Since the year 2000, the United States has lost over 5.5 million manufacturing jobs, nearly 50,000 manufacturing companies, and racked up an annual trade deficit with China of $273 billion in 2010, up from $83.8 billion in 2000. These escalating trade deficits with China have far-reaching effects, particularly on American workers. This article will examine the impact of free trade with China as documented in two of the annual reports submitted to Congress by the bi-partisan, 12 member U. S.-China Economic and Security Review Commission (USCC).

The 2007 report included a case study of the local impact of trade with China on North Carolina. The USCC report stated:

The accelerating decline in North Carolina's manufacturing employment is due in large measure to increasing competition from imports mostly from China... The combination of China's 2001 admission to the World Trade Organization (WTO), which gave it quota-free access to U.S. markets for its textile and clothing exports, and the subsequent U.S. grant of Most-Favored (Trading) Nation status that lowered most tariffs on Chinese imports, battered North Carolina's textile and apparel industries, and they never recovered.

China's top newspaper on Sunday warned that Asian exporters could be among the biggest victims of mounting U.S. economic woes after Standard and Poor's downgraded the United States' sovereign credit rating.

America’s Growing Trade Deficit Is Selling the Nation Out From Under Us. Here’s a Way to Fix the Problem—And We Need to Do It Now. By Warren Buffett (2003). I’M ABOUT TO DELIVER A WARNING regarding the U.S. trade deficit and also suggest a remedy for the problem. But first I need to mention two reasons you might want to be skeptical about what I say.

To begin, my forecasting record with respect to macroeconomics is far from inspiring. For example, over the past two decades I was excessively fearful of inflation.

More to the point at hand, I started way back in 1987 to publicly worry about our mounting trade deficits—and, as you know, we’ve not only survived but also thrived. So on the trade front, score at least one “wolf” for me.

Nevertheless, I am crying wolf again and FORTUNE NOVEMBER 10, 2003 this time backing it with Berkshire Hathaway’s money.

Through the spring of 2002, I had lived nearly 72 years without purchasing a foreign currency. Since then Berkshire has made significant investments in—and today holds—several currencies. I won’t give you particulars; in fact, it is largely irrelevant which currencies they are. What does matter is the underlying point: To hold other currencies
is to believe that the dollar will decline.

Both as an American and as an investor, I actually hope these commitments prove to be a mistake. Any profits Berkshire might make from currency trading would pale against the losses the company and our shareholders, in other aspects of their lives, would incur from a plunging dollar.

But as head of Berkshire Hathaway, I am in charge of investing its money in ways that make sense. And my reason for finally putting my money where my mouth has been so long is that our trade deficit has greatly worsened, to the point that our country’s “net worth,” so to speak, is now being transferred abroad at an alarming rate.

Not Only Debt Ceiling Deal But Worsening Trade Deficit Negative For US Growth. Numerous commentators have analysed the negative implications for US growth of the debt deal between President Obama and Republican leaders in the US Congress – this is considered below. But an aspect which should be integrated into analysis is that the drag on growth represented by the cuts in government spending in the debt deal will interact with another negative trend – the widening US trade deficit.

Mr. President: Skip the Bus Tour, Fix the Jobs Problem
Fox Business
The US trade deficit is now close to $600 billion annually, and oil and the deficit on trade with China account for nearly all of it. Simply, the US economy suffers from too little demand for what Americans make, and every dollar that goes abroad to ...

MEXICAN BANDITS INVADE TEXAS, MARFA WOMEN & CHILDREN FLEE

BEHIND THE TALIBAN LINES..WESTERN JOURNALIST GETS ACCESS..VIDEO..WOW!

IS IT MIND CONTROL OR POLITICAL ADVERTISING

Newspaper Article PDF with American Budget in Year 1794

So how much in today's dollars would George Washington have been banking? George Made 25 grand a year in 1794.

In 2010, the relative worth of $25,000.00 from 1794 is:

$512,000.00 using the Consumer Price Index
$496,000.00 using the GDP deflator
$9,320,000.00 using the unskilled wage
$21,600,000.00 using the Production Worker Compensation
$16,800,000.00 using the nominal GDP per capita
$1,170,000,000.00 using the relative share of GDP

How Much In Today's Dollars was That Worth Back Then Calculator

THE HERITAGE FOUNDATION....THE BEGINNIGS OF AMERICAN CONSERVATISM

Study: Remaking the Political Landscape & The Impact of Illegal Immigration and The Future of The GOP

Father of American Conservatism Says The Far Right Are Actually Not Conservative

DID YOU KNOW

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REPUBLICANISM

John Adams wrote Otis Warren in 1776, he agreed with the Greeks and the Romans, that, "Public Virtue cannot exist without private, and public Virtue is the only Foundation of Republics." Adams insisted, "There must be a positive Passion for the public good, the public Interest, Honour, Power, and Glory, established in the Minds of the People, or there can be no Republican Government, nor any real Liberty.

And this public Passion must be Superior to all private Passions. Men must be ready, they must pride themselves, and be happy to sacrifice their private Pleasures, Passions, and Interests, nay their private Friendships and dearest connections, when they Stand in Competition with the Rights of society."

Adams worried that a businessman might have financial interests that conflicted with republican duty; indeed, he was especially suspicious of banks.

WHAT THE HELL ARE VIRTUES ANYWAY?

Lets tax Chinese imports for 5 to 7 years and take the billions we collect and turn them into entrepreneur grants in the amount of $250,000 each.

The strength of our economy is individual ambition, good ideas, solid advice and lastly is the funding.

Think of the innovation that has been created in the US economy with a good idea, 250 grand and the right mentor.

Create $250,000 entrepreneur grants and give participating mentors access to a venture capital network willing to work with the program.

Here is how it works.

We The People, It is our money why can't we choose who gets it?

It is not the government or a banker who decides if an applicant is worthy of the grant it is a citizen who decides.

Each citizen decider/volunteer/mentor has to be a proven business success (a multi-millionaire) and committed to working with 2 grant applications/business plans/entrepreneurs during a calendar year plus be willing to mentor the recipients and work with venture capitalists.

The payoff for the mentor is a tax deduction that is residual.

The tax deductions take effect and the percentage increases with each of the chosen applicant successes (they can pick a couple every year if the program is extended).

Success is determined by a winning applicants hiring of a minimum of 4 employees the first year and keeping them employed for 365 days in the following year after their approval (it is a two year plan).

If the approved applicant continues to succeed in the future years the "mentor" gets a tax break for those years as well and the more his choices succeed the smaller his annual tax liability.

The well screened and pre-approved "mentors" (they have to apply to be a mentor) sign contracts not to steal ideas and can then scan through the web-based business plans database and choose the applicants/business plans they think have a real shot at success.

Access to the venture capitalist database is for the mentors only.

Millions of entrepreneurs could post their plans online and have a shot at not only 250 grand but also a top gun mentor with something to gain from their success.

Even if the mentors game the system for tax deductions by assisting the winning applicants with funding or creating companies the American people still win and hundreds of thousands of jobs and businesses are created.

If the business goes bust and the money is lost, so what it was spent here. losing the money here is a better than giving it to the Chinese. We enrich our country not China.

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Words of Wisdom from Ronald Reagan

“It is time for us to realize that we’re too great a nation to limit ourselves to small dreams. We’re not, as some would have us believe, doomed to an inevitable decline. I do not believe in a fate that will fall on us no matter what we do. I do believe in a fate that will fall on us if we do nothing.
So, with all the creative energy at our command, let us begin an era of national renewal. Let us renew our determination, our courage, and our strength. And let us renew our faith and our hope. We have every right to dream heroic dreams. Those who say that we’re in a time when there are no heroes, they just don’t know where to look.”……….

