The 2024 Republican National Convention will be remembered for the raw emotions evoked by an attempted assassination the preceding weekend of its presidential nominee Donald Trump and for the now mostly Trumpified Republicans posing as the populist champions of American workers against the elitist Democrats.
This convention, however, should be remembered for another reason too. It marks the entrenchment of an organized “national conservative” movement within the party that espouses an anti-free-market ideology, overtly scorning individual liberty in favor of a powerful nation-state. This shift in Republican thinking is most clearly evident in Trump’s choice of J.D. Vance as the party’s nominee for vice president (who recently explained his “NatCon” principles in a Foundation for American Innovation podcast) but is also hinted at in Trump’s advocacy of retaliatory tariffs in his acceptance speech:
“And right now as we speak large factories, just started, are being built across the border in Mexico. So with all the other things happening on our border and they’re being built by China to make cars and to sell them into our country, no tax, no anything. The United Auto Workers ought to be ashamed for allowing this to happen and the leader of the United Auto Workers should be fired immediately and every single auto worker, union and non-union should be voting for Donald Trump because we’re gonna bring back car manufacturing and we’re gonna bring it back fast. The ability, some of the largest auto plants anywhere in the world, think of it, in the world.
“We’re going to bring it back, we’re going to make them, we don’t, we don’t mind that happening. But those plants are going to be built in the United States and our people are going to man those plants and if they don’t agree with us, we’ll put a tariff of approximately 100 to 200% on each car, and they will be unsellable in the United States.”
For his part, Vance closely echoes the talking points of such NatCon champions as American Compass and the Claremont Institute. While conceding that free markets are better than government planners at allocating resources and empowering people to meet each other’s needs (Vance even cites the Austrian economist F.A. Hayek on that point), NatCons like Vance protest that America already has a de facto industrial policy that punishes capital-intensive industries while leaving them vulnerable to the malign policies of the Chinese Communists. According to the NatCons, Americans have a moral obligation to reorient their existing interventionism toward favoring American victims of Communist Chinese policies, not continue to favor the Wall Street and Big Tech elites that profit from the existing globalist order.
There are two fundamental errors in the NatCon portrait of America’s deindustrialization and the NatCon recommendation of “industrial policy” as a remedy, one theoretical, the other historical. From a theoretical perspective, the erection of new trade barriers and fresh governmental malinvestments of labor and other productive inputs can only diminish, not increase, the productivity of workers and thus can only lead to a deterioration of their living standards.
Only the removal of existing policies that hamper private investments in capital-intensive industries in America — that is, a shift toward laissez-faire policies — can demonstrably improve labor productivity and thus the real labor incomes of Americans. If the problem with the American economy is its existing globalist version of corporatism, then the solution is to get rid of such interventionism altogether, not hobble the productive sector further by layering a nationalist form of corporatist planning on top of existing interventions. Government investments can’t turn dying industries into a net gain for American workers, not even in counteracting deviations from laissez-faire by other governments.
Vance’s failure to understand the failures of industrial policy seems to be rooted in a misunderstanding of the Austrian School critique of socialist central planning. A little over a century ago, Ludwig von Mises demonstrated that forward-looking cost/benefit calculations for comparing alternative investment plans are impossible without the use of prices for capital goods and factor inputs that are generated by competitive profit-and-loss-driven markets.
Central planners aren’t merely ignorant of things known to other actors and thus more liable to make costly mistakes in their calculations (a point often stressed by Hayek); they literally can’t come up with prices that are meaningful in the real world to plan with at all. When the NatCons grandly declare that mere individuals owe it to their nation to protect fellow citizens against losing their jobs due to interventions by foreign governments, they neglect to warn us that they have absolutely no idea what the costs of their job protection schemes will be, much like the unknowable costs of the equally muddle-headed environmental, social and governance policies that globalists of the World Economic Forum have been foisting onto the corporate world.
From a historical perspective, the deindustrialization of America — which started in the 1970s — can’t honestly be blamed on China, which didn’t even become a significant player in international trade until some 30 years later when China joined the World Trade Organization in 2001 and didn’t catch up with America as a recipient of foreign direct investment until 2020. The Trumpian narrative that Wall Street financed a net offshoring of American industrial jobs to China thanks to rotten trade deals is fake news.
Communist Chinese policies over the first two decades of the 21st century in fact offered what could have been an enormous boon to American industries: China’s enormous merchandise trade surpluses with America contributed a great deal to the pool of savings available in America, since the Communist planners were loath to hurt Chinese exporters by repatriating their dollar earnings and making their export prices uncompetitive. China’s blundering industrial policy could have helped reverse the chronic long-term stagnation of American industries had more of the increased savings in America found their way into productive American investments.
Unfortunately, this opportunity to leverage greater savings to the advantage of American industries was squandered, and the well-being of American workers continued to deteriorate. Both Democratic and Republican politicians doubled down on their spendthrift ways to win votes, just as they have been doing since the dollar was cut off from its gold backing in 1971. The share of America’s gross domestic product devoted to net private domestic investment (i.e., the share that actually grows the American economy) has been languishing ever since then, largely displaced by a doubling of the GDP share devoted to Social Security, Medicare, and other governmental transfers.
Figure 1: Personal current transfer receipts as compared to net domestic investment, 1965-2024
Source: FRED.
China, by contrast, got rid of its Maoist “iron rice bowl,” with even the poorest Chinese taking to heart Deng Xiaoping’s admonition that “to get rich is glorious” and increasing their personal savings rates to much-higher levels than your typical American; it’s not hard to spot the enormous difference in the shares of GDP devoted to gross capital formation over this period.
China has reaped the rewards of its people’s thrift with a rapidly growing economy in spite of the shortcomings of its government’s interventionism. America, on the other hand, has reaped the whirlwind of both its major parties embracing the principle that all Americans are entitled to economic security at the federal government’s expense and of financing this expense by putting the dollar on a fiat basis so it can resort to unrestrained debt monetization. In short, America has resorted to a policy of capital consumption.
Trump made it clear in his acceptance speech that he has absolutely no intention of dealing with the Social Security/Medicare crisis nor have he or his NatCon allies expressed much interest in monetary or banking reforms that would restore serious fiscal discipline by shutting down the bipartisan debt monetization racket. Instead, he promised a stupendous miracle of simultaneously reducing interest rates, reducing government debt, reducing tax rates and reducing the rate of dollar depreciation while allowing Social Security and Medicare to grow unchecked.
He also promised not to provoke World War III, as if rival trade blocs resulting from a breakup of the international division of labor won’t be incentivized to fight over access to natural resources as was the case leading up to the first two world wars. Instead of addressing the actual causes of America’s decline, Trump and his party are blaming foreigners for America’s shortcomings and using that blame as a pretext for waging war on the American economy, creating yet a new set of vested interests to live at the expense of the declining productive sector.
