New apartments go up on the North Shore as long rise in credit spawns building boom in Chattanooga before a coming bust. (Photo David Tulis)
A locally owned shop in Soddy-Daisy, the Green Pond grocery, sells fuel and snacks. (Photo David Tulis)
Localism and lococentrism stray if they share the error of the builders of the tower of Babel, who sinned by refusing to scatter across the earth and who instead wanted to build a great city and empire around an obelisk. It strays if it fears the economy is a zero-sum game requiring rationing, regulation, compulsion and trade barriers. Every Lord’s Day morning at 7, “Axe the Root” from Reconstruction Radio airs on NoogaRadio AM 1240 in Chattanooga (on Facebook live and also on Noogaradio.com). This week Bo Marinov gives presentation about the perils of economic nationalism of the kind espoused by President Donald Trump. Of special interest is his rebuke of economic localism of the kind espoused here. I offer a twin view of liberty and Christian rebuilding, that of “local economy and free markets.” I believe I avoid the dangers Mr. Marinov describes; what do you think? — DJT
By Bo Marinov / Axe the Root
Welcome to Episode 40 of Axe to the Root Podcast, part of the War Room Productions. I am Bo Marinov, and for the next 20 minutes we will be talking about an ideology that is deeply irrational, has proven to be harmful to great masses of ordinary people, and yet continues to be popular among the same masses of people who have suffered the most from it: economic nationalism. It is known by a number of other names as well, like mercantilism, protectionism, import substitution, economic patriotism, positive trade balance, localism, domestic vertical linkages theory, etc., etc.
I prefer the name economic chauvinism, for, behind the façade of all these professionally-sounding names, the essence is deeply immoral, anti-Biblical, and based on a prideful belief in the natural superiority of one’s own group over the others; and pride comes before the fall, as we all know. It is also based on a lack of understanding of the nature of man of his economy; which, in turn, stems from the loss of the concept of Dominion Mandate under God, and in a belief in the divinity of collectives of men, and especially of their political governments. What I want to do this week is take a look at this ideology, show its anti-Biblical character and therefore also its irrationality, and lay out the Biblical view of economic relations.
The essential belief of economic nationalism is that the economic growth and prosperity for a society and its individuals are best achieved when that society is as isolated and independent as possible from outside suppliers. That is, when all the goods and services a society needs are produced within the political boundaries of a nation-state, controlled by a national political and economic elite, with only domestic citizens working to produce them. In its more ambitious version, the ideology envisions also a domestic economy which is “export-oriented,” that is, not only substitutes domestic production for imports, but also tries to take over markets outside its political borders through subsidies for export.
Whereas on the surface, the ideology seems to be concerned with production and profit, at its very essence, it is a socialist and statist ideology, for it always requires some form of compulsion by the state, whether in blocking imports through tariffs, or in manipulating the money supply, or in government subsidies for industries (which means higher taxes on everyone else), etc.
The BMW story
As a funny interlude, you know, I plan the topics for these episodes well ahead (I have a list of topics for 100 episodes ahead), and this specific episode’s topic was planned about 6 months ago. And ironically, or I should say, providentially, this last week Donald Trump provided me with a beautiful example of the folly and irrationality of economic nationalism which I can use as the main example for this episode. He engaged in a sort of twitter brawl with BMW over their decision to build a plant in Mexico for production of some of their lower-end models, with some of its production meant for import in the US. Trump demanded that BMW build their plant in the US, otherwise he would impose a 35% border tax on their imported vehicles.
The idea, of course, is that by building their plant in Mexico and importing in the US, BMW somehow has wronged Americans and America: after all, what is seen on the surface is that hard-earned American dollars are leaving the US and going to Mexico. So, there, we can use the power of the Federal government to keep that money back home. Either BMW builds the plant in the US, or if their cars are more expensive, people won’t buy them, and will buy instead American-made cars, which will mean creating more jobs in the US and keeping more money in the US.
This is a classical example of things seen and things not seen; and of course, as in every case of socialist government propaganda, the things unseen – which are the more important things – are ignored in favor of the things seen, because only the things seen matter when it comes to political propaganda. There is a number of concrete facts behind the whole story which, when taken into account, clearly show the folly of Trump’s threats.
First, BMW’s sales in the US are an important part of their business but they are not that important as some may imagine. BMW’s annual sales in number of vehicles are approaching the 2.5 million mark. Less than 15% of them – about 360,000 – are sold in the US. Of those, more than 100,000 – the most expensive ones – are produced in the US (yes, BMW already has a plant here, and we will mention it later). So, Trump’s border tax will affect no more than 10% of their vehicles, and that is the cheapest models. Which means, those really affected will be rather the middle class.