Ronald Reagan……….
At the beginning of the 80′s Harley-davidson was in financial distress with about 4% of the market it dominated in the 70′s. In 1981, Harley was in 5th position for market share behind Honda (38%), Yamaha (25%), Kawasaki (16%), and Suzuki (14%). At the request of Harley-Davidson (the same request was denied a few years before) and to protect the last remaining US motorcycle manufacturer against Japanese imports, the Ronald Reagan administration accepted to impose “Safeguards” by which imported motorcycles were “tariffed” and heavily taxed for the years 1983 to 1988 (starting at 49.4% the 1st year to 14.4% the last year).

From the CATO Institute January 12, 1984
Taking America for a Ride:
The Politics of Motorcycle Tariffs

It would be nearly impossible to conjure a scenario in which the concentrated, temporary benefits to a specific industry receiving protection were not overwhelmed by the costs of that protection on the broader economy….. (Same argument you give and it is over quarter century later and the economy boomed after the tariff.)

A matter that further obscures the motivations for the action is that even with the tariff hike there is a good chance that Harley-Davidson will fold…. (WRONG)

According to the economic analysis and estimation that have been done on the Harley-Davidson case, the new tariff will unambiguously prove to be a setback for the American economy….. (Reagan boom years followed)

Reagan was surely aware of the economic consequences of the tariff, yet he may well have felt that in the long run his decision was best for our “national economic interest.”….. (CORRECT)

After the American motorcycle industry has the advantage of the protection of a tariff for five years, it is likely that additional protection will be demanded….. (Harley demanded the tariff be dropped early)

Kawasaki’s main response to the tariff has been to shift more of its assembly activities to its U.S. plant in order to escape the duty…………..(GOOD FOR THE HOMELAND)

Tariff sucess #2 Obama’s Tire Tariff

Alliance for American Manufacturing September 1, 2010
Obama’s Bold Economic Move on Chinese Tire Imports is Paying Off

With the approaching one-year anniversary of President Obama’s decision to provide relief on imports of Certain Passenger Vehicle and Light Truck Tires from China, under Section 421 of the trade law, it is appropriate to look at the impact his actions have had on the domestic industry and its employees. After a finding by the U.S. International Trade Commission that the statutory requirements for an affirmative decision were met and a recommendation for three years of import relief was made, the Obama Administration determined to provide three years of relief to the affected workers, firms, and their communities who had been injured from a flood of Chinese tires.

★ capacity declined from 226.8 million tires to 186.4 million tires during 2004-2008
★ production declined from 218.4 million tires to 160.3 million tires during 2004-2008
★ capacity utilization declined from 96.3% to 86.0% during 2004-2008
★ U.S. producer commercial U.S. shipments declined from 194.7 million tires to 136.8 million tires during 2004-2008
★ employment data on number of production workers, hours worked, wages all declined substantially between 2004 and 2008
★ financial performance deteriorated between 2004 and 2008, e.g., operating income from $256.2 million to an operating loss of $262.8 million in 2008 (July 2009)

In June of 2009 the ITC voted 4-2 that the surge of imports of the subject tires was causing domestic market disruption and recommended that the President impose a series of tariffs

There can be no doubt that the relief authorized by the President has resulted in the reversal in the massive decline in domestic production. This is clearly reflected in press accounts and what the USW has seen at various domestic plants. According to the USW, in the 1st half of 2010 Goodyear Tire saw sharp increases in domestic sales volume of subject tires such as the Kelly brand. Goodyear conference calls on the fourth quarter of 2009 and the first two quarters of 2010 show sales (in units) stopped declining in the 4th quarter (16.9 million units (all tires) vs. 16.9 million in the prior year), to grow 9.2% in units in the 1st quarter of 2010 and 13.1% in the second quarter.

The improved volume also reflected improved net sales in dollars and improved profitability. It is believed that this is due to end use customers choosing a domestic brand over imported tires because 421 enforcement has caused the price discrepancy between American and Chinese produced tires to shrink and the disruption to the pricing in the market has abated.

Similarly, Cooper Tires showed its net sales in North America in the 2nd quarter of 2010 having increased (in dollars) by 35% from the prior year.
When comparing the periods before and after the 421 relief taking effect, one can see that U.S. rubber workers are starting to see a benefit in hours worked and increased hiring.

When comparing the periods before and after the 421 relief taking effect, one can see that U.S. rubber workers are starting to see a benefit in hours worked and increased hiring.

Effect on U.S. Workers Making Subject Tires
A recent article in Modern Tire Dealer quoted CEO of Cooper Tire & Rubber Company, Roy Armes, discussing growing tire demand and potential opportunities to add production capacity. “All of our plants are running at extremely high capacity utilization rates”…”Right now we’re doing everything we can to get our capacity up, so that doesn’t become a constraint for us.”

According to local USW sources, Goodyear plants producing 421 subject tires have hired 130 new hires in 2010 and are working an average of 20% overtime. Additionally, Michelin plants also manufacturing subject tires under the brands BF Goodrich and Uniroyal are working 7 days a week at around 15% overtime and have brought on 115 new production workers since the beginning of 2010. The story is the same at Cooper Tire & Rubber in Findlay, OH where 100 new hourly employees have been hired as well as additional salaried workers. Since the relief went into effect the operation has returned to a 7-day work schedule and mold utilizations have increased significantly driving an estimated 20% production increase at the facility. Findlay is also running hiring ads for maintenance workers and production employees.

The changes at Findlay took place almost immediately after the 421 announcement and have proven to be an important boost for the plant. At another Cooper Tire plant in Texarkana there have been 250 new hourly hires since the relief went into effect. The plant’s operations are running 7 days a week and the USW estimates that production is up approximately 20% as well.

U.S.-Korea trade deal is bad for both countries. There is some rosy fantasy that the pending U.S.-Korea Free Trade Agreement will create tens of thousands of well-paying jobs in both countries and strengthen and expand the U.S. relationship with Korea. This is a fabrication of multinational corporations that have no allegiance to either country. As a member of the Korean National Assembly, I would like to set the record straight: In reality, the deal is lose-lose.

China Aims to Become Solar Powerhouse with New Subsidies. China is already the world’s biggest solar panel manufacturer, but now it is making a move to become a major solar energy consumer as well, with a nationwide feed-in tariff to pay people or businesses a subsidy for electricity they produce with solar panels. This follows on the heels of the country’s wind energy feed-in tariff in 2009, which led to explosive growth in their wind industr

NEOLIBERAL THINKING IS....- "In fact, the U.S. trade deficit drives a lot of global growth."

THE REPUBLICAN COMPLIER NEWSPAPER FROM 1830 -1841

Muslim Mystics Will Bring Peace to The Islamic World

IS THE ESTATE TAX REALLY UN-AMERICAN?

THE PRESIDENT SPEAKS ON RELIGIOUS FREEDOM

IT'S THE COMMUNISTS STUPID!

THE BEST DAMNED MARKETING SCHEME EVER!

Lost in the flood of Ronald Reagan retrospectives and testimonials is a crucial fact with special relevance for all Americans today: To a great extent, Ronald Reagan was a trade realist.  
 
When major American industries were on the ropes, a combination of national security fears, electoral concerns, and outrage at inequitable, illegal competition prompted Reagan to act, and American manufacturing was unquestionably the stronger for it. Tragically, this is a crucial aspect of his legacy that all three of Reagan's White House successors have rejected, frittering away American manufacturing and jobs in one ill-advised free trade agreement after another.   
 
The conventional wisdom about Reagan as free enterprise, free market champion is largely true. But on trade policy, Reagan acted decisively in five instances to save major American industries from predatory foreign competition. Moreover, the temporary import relief succeeded spectacularly, resulting in improved performance by these industries and avoiding the captive market prices that conventional economics teaches will always flow from restricting foreign competition.  
 
