The Irrepressible Rothbard
Essays of Murray N. Rothbard
Edited by Llewellyn H. Rockwell, Jr.
Once again, libertarians and conservatives are being played for
suckers. And once again, free-market think-tanks and alleged devotees
of "free trade" are serving as point-men and front-men for a sinister
centrist Establishment whose devotion to freedom and free trade
is somewhat akin to Leonid Brezhnev's. The last time that "free
market economists" played such a repugnant role was in the 1986
"tax reform," engineered by Jacobin egalitarian economists in the
name of "fairness," "equality," and free markets. (Tip: genuine
free markets have nothing to do with "equality," and nothing whatever
to do with modern leftist notions of "fairness.") The "social compact"
devised by the 1986 Republican Jacobins was to cut upper income
tax rates in exchange for "closing the loopholes," "broadening the
tax base," and thereby keeping everything "revenue neutral." (Query:
what's so great about keeping tax revenues up, the eternal aim of
supply siders? Why not drastically lower tax rates and tax
revenues? Isn't that the real free-market position?)
Well, they closed the loopholes all right, thereby leveling a blow
to the real estate market from which it has still not recovered.
Thanks, Jacobins. And, as some of us predicted without being heeded
in 1986, it took only a few years for the upper income tax rates
to be raised again. This year, the rightist Jacobins feebly protested
when Clinton put through his horrible budget. So Clinton broke the
social compact of 1986! Does anybody really care?
The current Pied Piper, or Judas goat, role of free-market economists
is being played over the North American Free Trade Agreement (Nafta).
Just call it "free trade," and free-market economists and libertarians
will swallow anything. When Pat Buchanan ran for President, one
of the main arguments of Our People in sticking with Bush is that
Bush was a "free trader," while Pat had become a protectionist.
Never mind that Bush's trade record was the most protectionist in
many a moon. He talked a good "free trade" game, and rhetoric is
all that counts, right?
Bush's major trade legacy, now coming to a head, is of course the
much heralded Nafta. Well, it says "free trade" right there
in the title, so it must be good, right? Wrong. But unfortunately,
the push is on, and free-market economists are leading the hysterical
propaganda parade for Nafta. In addition to the usual neocon suspects
such as the Wall Street Journal, and free trade supply-siders
such as Robert Novak, virtually every free-market think-tank has
joined in an unusual "Nafta Network," to beat the drums for Nafta.
Real free trade, of course, doesn't require years of high-level
government negotiations. Real free trade doesn't require codicils
and compromises and agreements. If the Bush administration had wanted
real free trade, all they'd have had to do is to cut tariffs and
quotas, abolish the International Trade Commission, the "anti-dumping"
laws, and the rest of the panoply of monopolistic trade restrictions
that injure American consumers and coddle inefficient producers.
What the Establishment wants is government-directed, government-negotiated
trade, which is mercantilism not free trade. What it wants
also is institutions of internationalist super-government to take
decisionmaking out of American hands and into the hands of super-governments,
which would rule over Americans and not be accountable to the American
people. The mercantilist Establishment, emphatically including the
right-centrist Bush-types, wants government-regulated trade as well
as subsidized exports. Negotiated trade, whether Bush or
Clinton is doing the negotiating or David Rockefeller were doing
the negotiating directly, lowers import barriers only as bargaining
chips to force-feed American exports into foreign countries. In
addition, there is "foreign aid," essentially a vast racket by which
the American taxpayer is forced to hand out billions to export firms
The renegade free marketers and free traders who endorse Nafta
have two contrasting rebuttals to our argument, rebuttals which
virtually cancel each other out: (1) that by opposing Nafta we are
being "too purist," that we are, in the common phrase, "using the
best to oppose the good"; and (2) that we are associating with the
absurd arguments and the sinister interests of Left Liberals, the
AFL-CIO, and/or such conservative protectionists as Pat Buchanan.
On the first point, No. Though we may be purists, we don't think
that "half a loaf is worse than no loaf at all." I grant, for example,
that some of the nineteenth-century treaties, such as the Anglo-French
Treaty of 1860, were great steps toward free trade (e.g., Richard
Cobden in England, Michel Chevalier in France). They were made in
a general atmosphere of devotion to free trade. The current treaties
are very different; they are made by centrist mercantilists to advance
such anti-free trade and collectivist policies as internationalist
supra-government, regulated trade, and export subsidy. Whatever
tariffs may be reduced, they are more than offset by the
march toward regional, and eventually world, super-government that
is the essence of Nafta and all similar treaties in today's world.
Nafta would not bring us "half a loaf" of free trade; if we can
continue the analogy, it would bring us a "negative loaf." Nafta
is worse than no agreement at all.
