Envy, Asians, and Tariffs: How to Keep America Poorer
May 28, 2012
I have written about envy and its effects for almost 40 years. I was first alerted to the problem in an article written by Murray Rothbard: "Freedom, Inequality, Primitivism, and the Division of Labor." He summarized the findings of the book written by a sociologist whose name I knew well, Helmut Schoeck. Schoeck had co-edited a series of books I owned, published by the William Volker fund in the early 1960s. I bought the book, and it had a profound effect on my thinking.
The book's thesis is this: envy is different from jealousy, and it is even more destructive. Jealousy is where someone says: "You have what I want. I cannot get it on my own. So, I am going to take yours away from you by force, preferably through politics."
Envy is different. Envy is where someone does not say anything, but he thinks the following: "You have what I want. I know that I can never get it. I am going to destroy what you have, so that you will not be able to enjoy it." It is the politics of arson.
Schoeck made an observation: you can negotiate with somebody who is jealous. Maybe you can figure out a way that you could share some of what you have, and he will be bought off. This is surely what goes on in modern politics.
The author made another point: you cannot negotiate with somebody who is envious. The fact that you are in a strong enough position to offer him something of value further enrages him. He resents the fact that you have so much that you might be willing to give up a little of it in order to placate him. It is your position of strength that angers him. He wants to strip you of any sign of superiority over him. He does not want to become beholden to you. If he gained anything as a result of a negotiation, he would still feel as though you were in a stronger position than he is. He would far rather see you devoid of whatever it is that you have than gain anything from you.
In other words, you can deal with the jealous person; you cannot deal with the envious person. Envy is therefore a sin that it is almost impossible to deal with in somebody else.
The problem is, it is very difficult to deal with in ourselves.
HEAVEN OR HELL
The Bible offers a few cases of outright envy, but the story of Satan that English-speaking people are most familiar with is the story of envy. It is summarized in the one line from Milton's Paradise Lost that educated people remember. Satan makes this claim: "I would rather rule in hell than serve in heaven." This is the essence of envy. The devil had a good deal going for him in heaven. But he chose to rebel. It was better to be thrown out of heaven and cast into hell, in his thinking, than it was to remain in heaven. Heaven offered a great lifestyle, but not for someone driven by envy.
The point that Rothbard made over 40 years ago was this: socialism is driven by envy, not jealousy. He wrote: "Helmut Schoeck's Envy makes a powerful case for the view that the modern egalitarian drive for socialism and similar doctrines is a pandering to envy of the different and the unequal, but the socialist attempt to eliminate envy through egalitarianism can never hope to succeed" (p. 287). To the extent that socialism is based on envy, this assessment is correct. Therefore, it does no good to attempt to get a settlement with envy-driven people who are promoting socialism. You cannot persuade them by showing that socialism is less efficient than capitalism. They do not care that they would be richer under capitalism than under socialism. They realize that socialism is a system for tearing down people who are more successful. Therefore, you cannot placate a socialist who is driven by envy.
I am convinced that most people regard certain forms of economic intervention as a benefit to them. Most people who promote larger government are jealous people, but not envious. They think that others have gotten rich at their expense, and all they are really after, they insist, is a way to settle the score. They will settle for getting more of what somebody else possesses. They see politics as a way to negotiate a better deal for themselves at the expense of the minority of rich people.
Nevertheless, there is a hard-core of academic and intellectual leadership within the socialist movement that really is driven by envy. They really are not convinced by the fact, which they have believed since 1991, that capitalism is more efficient than socialism. They still are outraged by inequality, and they would rather destroy the capitalist system than negotiate with it. They would rather live in hell than live in heaven, because heaven is a place of inequality.
I do not think most socialists believe this. This is why we do not find many socialists any more. Ever since the collapse of the Soviet Union, it has been clear to socialists around the world that socialism leads to economic poverty. It took the collapse of the Soviet Union to convince a majority of socialists of this position. So, most of them really are more driven by jealousy than envy. They are out to steal from the rich rather than destroy them.
I find that the problem with envy afflicts conservatives as much as it afflicts socialists. In fact, I am of the opinion that it afflicts them even worse than today's socialists. Let me explain.
I hear endless warnings about the fact that Asians are getting rich. This bothers millions of conservatives. They are ready to impose tariffs and other restrictions on imports from Asia. They are ready to accept a high national sales tax on goods manufactured in China, despite the fact that they say that they are opposed to tax increases. They always make the exception for tariffs: sales taxes on imported goods. This has been going on for over 300 years. This was the heart of the old mercantilist system, which was based on a defense of Empire. It was a mixed tension of the idea of envy.
Why do I say this? Because people know that they will suffer more by paying higher taxes for imported goods. Nevertheless, they think it is a great idea to reduce imports from abroad. Why do they think this? Because, as voters, they think in terms of their position as employees, not as consumers. They are convinced that, because a product imported from Asia may reduce demand for the product which they manufacture, they will be better off if there are sales taxes on imported goods. This is jealousy.
