Guest Post: Dave Chappelle Understands Free Trade Better Than Most Politicians

Chappelle’s words of wisdom should be inscribed on plaques to be placed on the wall in the White House.


by Allan Golombek

Dave Chappelle is a great comedian. But he may be an even better economist. He certainly understands free trade a lot better than some of the people who are currently in charge of directing U.S. trade policy.

In a recent comedy routine, Chappelle provided a succinct explanation of why it makes more sense for the United States to import some goods from China rather than try to pursue a protectionist trade policy aimed at producing everything domestically.

The Difference Between Wearing and Making Nikes

Chappelle summarized President Trump’s position vis-à-vis China: “I’m gonna go to China, and I’m gonna get these jobs from China and bring ‘em back to America.” Chappelle then interrupted his Trump soliloquy, asking: “For what, so iPhones can be $9,000? Leave that job in China where it belongs … I wanna wear Nikes, I don’t wanna make those things. Stop trying to give us Chinese jobs.”

Chappelle’s words of wisdom should be inscribed on plaques to be placed on the wall in the White House, the office of the US Trade Representative, and the Department of Commerce — and the trade ministries of some other countries. The reason people buy imported goods is because they feel they are getting a better deal for their money than if the product was made domestically.

Would it make sense for us all to make our own footwear, assemble our own smartphones, grow our own food, and — for that matter — build our own homes? If we tried to do that, where would we get the time and energy to treat cancer, create new technologies and medications, or give Pilates lessons? If we had to make our own iPhones and Nikes, would we be able to afford to buy them? And what would we have to give up to be able to?

Moreover, by offshoring the assembly of iPhones and Nikes, we actually keep domestic jobs competitive. Most of the value added to an iPhone occurs in the United States — Chinese workers assembling them and adding some of the parts just makes Americans more competitive. Nike employs tens of thousands of people in Vietnam, but the company also employs thousands in metropolitan Portland — jobs that pay better, jobs that can be maintained only by offshoring some of the less complex and lower-paying work.

Warning: NSFW Language

An Economy Needs More than Exports

Growing an economy is not a matter of turning imports into exports. Robust economies do more of both. The opportunity to import actually helps achieve productivity and prosperity more than the opportunity to export because it does more to broaden choice. Importing widens the circle of potential suppliers competing to meet the needs of intermediate producers. When a country opens its borders to imported goods, it facilitates comparative advantage, importing inputs from countries that are more efficient at making them — and thereby making domestically-produced final products more competitive.

On the other hand, countries that have tried to fight reality and produce everything for themselves have paid the price. In which economy would you rather live — North or South Korea? In the early 1970s, both countries had roughly the same GDP per capita. One of the reasons South Korea has raced ahead is that North Korea has pursued autarky. South Korea has become so much wealthier not simply because it exports far more, but because it exports and imports far more. By buying things they need from other countries, they free themselves to do the things they are best at doing. Importing is not a necessary evil; it is a necessary ingredient.

Unfortunately, many look at imports as money leaving an economy instead of value entering it. Many look back fondly to a time when almost all goods sold in the United States were manufactured in the United States. Perhaps we could resurrect that world — but only if we were willing to give up the iPhones, Nikes, laptops, medical technologies, and all of the other modern goods that trade has made possible.

The reason we are able to maintain a 21st-century lifestyle is because we pursue a 21st-century economy. Bringing back the 1970s economy would also entail bringing back the 1970s lifestyle that came with it.

By importing from developing countries, we are in effect hiring people at a cheaper price than we could obtain at home. There is a word for the result — “progress.”

Reprinted from RealClearMarkets.

Allan Golombek is a Senior Director at the White House Writers Group.

This article was originally published on FEE.org. Read the original article.

History of World War II industrial effort gets new life in paperback

(This article appeared originally on Virginia Politics on Demand on July 1, 2013.)

Arthur Herman

It has come to my attention that Freedom's Forge: How American Business Produced Victory in World War II, written by Charlottesville-based historian Arthur Herman, will be published in paperback on July 2. The book was first released in hardcover in May 2012 and, soon afterward, I had an opportunity to interview Herman about it.

The most important takeaway of Herman's research is that, contrary to mythology, America's successful industrial effort during the Second World War was not the result of central planning or intensive government action. Rather, it succeeded precisely because it was decentralized and (relatively speaking) undirected.

By contrast, Nazi Germany and Imperial Japan had highly centralized, highly bureaucratized war industries that collapsed under their own weight (much as the Soviet Union did, 45 years later, at the end of the Cold War).

I interviewed Arthur Herman, by coincidence, on the anniversary of the D-Day invasion of Normandy. He summarized some of his findings:

Industrial goods needed by the military – airplanes, ships, weapons, and Jeeps – came about because, even before Pearl Harbor “the military learned it was best to let business and manufacturers handle it themselves,” and that production should be decentralized, Herman said.

“They learned that minimal control from Washington -- or even from the military services -- usually ended up getting products on time,” he explained, and “at a continually lower cost as well.”

