlisted the governments of Canada and Mexico to use the “Investor-State Dispute Settlement” provisions imbedded in NAFTA to declare COOL discriminatory to the trading interests of Canada and Mexico.

The cattle industry also found out that International trade trumps animal health considerations. Because of NAFTA, we imported BSE (Bovine Spongiform Encephalophagy) from Canada and continue to import tuberculosis from Mexico. Our trade treaties with South America puts us at a high risk of importing Foot and Mouth Disease (FMD). An outbreak of FMD will devastate livestock production for decades. The trade agreements saddle livestock producers with the risks from imported diseases, while the global corporations rake in the rewards.

What American agriculturalists did not consider in their embrace of the imperative to “get bigger or get out of agriculture” and in the promise of lucrative export markets, is that as a consequence the competitive market for what they grew would evaporate out from under them. The “market” for all of the major commodities can no longer be called actual “markets.” None of these crops are sold subject to true “supply and demand’ in a transparent competitive market place.

Any segment of agriculture that is dependent upon exports to absorb its excess production is vulnerable to changes in demand, foreign wars, environmental disasters, and policy decisions by our own government. The Farm Bill does not even try to protect agriculture from price shocks caused by disruption in export demand. Nor do the makers of farm policy apparently care if farmers and ranchers have fair and transparent markets.

As a consequence, farmers and ranchers are no longer independent producers, selling into a free market. Instead we are serfs, contractually and financially dependent upon a handful of interlocking vertically integrated global monopolies. So, obviously, there is more to the rural economic crisis than just whether China buys American soybeans and corn. Those of us who grow food are pawns in the high stakes game of who benefits from laissez faire free trade and who loses. These are serious issues that go beyond the solvency of our farms, because the future of our country and the survival of our constitutional government is also at stake.

Lobbying by global agri-business and the farm groups that represent them target farmers and ranchers to pressure the Trump Administration to back off on the declared trade war. It hard to say what has been the effect of this lobbying, since the Administration is happily flip flopping back and forth again on the stated goal of leveling the trade playing field. Farmers and ranchers may have no influence over the market for our products but if we still have some lingering political influence, we need to stand up to the global agri-business corporations. For the sake of all Americans, the international trade regimes need reform. In the process we need a united front if we are to restore competitive markets, regain our independence, and rebuild our communities.

Conclusion

Laissez faire free trade and international trade are two different things. Trade between countries should be equivalent. If another country needs to import things that we produce and if we need to buy things that they produce, then trade in natural. The terms imposed should be equal. Safety standards, respect for labor, and mitigation of the side effects on the environment should be strong and equivalent. The rights of the citizens of all countries to govern themselves, should be protected. International trade, just like commerce everywhere should bring together willing buyers with willing sellers. Properly structured trade agreements benefit everyone.

Recent news on the NAFTA re-negotiation talks are disturbing. There are indications that our negotiators will settle far short of the desperately needed NAFTA reforms. The “Investor-State Dispute Settlement” provisions, which were employed to outlaw COOL, may not be eliminated as promised. A problem with the Trump Administration’s approach to trade reform is that we, the public, are not privy to the bottom line. There is nothing written that explains the ultimate goal. This has been the problem all along with all of the trade negotiations – it has not been a democratic process. We the people have been systematically kept in the dark with no avenue to express our opinions or desires. The result is a trade regime that has eclipsed the Constitution. America deserve transparency because it is time to take our country back.

Gilles Stockton
Grass Range, Montana

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