In particular, the super-government. We should heed the warning
of the leading free-market expert on Nafta, James Sheehan of the
Competitive Enterprise Institute (a generally estimable outfit which
has unaccountably joined the Nafta Network). Sheehan points out
that Nafta would set up three governmental regional commissions,
that would have the power to levy fines on businesses, search the
premises of business, and sue in American courts, in order to enforce
three-country labor or environmental regulations.
It's like the European Community, which is being sold to the public
as a wonderful European "free trade zone." But European superbureaucrats
in Brussels have the power to enforce "harmonization" of: taxes,
welfare state regulations, etc., in all these countries. In order
to insure a "level playing field" (another synonym for left-wing
"fairness"), the Eurocrats can and have forced low-tax countries
to raise their taxes to be on par with their fellow-countries, and
to impose a greater welfare state or more stringent labor regulations.
The same powers would be placed by Nafta into the hands of
these North American bureaucrat Commissions.
The point is this: while leftist critics of Nafta are wailing about
evil Mexico avoiding those wonderful statist and welfarist U.S.
"labor" and "environmental" regulations, the real problem is precisely
the opposite. The real problem is that these rotten statist measures
will be enforced by supra-government commissions, commissions which
have acquired super-sovereignty, over Americans, Canadians, and
Mexicans, thereby injuring the consumers and the economies of all
Article 756 of Nafta requires these three-country commissions to
"harmonize" their labor, health, and environmental laws, which means,
as in Europe, harmonizing all of these measures in a statist and
For example: do the citizens of Texas, Arizona, and other right-to-work
law states know that Nafta would give these bureaucratic commissions
the right to challenge right-to-work laws in American courts, on
the grounds of violating the Nafta treaty? And do they realize that
because the Eisenhower administration managed to kill the great
old right Bricker Amendment in the 1950s, that treaties have been
interpreted as constitutionally overriding all other parts of the
U.S. Constitution? And if the Clinton administration should fail
in its ambition to prohibit employers from replacing strikers, the
Nafta Commission might be able to sue to impose such prohibitions
because union-ridden Canada and Mexico have them.
Article 1114 of Nafta prevents any country from "lowering any environmental
standard." So this means that the U.S. would be prevented by this
super-sovereign commission from trying to get out of any environmental
rules and restrictions imposed by Canada and Mexico, who are often
more in the grip of environmentalist socialists than we are.
Ironically, it was precisely the power of the super-bureaucratic
commissions that led Canadian Prime Minister Kim Campbell to withhold
her consent from Nafta. In a last minute deal, the U.S. then agreed
to let Canada off the hook and keep its sovereignty, while the rest
will be ruled by the Commissions. Canada can decide these disputes
for itself, while the U.S. and Mexico have agreed to abide by Commission
Why aren't Americans allowed the same powers of self-government
The second rebuttal is Guilt-by-Association. No, we are not buying
the absurd protectionist argument that "high-wage Americans" should
not have to compete with "low-wage Mexicans (Taiwanese, or...)."
This argument from economic ignorance puts the cart before the horse:
and it doesn't treat the deeper question: why are U.S. wages
so high, while Taiwanese or Mexican wages are much lower? The reason
is that American employers can afford to pay such high wages
while Mexican employers cannot. The reason for that is the superior
capital investment of the American economy, which has made the productivity
of U.S. workers far higher than in Mexico. This means that the labor
cost per unit of product in the U.S. tends to be much lower
than in Mexico, even though the wage rate is higher. For
high labor productivity means low labor cost.
Moreover, the very fact that the U.S. exports a lot of goods to
Mexico, Taiwan, etc. demonstrates that there is something very wrong
with this protectionist "low-wage" argument.
But the problem, as we indicated above, is the reverse of the standard
protectionist line. The problem with Nafta is not that it will allow
U.S. businesses to move to "low-wage" Mexico (they can do that now!).
The problem is not that Mexico might be able to escape U.S. union,
wage, and environmental regulations. The problem is that the United
States is going to suffer even more of these regulations
as imposed by the supra-sovereign North American Commissions.
Besides, people in glass houses, etc. If we are "associating"
with the AFL-CIO, you guys have to look in the mirror every morning
after associating with President Clinton and Mickey Kantor (Yucch!).
It is important that freedom-lovers in the American public not
get fooled by the "free-market" think-tank monolith. Nafta, like
the European Monetary System now virtually dismantled, is bad news.
It's worse than open socialism; for it's internationalist socialism
camouflaged in the fair clothing of freedom and free markets. Populists,
even protectionist populists, are right to view it with deep suspicion.
Kill Nafta and strike a blow directly in the gut of the
Clinton administration. A good rule of thumb: other things being
equal, if the Clinton administration is for it, whatever it is,
it should be opposed on general principles. The more the Clinton
administration fails, the more it withers and dies, the more American
freedom and prosperity, the more the Old Republic, shall live.