That, he said, “was really the key ingredient in the whole wartime production effort,” the fact “that the manufacturers and producers found ways to constantly roll the costs down."

This became, he said, "a huge boon not just for the American military, really giving us the tools to win World War II," but also a "huge boon to American business and industry because they became leaner, more efficient operating organizations as a result of the wartime effort.”

When I commented that some of the real-life figures he profiled in his book reminded me of characters out of an Ayn Rand novel like The Fountainhead or Atlas Shrugged, he agreed.

“What Ayn Rand understood,” he said, “and one of the lessons that you get from her work, which is in some ways is reflected in this book, is that what the arsenal of democracy was really all about wasn’t ships and tanks and planes, any more than national wealth or an economy is about oil wells and gold mines and factories and industrial output or goods and services.”

Rather, he explained, “what it’s really about is creativity. It’s about the creativity of the human mind. It’s about vision. It’s about leadership and problem-solving.”

Throughout its history, he noted, American business has “been really at the forefront of all of those aspects. That’s what drives American business. That’s what drives American civilization.”

Herman told me that one of the surprising things he learned while doing research for Freedom's Forge was how many people on the home front sacrificed their lives to the war effort.

“The most interesting statistic, stunning statistic that came out of my research was that in 1942, as this war production effort is going on, the number of Americans killed or injured in war-related industries surpassed the number of Americans in uniform killed and wounded in action in the war by a factor of 20 to 1,” he said.

The civilian sector of “what we call the Greatest Generation were [not] just sitting at home or just comfortably handling jobs while people in uniform were out risking their lives at sea and on land and in the air,” he said.

To the contrary, he explained, war production was “incredibly dangerous work. It involved enormous sacrifice from lots of people, including business executives. One hundred eighty-nine General Motors senior executives died on the job during the war.”

Another thing that people might find surprising is that the industrial war effort began long before the Japanese attack on Pearl Harbor in December 1941.

In fact, “the war production effort was well underway well before Pearl Harbor,” Herman pointed out.

“As I explain in the book, it really began in the summer of 1940 when Roosevelt realized war is going to come” and that he had to get the country ready for it,” so FDR called “Bill Knudsen, president of General Motors, and says, how do I do it?”

With the system that Knudsen put in place, with Roosevelt’s blessing, Herman continued, “far from being caught off guard, we had gone from a standing start to a wartime production that was fast approaching that of Hitler’s Germany. A lot of people don’t realize that but this is in fact what American industry could do.”

That 18-month jump on the "official" start of the war gave both military and civilian leaders a good learning curve

“starting in the summer of 1940,” Herman said, and “what the military learned was it was best to let business and manufacturers handle it themselves.”

The War Department, he explained, and President Roosevelt himself “learned that minimal control from Washington or even from the military services usually ended up getting products on time -- getting the tanks and planes and ships built -- at a continually lower cost as well”

The “key ingredient” of wartime production, Herman said, “is that the manufacturers and producers found ways to constantly roll the costs down, so it was a huge boon not just for the American military, giving us the tools to win World War II, but it was also a huge boon to American business and industry because they became leaner, more efficient operating organizations as a result of the wartime effort.”

While it may be common knowledge that some of the biggest pieces of war equipment were manufactured at the Newport News shipyards and similar facilities on both coasts of the United States, some vital items were made in central Virginia -- even in Charlottesville factories.

One was Ix Mills, located where the Frank Ix building still stands south of downtown.

During the war, he said, Ix Mills “moved from making commercial textiles to making parachute cloth. They really became the center of the parachute cloth making for the Second World War.”

The soldiers “who jumped on D-Day” as portrayed in Stephen Spielberg’s film, Saving Private Ryan, as well as the “airmen who had to jump out over Germany and at sea during the Second World War were using Charlottesville-produced parachutes.”

The other Charlottesville company that Herman discovered during his research was Southern Welding, which “made various kinds of iron piping and steel tubing. During the war, they shifted to making the steel tubing for aircraft, to contain all the electric lines and so on in B-24s and B-25s. What they also did, and their real breakthrough, is they developed the parts for arrester gear on navy aircraft carriers.”

The arrester gear allowed planes to land on the carriers without being pulled apart by a braking mechanism.

“Southern Welding, here in Charlottesville, developed the parts and manufactured the parts that went on aircraft carriers all across the Pacific. In fact, at one point, Charlottesville-made arrester gear and tailhook gear was on 43 separate aircraft carriers during the Second World War.”

Freedom's Forge is a great read. Far from a dry recitation of economic facts, the book offers compelling character profiles of otherwise unknown leaders. It shows how personality conflicts can affect the course of history and demonstrates that free enterprise can be beneficial even when -- or especially when -- the country is at war, and that efforts to direct the economy from Washington are usually (if not always) counterproductive.

If you haven't yet read Arthur Herman's account of America's World War II industrial triumph, get a paperback copy now to take with you to the beach this summer. It's an entertaining page-turner of 20th century history.