It’s hard to repress a devilish grin from stretching across my face when I see the most evil parasites of the world, from asset managers to European neoliberal politicians, in full-blown panic at the economic free fall triggered by President Trump’s “Liberation Day” tariffs. However, I can manage to stifle my joy by reminding myself of the 900 workers laid off by Stellantis allegedly due to the tariffs, or more generally that it will be the American working class that suffers the most from the approaching economic recession.
I am sure the lay off of those 900 workers is also being waved about by champions of unrestricted international trade as evidence that support for tariffs by unions like the United Auto Workers is misguided. And it’s this reaction that concerns me almost as much as the harms that will come from President Trump’s nonsensical tariffs. Because tariffs are not the problem – it is the reliance by President Trump, and practically every U.S. president since Jimmy Carter, on private investment to create domestic manufacturing that makes their tariffs so ineffective at protecting workers in this country. It was not always this way – the U.S. escape from the Great Depression and successful mobilization for World War II were predicated on one of the largest state plannings of the economy in human history, and when Americans saw the benefits, they became politically invested in it, from public housing to the Tennessee Valley Authority.
The Smoot-Hawley tariffs of 1930 are being used as a convenient historical example by critics of President Trump’s protectionism. The persuasive appeal is obvious – the Smoot-Hawley tariffs were a last-ditch effort to reverse the ever-deepening Great Depression.. And, depending on which historian you asked, these tariffs either failed to stop massive unemployment or made the situation far worse by the trade war it triggered. President Franklin Delano Roosevelt, otherwise a notorious boogeyman of “free market” proponents, ran on decreasing tariffs, ending the trade war, and reforming the political process for instituting tariffs.
However, while the increases of the Smoot-Hawley tariffs were undone by FDR, the huge decrease in tariffs did not occur until after 1947. A global economy devastated by World War II had largely made the question of imports undermining U.S. jobs a moot question, and to the contrary American capitalists wanted trade liberalization because the U.S. had become the unquestionable center of global manufacturing, not to be dethroned until 2010 by China. The state of Pennsylvania alone produced more steel in 1945 than Germany and Japan combined.
But that was not created by the “free market.” It was created by unprecedented (at least within the United States) centralization of manufacturing by the U.S. federal government. Perhaps the most obvious example was the War Production Board formed in 1942. The WPB directed $185 billion (equivalent to $2.48 trillion today) of production in its three years of existence. The Board converted companies’ production lines (whether they liked it or not), prohibited nonessential production, rationed several commodities, and otherwise behaved in a way that earned the admiration of more controversial state planning proponents.
Unsurprisingly given its broad mandate, the WPB also worked closely with the United States Tariff Commission. As this report from the Tariff Commission in 1942 reflects, changes in tariffs and other trade restrictions were not done out of some neoliberal ideology that the free-er the trade the better, but rather were calibrated to balance protecting domestic production while maximizing trade needed for the war effort. To just name one example, the report notes that the reliance on importing “canned fishery products” created a massive shortage once the war disrupted global trade. Even so, the report notes that any restrictions to ameliorate the situation had to be “consistent with the prosecution of the war.”
There is no such calibration between President Trump’s tariffs and state planning for production. To the contrary, planning of the economy in the U.S. was long ago turned over by the state to the finance industry (as epitomized by former War Production Board staffer and former Treasury Secretary Henry Fowler becoming the chairman of Goldman Sachs International in 1969). Even worse, President Trump’s strategy for incentivizing private investment is not even the typical flawed strategies of neoliberal orthodoxy (special economic zones, tax incentives, regulatory sandboxes, etc.), but rather to bully the world in the hope that foreign private capitalists will invest in American manufacturing out of fear of becoming a target. Whether this strategy will be effective in attracting foreign private investment is dubious at best – private investment generally is averse to the uncertainty and volatility that President Trump inculcates, and that is all the more the case when the purse strings are held by those with less influence over U.S. politics.
Even if President Trump’s strategy were to succeed though, it will not create the kind of manufacturing jobs that World War II era state investment paired with tariffs did. There will be no governmental support for unions and their ability to collectively bargain with employers, let alone the WPB’s threat of nationalization to those factories that did not promote industrial peace with the unions. And there is a certain irony to President Trump’s racist hatred of foreigners not extending to foreign capitalists, who are particularly well-positioned to exploit American workers. A CEO in Barcelona does not have to worry about his workers in Danville, Illinois showing up at his house or neighborhood charity fundraiser. And the International Centre for Settlement of Investment Disputes (ICSID) empowers these foreign corporations to attack what few protections exist for American workers. This is not conjecture – the Canadian mining company Glamis Gold took the U.S. to ICSID in 2003 over environmental and labor protections related to open pit mining in California.
In the words of Marxist economist Anwar Shaikh, “In real international competition, there are always winners and losers.” The neoliberal ideology behind global free trade ignores this reality by claiming that unrestricted global trade lifts all boats, when that is clearly not true. The Trumpian protectionist ideology meanwhile acknowledges this reality but attempts to make America the “winner” by bullying other countries with the hope that this leads to foreign private investment in U.S. manufacturing. That strategy will likely fail, or even worse create abominable manufacturing jobs with little protections for workers. In this time, socialists must thread the needle by arguing that tariffs are an important tool but must be paired with state investment and planning to replicate the process by which the U.S. became the manufacturing powerhouse with good union jobs in the post-World War II era. We must clearly say that tariffs cannot bring back good union jobs, and even state investment is not guaranteed to, but instead we should follow historic examples like the Tennessee Valley Authority where public investment was paired with democratic engagement and labor unions (which continues to this day).