Reagan's tactics were flexible. In autos, machine tools, and steel, his administration subjected foreign producers to so-called voluntary export restraints. In semiconductors, Reagan officials negotiated an agreement to secure a specific share of the Japanese market for U.S. companies, and then imposed tariffs on Japanese electronics imports when Tokyo briefly refused to keep a promise to halt semiconductor dumping.  
 
Reagan's trade policies were far from perfect but he was not a demagogue as all GOP'ers and most Dems are today when it comes to trade.

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Men Survive Over a Year in Antarctic After Ship Frozen in Ice

THE CIA FACT BOOK

Was Thomas Jefferson an Asshole or was he just playing politics?

What exactly is an evil person?

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As we peer into society’s future, we — you and I, and our government — must avoid the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.  
 
Dwight D. Eisenhower

The manufactures/corporations may be making money but the American people have lost since the free trade evangelists hijacked our economy.

The average family income in 1989 was $28,910

In 2009, the relative worth of $28,910.00 from 1989 is: $52,300.00 using the unskilled wage, $54,000.00 using the Production Worker Compensation

Today the median household income in the United States is $49,777 USD (2009) which was about $25,800 back in 1989.

In 2009, the relative worth of $25,800.00 from 1989 = $49,700.00 divided by 12 = $4141 per month.

So taking The average family income in 1989 of $28,910 and calculating that to today’s money you get $54,000.00 which means the average family income has dropped $4223

The number of households in the United States is projected to be 115 million in 2010

That is…….115 million households times $4223 less in annual income = four hundred eighty-five billion six hundred forty-five million a year in lost revenue!!!

Multiply an average of say $250 billion a year over 20 years and you get 5 trillion dollars! 250 billion times 20 = 5.0 × 1012

Free Trade bringing wealth to the people is not factually accurate and the decline in family income proves it.

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The republican ideal of civic duty was succinctly expressed in 1961 by the Democrat John F. Kennedy: "Ask not what your country can do for you, ask what you can do for your country."

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Eisenhower Republicanism: Pursuing the Middle Way
Stephen Wagner, Ph.D.
Northern Illinois University Press

In 1952 a recent Joplin (Mo.) High School graduate enrolled at what is now Pittsburg State University went downtown to check out the environment. He found, at about Fourth and Broadway in Pittsburg, a curious political installation. The front door was labeled “Republican Headquarters.” The side door’s sign read “Citizens for Eisenhower.” Finally, the optimistic student thought, a place where all could enter, where liberal-conservative, Republican-Democrat tags would be less important than the fact a good leader, proven in battles of another sort, could bring the nation together and move it forward in a middle of the road approach.

The above may only be a parenthetical example, but would this young idealist have been right?

Well, not entirely, Steven Wagner, a Missouri Southern State University associate professor of history, says in his book, Eisenhower Republicanism: Pursuing the Middle Way.

Sounds of the first Eisenhower campaign can still be heard 54 years later. The labels, the partisanship—and issues like agriculture policy, civil rights, Social Security, defense and education progress—are very much with us. The Middle Way is hard to achieve; Ike tried. But he predicted that no great leaders would follow who shared his spot on the road, where a centrist is constantly in danger of being hit from both sides.
Wagner’s book is a tightly written thread which continues to weave its way through American culture today. Unlike pompous, one-sided talk-show hosts who are overweight in many ways, the volume is a thin, targeted look at issues and the man. Many, whether they were Republicans or Democrats, would see it as a fair assessment of Eisenhower’s attempts to tackle the tough issues of his time through compromise—a philosophy which often seems foreign today.

The general, courted by both the GOP and Democrats because of his popularity, sought a more active role for the federal government in many areas, even the decidedly un-Republican expansion of several New Deal programs. Harry Truman offered to endorse Ike for the Democratic nomination to succeed him, but Eisenhower ultimately chose Republicanism. He believed he could create lasting change in the way the party and the people approached problems. Wagner believes that the skilled military strategist did not, however, succeed in recruiting enough troops in Congress or elsewhere to create a lasting legacy.

Ike was no weakling, Wagner says, and his approach bore some resemblance to that of another, earlier, unconventional president. But the man could not find, or his party did not want, the right human receptacles to sustain his philosophies.
As the Missouri Southern author puts it, “In American political culture those who describe themselves as ‘middle of the road’ are often portrayed as unwilling to take a stand or lacking in political sophistication. This was not the case with Eisenhower. The ‘middle way’ was a carefully considered political philosophy similar to Theodore Roosevelt’s cautious progressivism.” If rational men do not undertake to lead societal change, Roosevelt and Eisenhower reasoned, then the “lunatic fringe” would take over.

Ike was constantly fighting various wings of his party and used a young man named Richard Nixon as his vice president and go-between with the “right-wing” conservative zealots … although his later endorsement of Nixon as a successor was a rather timid one. The guy was just not mature enough, Eisenhower told others.

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TIMES, PULASKI, VA., Sunday, February 22, 1976

Philosophy For Our Time

Professor Irving Kristol of -New York University
has emerged an articulate spokesman in America
for a philosophy geared to the needs of our time.
Kristol, whose prolific writings regularly appear in
such publications as the Wall Street Journal, recently
resigned himself to the "neo-conservative" label
pinned on him by leading U.S. publications. In the
Jan. 19 issue of Newsweek, he seeks to define what
that means. From the article:
"In general, it(neo-conservatism) approves of
those social reforms that, while providing needed
security and comfort to the individual in our
dynamic, urbanized society, do so_with a minimum of
bureaucratic intrusion in the individual's affairs
Such reforms would include, of course, social
seturity, unemployment insurance, some form of
national health insurance, some kind of familyassistance
plan, ttc. In contrast, it is skeptical of
those social programs that create vast and energetic
bureaucracies to 'solve social problems.'"
"Neo-conservatism tends to be respectful of
traditional values and institutions: religion, the
family, the 'high culture' of Western civilization. If
there is any one thing that neo-conservatives are unanimous about, it is their dislike of the .'counterculture'
that has played so remarkable a role in American life over these past 15 years....Values
emerge out of the experience of generations and
represent the accumulated wisdom of these
generations; they simply cannot be got out of rap
sessions about 'identity' or 'authenticity.'"
"Neo-conservatism affirms the traditional
American idea of equality, but rejects
egalitarianism—the equality of condition for all
citizens—as a proper goal for government to pursue...
the encouragement of equality of opportunity is
always a proper concern of democratic government.
But is it a dangerous sophistry to insist that there Is
no true equality of opportunity unless and until
everyone ends up with equal shares of everything."
"In foreign policy, neo-conservatism believes that
American democracy is not likely to survive for long
in a world that is overwhelmingly hostile to American values "

As Kristol notes in the Newsweek article, this
philosophy may well be called "neo-liberal" tomorrow. Whatever it's labeled, we like it.

Every $1 billion of trade deficit costs America from 10-20,000 jobs -- let's say 15,000 for the sake of this argument. Thus, at $500 billion and rising, the trade deficit costs America about 7.5 million jobs. Okay, a lot of the trade deficit is the result of oil imports that don't really reduce U.S. jobs. So let's cut the number in half and say the trade induced job loss is 3.75 million jobs. That's still a lot of jobs.

What could the United States do to get those jobs back or to replace them with other jobs? The answer is that the United States is a highly competitive location for production and provision of most tradable goods and services. In a truly free market global environment the U.S. trade deficit would tend to be far smaller than it presently is. But the global environment is not anywhere near being a free market/free trade environment, and if America is to do the obvious and create jobs by reducing its trade deficit, it must have an export led growth strategy similar to those of China, Germany, South Korea, and other highly competitive economies.