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Second, even if BMW loses sales of 100-200,000 vehicles a year, and these sales go to domestic automakers, this won’t affect the job market in any way. The annual production in the US is about 12 million units, but the total capacity is over 16 million. Thus, the domestic automakers can easily increase the production without hiring new people. Modern technologies can make this happen.
Third, such investment decisions are made for decades ahead, and a temporary tantrum by some political figure whose period of power will be 4 or maximum 8 years can’t affect them. For BMW, 4 years of lower sales will be preferable to an abrupt change in investment plans for $1 billion. Besides, the Mexico plant is expected to sell to more than 30 countries with whom Mexico has free trade agreements. The US had such agreements with less than 15 countries. Trump may brag about his total wealth, but as impressive as it is, it is less than BMW’s profits for one year only. BMW can weather several US Presidents without having to adjust to their stupidity and socialist propaganda.
Fourth, the plant BMW is building in Mexico is a relatively small plant, its production capacity is about 150,000 vehicles a year, and it will hire no more than 1,500 workers. It’s an assembly plant, it’s not a full production plant. In the modern world, no company has all of its production facilities in the same place. Even if that plant was moved to the US, it would still buy the bulk of its materials and parts from where it has always bought them. What would Trump do then? Impose 35% border tax on nuts and bolts? In comparison, BMW already has a plant in the US, in Greer, South Carolina. This plant hires 8,000 workers, and it is the largest BMW plant in the world, even larger than the BMW plant in Dingolfing Germany. It produced 400,000 vehicles in 2015, BMW’s higher-end models, and exports 70% of its production abroad. Which means, if economic nationalism was right, then BMW is doing America a favor. If Trump’s policies of isolationism and closed borders become the norm around the world, that plant will have to close or cut production.
And fifth, the company BMW may have to take some decrease in regional sales, but the real losers will be the hundreds specialized BMW dealerships and service centers in the US, hiring more than 100,000 people. A drop in sales will drive some of them out of business; thus, billions of investment dollars wasted. In our modern world, manufacturing takes an insignificant part of the workforce; BMW global staff is only 122,000. A punishment on the company won’t affect it but it will affect the service companies in the US – and that all for the public stunt of opening 1,500 or fewer jobs in a plant.
Irrationality of economic nationalism
To these hard economic facts we need to add the equally – if not more – important moral consequences. Whenever political propaganda trumps economic realities, the result is an encouragement of dishonesty. Political slogans don’t change economic realities or decisions; they only make the economic leaders adopt the language of propaganda in order to avoid trouble. That’s what happened under Communism in Eastern Europe: directors of government plants cooked data to fit the government propaganda while their plants produced nothing. In the US, CEOs will simply adopt Trump’s socialist and populist lingo and will present glowing reports of new jobs created, while they will continue doing the same things.
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Such public dishonesty may have serious consequences on the society; but it is unavoidable once an administration makes everyone – including itself – a prisoner of its own false ideology and sloganism. Obamacare should have been a good warning to this effect, but I guess, we seldom learn even from our most direct experiences. Not to mention that just like with individuals, when countries are quick to change their government policies based on the personal whims or irrational ideology of this or that politician, this destroys the confidence of investors. Also, not to mention that the artificial removal of one serious player on the market – especially one like BMW who offers extremely high quality at affordable prices – will result in lower competition, and we as Americans more than anyone else should know that lower competition inevitably leads to lower quality and higher prices. In short, Trump’s rant against BMW is completely irrational. It won’t create more jobs or economic growth for America, but it certainly can create problems for the economic growth in the long term, and for the well-being of ordinary people in the short term.
I went into all these details about BMW because this example was very instructive about the irrationality of economic nationalism. Many, however, are tempted to believe that such irrationality is a side issue, that it is not characteristic to economic nationalism, that one can somehow build rational economic nationalist policy. That is, the same belief that makes many people say, “Communism is a good ideology, it just hasn’t been applied properly.” Or, “Police is good, it’s just a few bad apples.” Or, “Obamacare is good, we just need to make it work.”
The truth is, however, that economic nationalism is always irrational, there is never a way to make it work. And the reason it can’t be made to work is because that irrationalism is not accidental. There is much more behind it.
We have talked before in previous episodes, and Van Til has given us even more insight in his books on what we call the “noetic effect of sin,” that is, how sin influences our ability to do logic and be rational, but I will repeat it here: irrationalism is not morally neutral. It always follows from some form of idolatry. When people are illogical, schizophrenic, when they tend to believe in contradictory things at the same time, when they tend to ignore the obvious negative consequences of their own actions and beliefs on themselves, this is because at some deep level – presuppositional level – they have adopted some false religion which has twisted and destroyed their ability to think clearly.
