Tuesday, May 29, 2012

Envy, Asians, and Tariffs by Gary North

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.
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.

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