Such strategies entail raising taxes on consumption -- so called Value Added Taxes (VATs) - while cutting them on saving and investment. They mean preventing dollar over-valuation -- if need be by taking measures to counter the illegal interventions of some countries that use currency undervaluation as a subsidy for exports. They also mean aggressive use of financial investment incentives to attract investment in the production/provision of tradable goods and services to the United States and to offset the impact of such incentive offers from other countries. They also entail serious thinking about what industries can be competitive from an American base and a comprehensive approach to creating a regulatory environment that maximizes their competitiveness.

None of this is rocket science. Germany, Sweden, the Netherlands, South Korea, China, Singapore, and other countries are already doing it very successfully. How to find a way for America to do it as well and to create the good jobs of the future here must become the focus of both parties as we move toward the next presidential election year.

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cheap labor is indeed a big part of the equation just like the free traders of today. without cheap labor the whole free trade masquerade would be nothing but a blatantly stupid idea.

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Here is something from the denver post 4/17/2011

How the South finally won

The sesquicentennial commemoration of the American Civil War began last week with the 150th anniversary of the Confederate attack on Fort Sumter in South Carolina, and the observations will continue for the next four years through the defeat of the Confederacy as its generals surrendered to Union commanders in 1865.

But one might make the argument that if you take the long view, the Confederacy actually triumphed. We can start with the Republican Party, founded in 1854 to oppose the Dixie way of life, but now a reflection of Southern attitudes. In capturing the Republican Party, the political descendants of the Confederates are accomplishing through politics what their ideological ancestors failed to accomplish on the battlefield.

To be sure, chattel slavery has long been abolished in this nation. But you could consider slavery a form of cheap labor with no legal protections for the laborers. Now consider the GOP current efforts to bust unions, cut wages and benefits, and reduce workplace safety regulations.
In other words, one essence of the antebellum South’s economic system is becoming part of the national economic system.

Lincoln and the Republicans of 1861 supported protective tariffs, not just to help finance the federal government, but also to support domestic industry and raise wages. The South supported free trade — South Carolina’s first secession threat came in 1832 in opposition to “the tariff of abominations” — and today’s GOP is a big supporter of free trade.

The Old South also opposed federal spending on “internal improvements” — canals, railroads, turnpikes and the like — in the first part of the 19th century. That is, investment in national infrastructure, and where does the anti-investment rhetoric come from today if not the GOP?

Nor was the South big on spending for education. Southern senators and representatives blocked early efforts to establish state land-grant colleges. As for the local common schools, the illiteracy rate in Dixie, even among whites, was much higher than in the North, which supported public education. The Southern heritage of poorly funding public education is now a national Republican policy, which also involves taking money from the public coffers to support private religious schools.

Add all this up, and there’s a strong argument that the Confederacy actually won the Civil War — not by force of arms, but by taking over the political party that had once been dedicated to its destruction.

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tell me what is wrong with the american school of of economicseconomics?

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all demagoguery aside, i know that is virtually impossible to do for free traders but try it and explain to me after reading the clip below what is wrong with the american system. i just don’t get the logic of the denial so enlighten me….. what is wrong with the american system?

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The American School, also known as “National System”, represents three different yet related constructs in politics, policy and philosophy. It was the American policy for the 1860s to the 1940s, waxing and waning in actual degrees and details of implementation. Historian Michael Lind describes it as a coherent applied economic philosophy with logical and conceptual relationships with other economic ideas.

It is the macroeconomic philosophy that dominated United States national policies from the time of the American Civil War until the mid-twentieth century. It consisted of these three core policies:
protecting industry through selective high tariffs (especially 1861–1932) and some include through subsidies (especially 1932–70)

government investments in infrastructure creating targeted internal improvements (especially in transportation)

a national bank with policies that promote the growth of productive enterprises rather than speculation.

It is a capitalist economic school based on the Hamiltonian economic program. The American School of capitalism was intended to allow the United States to become economically independent and nationally self-sufficient.

The American School’s key elements were promoted by John Q. Adams and his National Republican Party, Henry Clay and the Whig Party, and Abraham Lincoln through the early Republican Party which embraced, implemented, and maintained this economic system.

During its American System period the United States grew into the largest economy in the world with the highest standard of living, surpassing the British Empire by the 1880s……..

Don’t use the Hoover propaganda that says the great depression came from protectionism, that is easily shot down in the progressives own words….

**Northern Progressives sought free trade to undermine the power base of Republicans** – Woodrow Wilson would admit as much in a speech to Congress. A brief resurgence by Republicans in the 1920s was disastrous for them. Woodrow Wilson’s ideological understudy, Franklin Roosevelt, would essentially blame the Great Depression upon the protectionist policies exemplified by the previous Republican President, Herbert Hoover……….

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the last i checked it was we the people not we the corporations…. you need a better answer

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Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains.”
Thomas Jefferson

the corporation as a person is an evolution via the 14th amendment that corporations used to become people. ……..

Morton Mintz pointed out in the National Law Journal in an 1888 case that ignored the fact that “the only ‘person’ Congress had in mind when it adopted the 14th Amendment in 1866 was the newly freed slave.”

Justice Black observed in the 1930s that in the first fifty years following the adoption of the 14th Amendment, “less than one-half of 1 percent of Supreme Court cases invoked it in protection of the Negro race, and more than 50 percent asked that its benefits be extended to corporations.”

****you see how the justice black point matches the confederate/classical liberals idea of their making profits on labor exploitation and cheap imports without government interference or regard to the workers or the country as a whole…………****

In the beginning, if you wanted to form a corporation you needed a state charter and had to prove it was in the public interest, convenience and necessity.

Jefferson to the end opposed liberal grants of corporate charters and argued that states should be allowed to intervene in corporate matters or take back a charter if necessary.

It wasn’t until after the Civil War that economic conditions turned sharply in favor of the large corporation.

. . .*** The corporation killed the republican theory of the distribution of wealth and probably ended whatever was left of the political theory of republicanism as well***. . . .

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soo the point is the people should come before the corporation and that means protectionism. that at least was the original idea…….

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MILTON FRIEDMAN

Interview
On freedom and free markets:

INTERVIEWER: Why are free markets and freedom inseparable?

MILTON FRIEDMAN: Freedom requires individuals to be free to use their own resources in their own way, and modern society requires cooperation among a large number of people. The question is, how can you have cooperation without coercion? If you have a central direction you inevitably have coercion. The only way that has ever been discovered to have a lot of people cooperate together voluntarily is through the free market. And that's why it's so essential to preserving individual freedom.

INTERVIEWER: Marxists say that property is theft. Why, in your view, is private property so central to freedom?

MILTON FRIEDMAN: Because the only way in which you can be free to bring your knowledge to bear in your particular way is by controlling your property. If you don't control your property, if somebody else controls it, they're going to decide what to do with it, and you have no possibility of exercising influence on it.

The interesting thing is that there's a lot of knowledge in this society, but, as Friedrich Hayek emphasized so strongly, that knowledge is divided. I have some knowledge; you have some knowledge; he has some knowledge. How do we bring these scattered bits of knowledge back together? And how do we make it in the self-interest of individuals to use that knowledge efficiently?

The key to that is private property, because if it belongs to me, you know, there's an obvious fact. Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own.

So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.

Free markets, black markets and the law.

INTERVIEWER: Tell me why you can see the black market as a positive thing?

MILTON FRIEDMAN: Well, the black market was a way of getting around government controls. It was a way of enabling the free market to work. It was a way of opening up, enabling people. You want to trade with me, and the law won't let you. But that trade will be mutually beneficial to both of us. The most important single central fact about a free market is that no exchange takes place unless both parties benefit. The big difference between government coercion and private markets is that government can use coercion to make an exchange in which A benefits and B loses. But in the market, if A and B come to a voluntary agreement, it's because both of them are better off. And that's what the black market does, is to get around these artificial government restrictions.