Only a self-conscious belief in the Triune God of the Bible and His Gospel can create the foundation for rational, logical, consistent, coherent thinking not only in the theoretical disciplines but also in practical ideology. The reason socialists are so irrational and schizophrenic in the face of overwhelming evidence against socialism is not because they are stupid but because they are self-conscious idolaters. The reason conservatives defend cops even in the face of historical evidence against the existence of police, or current evidence about the corruption of police and the Democrat loyalty of the police unions is, again, because they are idolaters. And the reason why the protectionists continue defending their policies in the face of overwhelming evidence against them is, again, an idolatry at the bottom of it, a faith that denies God and His Word, and denies the meaning and the work of His Gospel in history.
What is the religion behind economic nationalism, then?
Zero-sum game — deep pessimism
The key to understanding this religion is in the following: Economic nationalism views economy as a zero-sum game and the world as a zero-growth world.
It views the economy as a zero-sum game because, in the eyes of economic nationalists, profit for one person is by necessity loss for another. Wealth is not created, it is only transferred from one place to another, from one person’s bank account to another, from one nation to another. It is impossible for all the participants on the market to profit at the same time.
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When one participant makes a profit, that’s because another participant must have suffered a loss. When a company builds a plant in one nation, thus creating jobs, this must be because another nation has “lost” those jobs. A car imported in the United States must by default be a loss for the United States, because there is money going to another country. A car exported from the United States must be a profit for the United States because there is money coming in. (We will talk in a future episode about the curse of an export-oriented economy.) When a company closes its plant in one place and local people lose their jobs, it must be because someone else has won these jobs.
The reason economic nationalists view the economy as a zero-sum game is because they view the world as a stagnant, zero-growth world.
There is no dynamics in history, no development in mankind – moral, technological, industrial, economic. Mankind of today can’t be better off than mankind of yesterday, at least in the larger scheme of things. Progress in one place by necessity is achieved by regress in another. Yes, yes, in theory, economic nationalists do pay lip service to some theory of progress; but when it comes to practical policies, their first instinct is to assume that growth everywhere at the same time is impossible; it is impossible to have growth in the US if there is growth in Mexico as well. Thus, economic nationalism is based on deep pessimism about the future, on a belief in the impossibility of progress. That’s where its drive to localization and encapsulation comes from; they are its defense against change, because by default, change cannot mean change to the better, it is always change to the worse. When a coal mine shuts down in Virginia, the pessimist can’t imagine that this is because better and more efficient sources of energy are available – like oil and gas from fracking – and therefore, in general, the economy is better off, and therefore the miners need to be encouraged to move to a new occupation. When taxi cabs in New York City lose business because of Uber and Lyft, the pessimist can’t imagine that this is because better and more efficient and cheaper ways of transportation are made available by new technologies, and therefore the economy is better off, and therefore taxi drivers should be encouraged to develop technologically.
Borders, stagnation
His only solution is to protect the coal mine, whether there is economic sense in it or not; or to ban Uber and Lyft, no matter what the millions of their customers say. Being a pessimist, the economic nationalist can only see the loss of the yesterday’s world; and the world of tomorrow is by default a worse world for him. So to protect the yesterday’s world from inevitable change, he has to encapsulate himself within borders and enforce stagnation. And since enforcing that stagnation requires enforcing his views on other people, the only logical tool for his defense against the future is the power of the state, and the borders therefore are the political borders within which that state operates. People can profit only at the expense of other people; thus, state intervention is justified to prevent people from making profit. Or to prevent other nations from making profit.
In his book, Wages of Destruction, the British historian Adam Tooze shows that this pessimism was the real reason behind the extreme political nationalism of Hitler, and behind the economic nationalism of all the Western nations at the time.
He shows how Keynesianism, which was adopted by all Western nations at the time, gave no hope for the future – in fact, Keynes himself believed that long-term sustained economic growth was an illusion, and his theory was designed to be a government regulation of a world of zero-growth. Tooze shows how Hitler’s policies were entirely based on such belief in zero-sum game and zero-growth. But Hitler wasn’t the only one. Marx’s economic theory was based on the same beliefs: that profit for one person is by necessity a loss, or exploitation, for another. The policies of the Communist countries in Eastern Europe were predicated on the same beliefs: hence the closed borders, almost zero imports, and a frantic quest for self-sufficiency. (Witness modern North Korea, if you don’t remember Eastern Europe of 40 years ago.) The same faith can be seen in the remote tribes in places like the Amazon and Papua New Guinea: such tribes jealously guard their territories against any stranger, and mercilessly kill any stranger that approaches. For a stranger means something new, and anything new is danger, because nothing can be expected of change but a change to the worse.