But there are some hard-core conservatives, meaning envy-driven conservatives, who really believe that an economy works better in a high-tariff environment. They understand that they will have to pay more as consumers, but they do not care. They hate the idea of Asians getting ahead. They hate the idea of the comparative advantage of anybody.
The problem is this: all trade is based on comparative advantage. Somebody else does something better than you do, so you trade with him in order to better your position. People understand this with respect to the efforts of somebody who lives across the street or around the block. But they do not believe it, and they argue against it, when somebody lives across a particular invisible line called the border. Before the Constitution was ratified, the border was a state border. Ever since the Constitution was ratified, resistance to imported goods from other states has disappeared. Everybody accepts this within the United States. But, with respect to imported goods, most Americans prefer tariffs.
Some Americans prefer them because they understand that free trade will advance foreigners who have comparative advantages in certain forms of manufacturing, and they resent the idea that foreigners will ever enjoy an advantage in anything. This is envy, pure and simple. It is the desire to tear the other guy down just for the joy of seeing him torn down.
Free trade of any kind, whether with someone across the street or around the world, benefits the other person. In some way, he will do better after the voluntary exchange, or at least he thinks he will. Free trade advances everybody's wealth. A specific case of free trade can lead to a loss of income by somebody who is not efficient in a particular field in the economy. But, if we are talking about the effects of the system on the lives of all customers, free trade is universally beneficial. There are enough people across a particular border who are willing to sell something cheaper, or improve its quality, so that customers on the other side of the border will be benefited.
There is no question that Asians are getting richer, faster, and more widely than Americans are. Why is this? Because they were so far down. When you begin to expand the growth of anything, it grows more rapidly when it is smaller than when it gets larger. Example: some investor can do very well at the beginning of a successful investment strategy, but, at some point, the rate of return slows down, because he becomes a larger player in the particular field. He cannot buy low and sell high, because he is the biggest guy buying low and trying to sell high.
Individuals in China are, for the most part, poverty-stricken. Most people living in China live in rural areas that are incredibly poor. But we do not see them, and we do not hear about them. We hear stories about a handful of entrepreneurs who were born in poor rural areas, moved to a city closer to the coast, found a way to become productive in the export business, and got rich. As a percentage of the population, there are very few of these people in any society, but because there are so many people in China, we hear more of these stories.
Americans keep hearing these stories, which are promoted by people who have no comprehension of economic theory. Mercantilism is the default setting of most people most of the time. They want a monopoly for themselves from government, such as licensing, and they adopt the philosophy of voluntary exchange that is in fact involuntary exchange. Adam Smith argued against these arguments in 1776, but we still find that the average guy is a mercantilist in his thinking.
Asians have a huge problem: they are not reproducing themselves. Across Asia, birth rates have fallen rapidly. In South Korea, in China, and for over a generation in Japan, birth rates are now below replacement rate. In other words, they are below 2.1 children per family. Japan will suffer from this, but China will be devastated by this, beginning in about 15 years, and surely within 20 years. Japan is rich. It got into the Western system of free trade long before China did. Japanese oldsters are rich compared to other Asians. China is still poor. Now, it is facing a demographic catastrophe.
The old Chinese system had sons supporting their aged parents. This may still work in the countryside, but it is fading as an ideal in the cities. Sons have departed from their rural homes, and they are seeking wealth in the cities. The vast majority of them are unlikely to achieve sufficient wealth over the next 15 or 20 years to enable them to support aged parents. Aged parents are still rural, and they are still poor.
There is no Social Security system in China. What I mean is, there is no government-funded Social Security system in China. But, as the bonds between sons and parents are weakened by urban living, the old Social Security system is beginning to break down. Sons will not be able to afford to support parents, because there will be more parents than sons in a family. In the old days, multiple sons contributed resources to support the parents. Today, there is only one son per family. This is not quite true, of course, because the policy of one child per family is not always enforced. But this is the direction that China has gone for 40 years.
RICH AND POOR
There is this popular thought: Asians are going to be in a position to tell Americans what to do, because they will be highly productive, and we will not be productive. This is nonsense. Nobody tells anybody what to do in a system of voluntary exchange. Everybody wants to trade with somebody who has more money. They are willing to trade with poor people, but only if there are a whole lot of poor people, which means that someone could sell to a whole lot of people and make the money on volume.
The way to get rich is not to enslave somebody else. The way to get rich is to offer somebody with money to spare a deal that he will not refuse. You do not go into business to sell something to people with no money. You go into business to sell something to people who have a lot of money. They have so much money that it is not a big burden for them to buy. It is really hard to sell something to somebody who is poor, because he does not have enough money to buy what you want to sell.
This is obvious in a one-on-one situation. But, when people begin to think about the invisible line called a national border, they lose their ability to think economically. An invisible national border is Kryptonite for economic reasoning.