Now, obviously you'd like a world in which you obey the law. The fact that the black market involves breaking the law is something against it. It's an undesirable feature. But this only exists when there are bad laws. And nobody, nobody believes that obeying every law is an ultimate moral principle. There comes a point, if you look back at the history of law obedience -- think of conscientious objection during wars -- I think you will see that everybody agrees that there is a point at which there is a higher law than the legislative law.

On Friedrich Hayek

INTERVIEWER: Do you remember reading Hayek's Road to Serfdom? Did that have an impact on you?

MILTON FRIEDMAN: Yes, it certainly did have an impact. It was a very clear, definite statement of certain fundamental ideas. It was a passionate plea by a passionate man, and so it was very well written, and for those of us who were concerned about these kinds of issues, I think it had a tremendous impact.

In fact, I've often gone around and asked people what determined their views. I've asked people who were in favor of free markets and free enterprise, who formerly had been of a different view, what caused them to change their mind.

I'm talking particularly not about economists, not about professionals, but generally ordinary people, most of whom had been socialist or in favor of government control at one time and had come over to free markets. And two names have come up over and over again: Hayek on the one hand, The Road to Serfdom from Hayek, and Ayn Rand on the other, Atlas Shrugged and her other books.

INTERVIEWER: You were invited to Friederich Hayek's first Mont Pelerin meeting in 1947. Why?

MILTON FRIEDMAN: Well, I was invited primarily because of my brother-in-law, Aaron Director. He was an economist teaching [at] the University of Chicago, and when Hayek's Road to Serfdom was submitted to American publishers, one publisher after another rejected it. He was finally published by the University of Chicago Press, partly because of Aaron Director's intervention. He wasn't at Chicago at the time, he was in Washington, but he knew the director of the press, and he also was very close to Frank Knight, who was a professor at Chicago. And so Aaron had a considerable role in getting The Road to Serfdom published.

Also, he had studied at the London School of Economics and had met Hayek [there] before. One of the people whom Hayek was in touch with when he was exploring the possibilities of having the Mont Pelerin meeting was there. And so Aaron organized a group from the University of Chicago. There was myself, there was George Stigler, there was Frank Knight, and there was Aaron Director.

INTERVIEWER: What kind of people gathered at Mont Pelerin, and what was the point of the meeting?

MILTON FRIEDMAN: The point of the meeting was very clear. It was Hayek's belief, and the belief of other people who joined him there, that freedom was in serious danger. During the war, every country had relied heavily on government to organize the economy, to shift all production toward armaments and military purposes.

And you came out of the war with the widespread belief that the war had demonstrated that central planning would work. It reinforced the lesson that had earlier been driven home, supposedly, by Russia. The left in particular, or the intellectuals in general in Britain and the United States, in France, wherever, had interpreted Russia as a successful experiment in central planning. And so there were strong movements everywhere. In Britain a socialist [Clement Attlee] had won the election. In France there was indicative planning that was [in] development. And so everywhere, Hayek and others felt that freedom was very much imperiled, that the world was turning toward planning and that somehow we had to develop an intellectual current that would offset that movement. This was the theme of The Road to Serfdom.

Essentially, the Mont Pelerin Society was an attempt to offset The Road to Serfdom, to start a movement, a road to freedom as it were.

Now, who were the people who were there? There were economists, historians, mostly economists and historians, but a few journalists and businessmen, people who, despite the general intellectual current moving towards socialism, had retained the belief in free markets and in political and economic freedom. They were those people whom Hayek happened to know, or whom he had met, whom he had run into in the course of his travels.

INTERVIEWER: Now what was Hayek's role at these meetings and what was he like personally? This must have been the first time you met him.

MILTON FRIEDMAN: No, I had met him before that. I had met him in Chicago when he was in the United States lecturing on The Road to Serfdom. Hayek's role? Number one, he was responsible for the meeting. He organized it. He selected the people who were going to be there.

He helped to line up some of the money that was used to finance it, though a considerable part of that came from a Swiss source. That's why it was held in Switzerland.

So far as his role at the meetings was concerned, he gave a talk at the opening session which set out what he had in mind. Along with several other people, he set up the agenda and presided over some of the sessions, participated in the debates, and was a very effective participant from beginning to end.

INTERVIEWER: Some of those debates became very, very heated. I think [Ludwig] von Mises once stormed out.

MILTON FRIEDMAN: Oh, yes, he did. Yes, in the middle of a debate on the subject of distribution of income, in which you had people who you would hardly call socialist or egalitarian -- people like Lionel Robbins, like George Stigler, like Frank Knight, like myself -- Mises got up and said, "You're all a bunch of socialists," and walked right out of the room. (laughs) But Mises was a person of very strong views and rather intolerant about any differences of opinion.

INTERVIEWER: What was Hayek's personal style? What was he like personally?

MILTON FRIEDMAN Oh, personally Hayek was a lovely man, a pure intellectual. He was seriously interested in the truth and in understanding. He differed very much in this way from Mises. There was none of that same kind of manner. He accepted disagreement and wanted to argue, wanted to reason about it and discuss it. He was a very cultured and delightful companion on any occasion. ... I must say, he undoubtedly was the dominant figure in all of the Mont Pelerin meetings for many, many years.

On John Maynard Keynes

INTERVIEWER: What impact did John Maynard Keynes have on you?

MILTON FRIEDMAN: Well, I read his book, of course, The General Theory of Employment, Interest, and Money, as everybody else did. I may say I had earlier read a good deal of Keynes. In fact, in my opinion, one of the best books he wrote was published in 1924 I believe, A Tract on Monetary Reform, which I think is really, in the long run, fundamentally better than The General Theory, which came much later. And so I was exposed to Keynes as a graduate student, and his General Theory was in the air. Everybody was talking about it. It was part of the general atmosphere.

It was when I went back and looked at some memos that I had written while I was working at the Treasury that I discovered how much more Keynesian I was than I thought. (amused)

So what was his influence on me? It was, as on everybody else, to emphasize fiscal policy as opposed to monetary policy, and in particular to pay relatively little attention to the quantity of money as opposed to the interest rate.

INTERVIEWER: On a personal level, what contact did you have with him?

MILTON FRIEDMAN: With Keynes? The only contact I had with him was to submit an article to the Economic Journal which he was editor of, which he refused and rejected. I had no personal contact with him other than that.

INTERVIEWER: What did the rejection say?

MILTON FRIEDMAN: Well, it was an article which was critical of something that A.C. Pigou, a professor in London and at Cambridge, had written. And Keynes wrote back that he had shown my article to Pigou. Pigou did not agree with the criticism, and so he had decided to reject it. The article was subsequently published by the Quarterly Journal of Economics, and Pigou wrote a rejoinder to it.

INTERVIEWER: When did you begin to break with Keynes and why? What were the first doubts you had?

MILTON FRIEDMAN: Very shortly after the war, when I came to the University of Chicago and started working on money and its relation to the economic cycle. I cannot tell you exactly when, but very shortly thereafter, as I studied the facts, they seemed to me to contradict what Keynesian theory would call for.

INTERVIEWER: What was it that you studied that made you begin to feel that this didn't add up?

MILTON FRIEDMAN: Let me emphasize [that] I think Keynes was a great economist. I think his particular theory in The General Theory of Employment, Interest, and Money is a fascinating theory. It's a right kind of a theory. It's one which says a lot by using only a little. So it's a theory that has great potentiality.

And you know, in all of science, progress comes through people proposing hypotheses which are subject to test and rejected and replaced by better hypotheses. And Keynes's theory, in my opinion, was one of those very productive hypotheses -- a very ingenious one, a very intelligent one. It just turned out to be incompatible with the facts when it was put to the test. So I'm not criticizing Keynes. I am a great admirer of Keynes as an economist, much more than on the political level. On the political level, that's a different question, but as an economist, he was brilliant and one of the great economists.