Localism, fear behind tower of Babel
A good example of such pessimism and fear of the future, and fear of change and growth we see in the Bible, Genesis 11, the Tower of Babel. Modern preachers, following modern political ideologies, like to interpret the Tower of Babel as some sort of globalist conspiracy. And then God’s judgment on the builders as God supposedly establishing separate isolated nation-states. But such interpretation has nothing to do with what the Bible describes.
Far from being a globalist conspiracy, it was an attempt at a localized experiment in nationalism and collectivism. These were people who spoke the same language, were of the same genetic stock, who gathered in one place, under one political ruler – Nimrod (see Genesis 10:10) – and tried to build a collectivist state. What was their motivation? Pessimism and fear of development: “. . . otherwise we will be scattered abroad over the face of the whole earth.” Scattering was God’s plan for mankind; scattering had to do with His Dominion Mandate to man to subdue the earth for God’s glory. God’s answer to their isolationism and nationalism was the confusion of languages. You try to build a collective because of your pessimism and fear, God will always break it down. His answer to encapsulation is making it impossible to live within your walls.
This ideology of zero-sum game and zero growth is, at its very bottom, the good old religion of death. Modern environmentalists follow that religion: for them, using natural resources means by default the “destruction of nature.” Thus, they would prefer to see the death of mankind because they can not imagine that it is possible for man to be both technologically developed and a good steward of nature. Modern advocates of abortion follow the same religion: resources spent on raising children mean by default resources taken away from personal career advancement – so let’s murder unborn children in order to have economic growth. Modern over-population alarmists follow the same religion: they can’t imagine a world where there is both demographic and economic growth. Modern socialists and government welfare advocates follow the same religion: they can’t imagine that a company and its owners can make profits without by default making other people poor; hence, it takes government force to have “social justice.” Modern war-mongers in the Republican Party follow the same religion: They can’t imagine that it is possible for one nation to prosper unless other nations are brought to ruins. Economic nationalism is just one of the expressions of the same religion of death, a religion that sees the world as a grim place of permanent stagnation, where the only hope for an individual, group, or nation is to subjugate other individuals, groups and nations, or at least cut them of from growth.
Nationalism rejects biblical mandate
God’s answer to this religion of death is His Dominion Mandate: the covenantal obligation upon every single individual to be a faithful steward of God’s creation, and develop his part of the creation to full productivity. This obligation is of man before God, and no earthly institution is allowed to stand between man and God in the fulfillment of that Dominion Mandate. As long as an individual man is not committing crimes, he must be freed from any interference, control, regulations, or punishments. The purpose of political boundaries is to limit the jurisdiction of the state, not to limit the economic choices and decisions of individuals. Any government which uses its power to limit economic choices and decisions of individuals has practically declared itself divine, and has therefore established itself as an idol.
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It is in the free pursuit of man’s calling, including in his free associations with other men – whether in trade, or business corporations and enterprises, or exploration, etc. – that prosperity is created. Free men under God work to innovate and organize production in ways to make their products cheaper and more efficient, so that they can serve their customers better, so that they can have their business. This means also division of labor: some people or groups of people will specialize in one product or service more than other people, will produce is better and cheaper, and will exchange it for other goods and services. This process benefits all of them, and all of them profit. (When a BMW is sold from the Mexico plant to the US, it is not just Mexico that profits. The US customer also profits because he gets a good car for a lower price.) In such free associations and trade, profit for one man doesn’t mean loss for another; to the contrary, the only way for one man to profit is to make other men profit too. This is the faith of life and growth of the Bible applied to the economic life of man and his society, God’s Dominion Mandate.
And when the state intervenes to control and regulate man and his economic choices, it can only destroy life and destroy growth. That’s the religious root of economic nationalism: the religion of death. The farther we stay from it, the faster we will grow our economy.
The book I will assign for reading this week is Wages for Destruction: The Making and Breaking of Nazi Economy, by Adam Tooze. The book is a delightful read for any WWII buff (and I am one of them). It looks at the Third Reich from a perspective that is rare: the economic policies of the Nazis. It shows the fatal mistake of the Nazis to view the economy as a zero-sum game and the world as a zero-growth world. The wars that followed were only the logical conclusion from these beliefs.
And I will return your attention again to my mission field, Eastern Europe, and Bulgarian Reformation Ministries. In our work, we have been active in proclaiming not only the basic of the Gospel but also its applications – especially in the areas of economics and government regulations. We have consistently defended free markets, not simply from a rationalist perspective, but from the perspective of the Biblical worldview. Help us continue the work. Go to BulgarianReformation.com. Subscribe to the newsletter, and donate. God bless you all.
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