To think that Asians are going to make Americans poorer by selling Americans things Americans want to buy is illogical. Nobody gets poor by buying something cheap that he really wants to buy. He has less expense in buying the item, which means he has more money left over to buy something else. This is so obvious that you would think everybody would believe it almost by the time he reaches age eight or nine. But people do believe it. They choose not to believe it whenever they think about an invisible line called a national border.
The richer you are, the less likely it is that somebody in China is going to produce something that you manufacture. Americans do not go to work to make trinkets. We buy things at Wal-Mart that were made in China, such as socks or T-shirts, but we buy very few sophisticated items from China. In any case, China is not the problem; Venezuela is the problem. Oil imports constitute a big percentage of the imports into the United States. China does not export oil.
So, when we look to Asians who are getting wealthy, we ought to rejoice. But, because of envy, we are tempted to resent the increasing wealth of Asians. We would not resent the increasing wealth of somebody who lives across the street, or somebody we go to church with. But we do resist when someone across an invisible line: national border gets wealthier.
If Mexicans got much richer, and they stayed in Mexico to work rather than come to the United States, millions of Americans would rejoice. This, in fact, is what has been taking place over the last five years. The immigration rate from Mexico has slowed, and the reason for it is obvious: the Mexican economy is booming. Per capita wealth in Mexico is rising. National wealth in Mexico is rising. Americans do not worry about this. They are barely aware of it.
Surely, they do not worry that Canadians are getting rich. I do not think anybody in America worries about Canadians getting rich, but the fact is this: if Canadian tar sands really are efficient ways of producing oil, Canada will start exporting a lot more oil to the United States. We will start paying Canadians, meaning those Canadians who own the oil, a lot more money. Will Canadians be "stripping America of its wealth"? Of course not. We are really glad if somebody else finds a way to produce oil cheaper than we can buy it from Venezuela or Mexico. We rejoice if the cost of producing oil in some other country can lower our cost of gasoline. (In fact, no country can do this today -- not enough oil at the margin.) But, remember, this means that we must send money across an invisible border in order to persuade somebody on the other side of the border to sell us oil.
We want the oil. We know we will do better with cheaper oil. So, this means that we are going to have to pay somebody outside the United States for the oil, since we are pretty well convinced that America long ago maximized its output of oil. If we are going to get more oil, we are going to have to buy it from across the national borders. So, because we really do understand this, we do not get upset by the fact that somebody across the border will sell oil cheaper, at least if they speak English -- yes, even if they keep saying "eh?"
In other words, Americans are illogical in economics. They do not follow an economic argument. I think the reasons they do follow are twofold. First, they think as producers who are facing competitors. They do not think of themselves primarily as customers who are getting a better deal. Second, they really are driven by envy. Maybe most of them are not, but enough of them are. They see that they will get richer if they trade, but, because they are rich, and because the person they trade with is less rich if the person is in Asia, they resist additional trade, because they know, as a percentage of personal wealth, the Asian will do better from the trade. He is so poor compared to an American, and the American is so rich compared to the Asian, that the voluntary exchange is likely to improve that Asian's lifestyle more than it improves the American's lifestyle. This is resentment by rich people against poor people.
We think of socialism as driven by envy: poor people, who have more votes, resisting the success of rich people. But, with respect to foreign trade, it is the opposite. Rich people, meaning tens of millions of Americans, resent the success of poor people, meaning hundreds of millions of Asians. Rich people have all those poor people trying to compete against each other to sell them something of value, yet the rich people resent this. Economically, this attitude is self-destructive. That is the problem with envy. It is self-destructive.
In the good old days, which were not so good, rich people hired lots of servants. They liked to have lots of servants around them who did not have any money and not many prospects. They did not want poor people to get rich by working in a factory, because poor people would then charge more money to work as domestic servants in rich people's households. In the era of Southern plantations and New York aristocratic families, rich people preferred poor people to stay poor. They liked the hierarchy they enjoyed, because they were comparatively much richer than the servants who worked for them.
Today, well over a century later, the average poor person is better off economically than the rich person was in the old days. He has better medical care; he has a television; and he has all of the gadgets that have come onto the market since 1850. As the libertarian humorist P. J. O Rourke says, when we think of the good old days, we should think of one word: dentistry. I quote that often, because it is so true.
What makes Americans richer is the liberty of contract and trade.
Do not worry about Asians getting richer at Americans' expense. Everybody gets richer at somebody else's expense, which is the meaning of trade. There are no free lunches. Everyone gives up something in the transaction. But the emphasis should be on the words "everyone gets richer." Do not be fooled by words "at the expense of."
If Asians get richer, faster, rejoice. It's good enough to get richer, slower.
Trade is superior to autarky. Community is better than a hermit's life. The division of labor is our friend.
Better to serve others in heaven than to be alone in hell.