Now, the crucial issue is, which is more important in determining the short-run course of the economy? What happens to investment on the one hand, or what happens to the quantity of money on the other hand? What happens to fiscal policy on the one hand, or what happens to monetary policy on the other hand?

And the facts that led me to believe that his hypothesis was not correct was that again and again it turned out that what happened to the quantity of money was far more important than what was happening to investments.

The essential difference between the Keynesian theory and the pre-Keynesian, or the monetarist theory, as it was developed, is whether what's important to understanding the short-run movements of the economy is the relation between the flow of investments -- the amount of money being spent on new investments, on the one hand, or the flow of money, the quantity of money in the economy and what's happening to it.

By the quantity of money I just mean the cash that people count, carry around in their pockets and the deposits that they have in banks on which they can write checks. That's the quantity of money. And the quantity of money is controlled by monetary policy.

On the investment side, the flow of investment is controlled by private individuals, but is also affected by fiscal policy, by government taxing and government spending.

The essential Keynesian argument, the basic Keynesian argument, was that the way to affect what happened to the economy as a whole, not to a particular part of it, but to the level of income, of employment and so on, was through fiscal policy, through changing government taxes and spending.

The argument from the monetarists' side was that what was more important was what was happening to the quantity of money, monetary policy on that side. And so, as I examined the facts about these phenomena, it more and more became clear that what was important was the flow of money as compared to the flow of government spending, and when fiscal policy and monetary policy went in the same direction, you couldn't tell which was more important. But if you looked at those periods when fiscal policy went in one direction and monetary policy went in another direction, invariably it was what happened to monetary policy that determined matters.

The public event that changed the opinion of the profession and of people at large was the stagflation of the 1970s, because under the Keynesian view, that was a period in which you had a very expansive fiscal policy, in which you should have had a great expansion in the economy. Instead you had two things at the same time, which under the Keynesian view would have been impossible: You had stagnation in the economy, a high level of unemployment. You had inflation with prices rising rapidly. We had predicted in advance that that would be what happened, and when it happened, it was very effective in leading people to believe that maybe there was something to what before had been regarded as utter nonsense.

INTERVIEWER: Was stagflation the end for Keynesianism?

MILTON FRIEDMAN: Stagflation was the end of naive Keynesianism. Now, obviously the term "Keynesian" can mean anything you want it to mean, and so you have new Keynesianism, but this particular feature was put to an end by the stagflation episode.

INTERVIEWER: Talking about Keynesian policies, John Kenneth Galbraith, when we talked to him a few days ago, said that World War II "affirmed Keynes and his policies." Do you agree?

MILTON FRIEDMAN: No, I don't agree at all. World War II affirmed what everybody knew for a long time. If you print enough money and spend it you can create an appearance of activity and prosperity. That's what it confirmed. It did not confirm his theories about how you preserve full employment over a long time.

The Great Depression

INTERVIEWER: You've written that what really caused the Depression was mistakes by the government. Looking back now, what in your view was the actual cause?

MILTON FRIEDMAN: Well, we have to distinguish between the recession of 1929, the early stages, and the conversion of that recession into a major catastrophe. The recession was an ordinary business cycle. We had repeated recessions over hundreds of years, but what converted [this one] into a major depression was bad monetary policy.

The Federal Reserve system had been established to prevent what actually happened. It was set up to avoid a situation in which you would have to close down banks, in which you would have a banking crisis. And yet, under the Federal Reserve system, you had the worst banking crisis in the history of the United States. There's no other example I can think of, of a government measure which produced so clearly the opposite of the results that were intended.

And what happened is that [the Federal Reserve] followed policies which led to a decline in the quantity of money by a third. For every $100 in paper money, in deposits, in cash, in currency, in existence in 1929, by the time you got to 1933 there was only about $65, $66 left. And that extraordinary collapse in the banking system, with about a third of the banks failing from beginning to end, with millions of people having their savings essentially washed out, that decline was utterly unnecessary.

At all times, the Federal Reserve had the power and the knowledge to have stopped that. And there were people at the time who were all the time urging them to do that. So it was, in my opinion, clearly a mistake of policy that led to the Great Depression.

INTERVIEWER: How did the Depression change your life and your career plans? You started out [with plans] to become an insurance actuary; instead you became an economist.

MILTON FRIEDMAN: Well, I don't think that's very hard to understand. It's 1932. Twenty-five percent of the American working force is unemployed. My major problem with the world is a problem of scarcity in the midst of plenty... of people starving while there are unused resources... people having skills which are not being used.

If you're a 19-year-old college senior, which is going to be more important to you: figuring out what the right prices ought to be for life insurance, or trying to understand how the world got into that kind of a mess?

Why are you not, and why have you never been a communist?

INTERVIEWER: A lot of people in the '30s were drawn to the left. So why are you not and why have you never been a communist?

MILTON FRIEDMAN: (laughs) No, I've not, never been a communist. Never even been a socialist -- [though] it may well be that I harbored socialist thoughts at the time when I was an undergraduate. But undoubtedly [the fact that I'm not a communist] is tied in with the accident that I went to the University of Chicago for graduate study, and at the department of economics at the University of Chicago, they were classical liberal economists.

Classical economics, which begins with Adam Smith, with his book The Wealth of Nations, published in 1776, the same year as the American Revolution and the American Declaration of Independence, emphasizes the individual as the ultimate objective of science. And the question of economic science is how to explain the way in which individuals interact with one another, to use their limited resources to satisfy their alternative ends.

The emphasis is on the fact that there are many objectives that people have. There are limited resources to satisfy them. What's the mechanism whereby you decide which ends are to be satisfied for which people in what way? And the emphasis in the classical liberal economists is on doing that through free markets.

Did you support Franklin Roosevelt's New Deal?

INTERVIEWER: Now, at the time of the Depression, did you personally support New Deal policies?

MILTON FRIEDMAN: You're now talking not about the Depression, but the post-Depression. At least the bottom of the Depression was in 1933.

You have to distinguish between two classes of New Deal policies. One class of New Deal policies was reform: wage and price control, the Blue Eagle, the national industrial recovery movement. I did not support those. The other part of the new deal policy was relief and recovery... providing relief for the unemployed, providing jobs for the unemployed, and motivating the economy to expand... an expansive monetary policy. Those parts of the New Deal I did support.

INTERVIEWER: But why did you support those?

MILTON FRIEDMAN: Because it was a very exceptional circumstance. We'd gotten into an extraordinarily difficult situation, unprecedented in the nation's history. You had millions of people out of work. Something had to be done; it was intolerable. And it was a case in which, unlike most cases, the short run deserved to dominate.

I want to emphasize that you're talking about a long time ago. I was very young and unsophisticated, inexperienced, and I can't swear to you that what I'm saying now is actually what I believed then. I don't have any record of what my specific attitude was toward the New Deal policies. I must confess that probably I was thinking at that time more about my own interests and position than I was about these broader issues. So I think this is somewhat retrospective thinking rather than thinking at the time.

On Richard Nixon

MILTON FRIEDMAN: Nixon was the most socialist of the presidents of the United States in the 20th century.

INTERVIEWER: I've heard Nixon accused of many things, but never [of being] a socialist before.

MILTON FRIEDMAN: Well, his ideas were not socialist -- quite the opposite -- but if you look at what happened during his administration, first of all, the number of pages in the Federal Register, which is full of regulations about business, doubled during his regime. During his regime the EPA, the Environmental Protection Agency, was established and the OSHA, the Occupational Safety and Health Administration, the OECA [the EPA's Office of Enforcement and Compliance Assurance] -- about a dozen, a half dozen alphabetic agencies were established, so that you had the biggest increase in government regulation and control of industry during the Nixon administration that you had in the whole postwar period.

INTERVIEWER: Tell us how Nixon decided to adopt wage and price controls.

MILTON FRIEDMAN: Nixon, as you know, had been in the price control organization during World War II and understood that price controls were a very bad idea, and so he was strongly opposed to price controls. Yet in 1971, August 15, 1971, he adopted wage and price controls. And the reason he did it, in my opinion, was because of something else that was happening, and that had to do with the exchange rate; that had to do with Breton Woods and the agreement to peg the price of gold.

The U.S. had agreed in 1944, at the Breton Woods Conference, on an international financial system under which other countries would link their currencies to the U.S. dollar, and the U.S. would link its currency to gold and keep the price of gold at $35 an ounce. And because of the policies that were followed by the Kennedy and Johnson administrations, it had become very difficult to do that. We had had inflationary policies, which led to a tendency for the gold to flow out, for the price of gold to go above $35 an ounce. And the situation had become very critical in 1971.

Nixon had to do something about that. If he had done nothing but close the gold window, if he had said the U.S. is going off the gold standard and done nothing else, every headline in every newspaper would have been: "That negative Nixon again! Just a negative act."

And so instead he dressed it up by making it part of a general economic policy, a recovery policy in which wage and price controls, which the Democrats had been urging all along, became a major element. And by putting together the combination of closing the gold window and at the same time having wage and price controls, he converted what would have been a negative from a political point of view to a political positive. And that was the political reason for which he did it.

INTERVIEWER: There is a photograph of you and George Schultz with Nixon in the Oval Office. What did you say to him on that occasion? What did you tell him?

MILTON FRIEDMAN: Well, I don't know what occasion that particular one was, but the one that's relevant to your question is the last time I saw Nixon in the Oval Office with George Schultz. What we usually discussed when Nixon wanted to talk was the state of the economy: what monetary policy was doing.

Nixon was a very, very smart person. In fact, he had one of the highest IQs of any public official I've met. The problem with Nixon was not intelligence and not prejudices. The problem with him was that he was willing to sacrifice principles too easily for political advantage.

But at any rate, as I was getting up to leave, President Nixon said to me, "Don't blame George for this silly business of wage and price controls," meaning George Schultz. And I believe I said to him, I think I said to him, "Oh, no, Mr. President. I don't blame George; I blame you! " (laughs)

And that, I think, was the last thing I said to him. Now, the interesting point of that story is that the Nixon tapes are now available, and I have been trying to get that part of the Nixon tapes, but I haven't been able to get them yet. I want to make sure I didn't make this up.

On Ronald Reagan

INTERVIEWER: Tell us briefly how Paul Volcker set out to squeeze inflation out of the economy.

MILTON FRIEDMAN: Well, by the time Paul Volcker came along -- this was in 1968-69 [Volcker was undersecratary in the Treasury Department from 1969-74, president of the New York Federal Reserve Bank from 1975-79, and appointed chairman of the Board of Governors of the Federal Reserve Board from 1979-87.] -- inflation had gotten very high and had gone up close to 20 percent. He was at a meeting of the International Monetary Fund in Yugoslavia in 1979 (q/c date), when the U.S. came under great criticism from the other people there for our inflationary policies. And he came back to the United States and had got the open-market committee to announce that they would change their policy and shift from controlling interest rates to controlling the quantity of money.

Now, this was mostly verbal rhetoric. What he really wanted to do was to have the interest rate go up very high to reflect the amount of inflation, but he could do it better by professing that he wasn't controlling it and that he was controlling the quantity of money, and the right policy at that time was to limit what was happening to the quantity of money, and that meant the interest rate shot way up. This is a complex story.

It isn't all one way, because in early 1980 (q/c date) President Carter introduced controls on installment spending, and that caused a very sharp collapse in the credit market and caused a very sharp downward spiral in the economy. In counter to that, the Federal Reserve increased the money supply very rapidly. In the five months before the 1980 election, the money supply went up more rapidly than in any other five-month period in the postwar era. Immediately after him, Reagan was elected, and the money supply started going down. So that was a very political reaction during that period.

INTERVIEWER: How important was President Reagan's support for Volcker's policies?

MILTON FRIEDMAN: Enormously important. There is no other president in the postwar period who would have stood by without trying to interfere, to intervene with the Federal Reserve.

The situation was this: The only way you could get the inflation down was by having monetary contraction. There was no way you could do that without having a temporary recession. The great error in the earlier period had been that whenever there was a little contraction, there was a tendency to expand the money supply rapidly in order to avoid unemployment. That stop-and-go policy was really what bedeviled the Fed during the '60s and '70s.

That was the situation in 1980, in '81 in particular. After Reagan came into office, the Fed did step on the money supply, did hold down its growth, and that did lead to a recession.

At that point every other president would have immediately come in and tried to get the Federal Reserve to expand. Reagan knew what was happening. He understood very well that the only way he could get inflation down was by accepting a temporary recession, and he supported Volcker and did not try to intervene.

Now, you know, there is a myth that Reagan was somehow simpleminded and didn't understand these things. That's a bunch of nonsense. He understood this issue very well. And I know -- I can speak with, I think, authority on this -- that he realized what he was doing, and he knew very well that he was risking his political standing in order to achieve a basic economic objective. And, as you know, his poll ratings went way down in 1982, and then, when the inflation seemed to be broken enough, the Fed reversed policy, started to expand the money supply, the economy recovered, and along with it, Reagan's poll ratings went back up.

INTERVIEWER: And the economy has been pretty solid ever since. [As of the year 2000.]

MILTON FRIEDMAN: Yes, absolutely. There is no doubt in my mind that that action of Reagan, plus his emphasis on lowering tax rates, plus his emphasis on deregulating... I mentioned that the regulations had doubled, the number of pages in the Federal Register had doubled, during the Nixon regime; they almost halved during the Reagan regime. So those actions of Reagan unleashed the basic constructive forces of the free market and from 1983 on, it's been almost entirely up.

INTERVIEWER: What Reagan was doing was almost exactly mirrored in Britain by what Mrs. Thatcher was doing at about the same time.

MILTON FRIEDMAN: Absolutely.

INTERVIEWER: Were the two influencing to each other, or was it just a case of ideas coming into their own?

MILTON FRIEDMAN: Both of them faced similar situations. And both of them, fortunately, had exposure to similar ideas. They reinforced one another. Each saw the success of the other. I think that the coincidence of Thatcher and Reagan having been in office at the same time was enormously important for the public acceptance, worldwide, of a different approach to economic and monetary policy.

On his role in Chile under Pinochet

INTERVIEWER: Tell us about some of the abuse you had to suffer and the degree to which you were seen as a figure out on the fringes.

MILTON FRIEDMAN: Well, I wouldn't call it abuse, really. (laughs) I enjoyed it. The only thing I would call abuse was in connection with the Chilean episode, when Allende was thrown out in Chile, and a new government came in that was headed by Pinochet.

At that time, for an accidental reason, the only economists in Chile who were not tainted with the connection to Allende were a group that had been trained at the University of Chicago, who got to be known as the Chicago Boys. And at one stage I went down to Chile and spent five days there with another group -- there were three or four of us from Chicago -- giving a series of lectures on the Chilean problem, particularly the problem of inflation and how they should proceed to do something about it.

The communists were determined to overthrow Pinochet. It was very important to them, because Allende's regime, they thought, was going to bring a communist state in through regular political channels, not by revolution. And here Pinochet overthrew that. They were determined to discredit Pinochet. As a result, they were going to discredit anybody who had anything to do with him, and in that connection, I was subject to abuse in the sense that there were large demonstrations against me at the Nobel ceremonies in Stockholm. I remember seeing the same faces in the crowd in a talk in Chicago and a talk in Santiago. And there was no doubt that there was a concerted effort to tar and feather me.

INTERVIEWER: It seems to us that Chile deserves a place in history because it's the first country to put Chicago theory into practice. Do you agree?

MILTON FRIEDMAN: No, no, no. Not at all. After all, Great Britain put Chicago theory in practice in the 19th century. (amused) The United States put the Chicago theory in practice in the 19th and 20th century. I don't believe that's right.

INTERVIEWER: You don't see Chile as a small turning point then?

MILTON FRIEDMAN: It may have been a turning point, but not because it was the first place to put the Chicago theory in practice. It was important on the political side, not so much on the economic side.

Here was the first case in which you had a movement toward communism which was replaced by a movement toward free markets. See, the really extraordinary thing about the Chilean case was that a military government followed the opposite of military policies.

The military is distinguished from the ordinary economy by the fact that it's a top-down organization. The general tells the colonel, the colonel tells the captain, and so on down, whereas a market is a bottom-up organization. The customer goes into the store and tells the retailer what he wants, the retailer sends it back up the line to the manufacturer, and so on. So the basic organizational principles in the military are almost the opposite of the basic organizational principles of a free market and a free society.

And the really remarkable thing about Chile is that the military adopted the free-market arrangements instead of the military arrangements.

INTERVIEWER: When you were down in Chile you spoke to some students in Santiago. Can you tell me about that speech in Santiago?

MILTON FRIEDMAN: Sure. While I was in Santiago, Chile, I gave a talk at the Catholic University of Chile. Now, I should explain that the University of Chicago had had an arrangement for years with the Catholic University of Chile whereby they send students to us and we send people down there to help them reorganize their economics department. And I gave a talk at the Catholic University of Chile under the title "The Fragility of Freedom."

The essence of the talk was that freedom was a very fragile thing and that what destroyed it more than anything else was central control; that in order to maintain freedom, you had to have free markets, and that free markets would work best if you had political freedom. So it was essentially an anti-totalitarian talk. (amused)

INTERVIEWER: So you envisaged, therefore, that the free markets ultimately would undermine Pinochet?

MILTON FRIEDMAN: Oh, absolutely. The emphasis of that talk was that free markets would undermine political centralization and political control.

And incidentally, I should say that I was not in Chile as a guest of the government. I was in Chile as the guest of a private organization.

INTERVIEWER: Do you think the Chile affair damaged your reputation, or more importantly, made it harder for you to get your ideas across?

MILTON FRIEDMAN: That's a very hard thing to say, because I think it had effects in both directions. It got a lot of publicity. It made a lot of people familiar with the views who would not otherwise have been. On the other hand, in terms of the political side of it, as you realize, most of the intellectual community, the intellectual elite, as it were, were on the side of Allende, not on the side of Pinochet. And so in a sense they regarded me as a traitor for having been willing to talk in Chile.

I must say, it's such a wonderful example of a double standard, because I had spent time in Yugoslavia, which was a communist country. I later gave a series of lectures in China. When I came back from communist China, I wrote a letter to the Stanford Daily newspaper in which I said: '"It's curious. I gave exactly the same lectures in China that I gave in Chile.

I have had many demonstrations against me for what I said in Chile. Nobody has made any objections to what I said in China. How come?"

INTERVIEWER: In the end, the Chilean [economy] did quite well, didn't it?

MILTON FRIEDMAN: Oh, very well. Extremely well. The Chilean economy did very well, but more important, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society.

On Politics and the Federal Reserve Bank

FRIEDMAN: I've always thought the independence of the Federal Reserve was not very meaningful. If you look back at the record and ask would you know more, could you predict monetary policy better by knowing the name of the chairman [of the Federal Reserve Bank] or knowing the name of the president under whom he served, there is no doubt you'd do better knowing the name of the president, not the name of the chairman.

There can't be real independence; there shouldn't be real independence. After all, monetary policy is much too important a function to be put, in a democracy, in the hands of unelected representatives. So that I don't believe. I'm not in favor of independence -- on political grounds more than economic grounds.

Where we stand today

INTERVIEWER: From your apartment, you can almost see Silicon Valley. How do you think information technology, the Internet, the new economy, will affect the big issues of economics and politics that you've devoted your life to?

MILTON FRIEDMAN: The most important ways in which I think the Internet will affect the big issue is that it will make it more difficult for government to collect taxes, and I think that's a very important factor. Governments can most effectively collect taxes on things that can't move. That's why property taxes are invariably the first tax. People can move, so it's a little more difficult to collect taxes on them. States within the United States find it more difficult to collect taxes on people, but the United States as a whole can collect taxes on people more easily. Now the Internet, by enabling transactions to be made in cyberspace, not recorded, by enabling them to move so that somebody in Britain can order books from Amazon.com in the United States, somebody in the United States can do a deal India, I think the cyberspace is going to make it very much more difficult for government to collect taxes, and that will have a very important effect on reducing the role that governments can play.

INTERVIEWER: So we're sort of marching forward to a kind of... the ultimate "Hayekian" state, are we?

MILTON FRIEDMAN: I think we are in that respect. Now, of course it has its advantages and disadvantages. It makes it easier for criminals to conduct their affairs. But, you know, you have to distinguish between criminals and criminals. We have as many criminals as we have because we have as many laws to break as we have. You take the situation in the United States. We have two million people in prison, four million people who are under parole or under supervision. Why? Because of our mistaken attempt to control what people put in their bodies. Prohibition of so called drugs, of illegal drugs, is a major reason for all of those prisons. And those are victimless crimes, which should not be crimes.. Now the internet, by enabling transactions to be made in cyberspace, not recorded, by enabling them to move so that somebody in Britain can order books from Amazon.com in the United States, somebody in the United States can do a deal India,—I think the cyberspace is going to make it very much more difficult for Government to collect taxes. And that will have a very important effect on reducing the role that Governments can play.

INTERVIEWER: So we're sort of marching forward to a kind of, the ultimate "Hayekian" state are we?

MILTON FRIEDMAN: I think we are in that respect. Now, of course it has its advantages and disadvantages. It makes it easier for criminals to conduct their affairs, but, you know, you have to distinguish between criminals and criminals. We have as many criminals as we have because we have as many laws to break as we have. You take the situation in the United States. We have two million people in prison, four million people who are under parole or under supervision. Why? Because of our mistaken attempt to control what people put in their bodies. Prohibition of so-called drugs, of illegal drugs, is a major reason for all of those prisons. And those are victimless crimes, which should not be crimes.

INTERVIEWER: More than half a century after that first meeting in Mont Pelerin, who's won the argument, [and] who lost?

MILTON FRIEDMAN: There is no doubt who won the intellectual argument. There is no doubt that the received intellectual opinion of the world today is much less favorable towards central planning and controls than it was in 1947. What's much more dubious is who won the practical argument.

The world is more socialist today than it was in 1947. Government spending in almost every Western country is higher today than it was in 1947, as a fraction of income, not simply in dollars. Government regulation of business is larger. There has not been a great deal of nationalization, socialization in that sense, but government intervention in the economy has undoubtedly gone up.

The only countries where that is not true are the countries which were formerly part of the communist system. You can see that we won the argument in practice as well as on the intellectual level in Poland, in Czechoslovakia, in Hungary, in Russia, and throughout that part of the world. But in the West the practical argument is as yet undecided.

INTERVIEWER: Are you hopeful?

MILTON FRIEDMAN: Oh, yes, I'm very hopeful about it. Don't misunderstand me. At the moment we have not won the argument in practice, but I think in the long run ideas will dominate, and I think we will win the argument in practice as well as on the intellectual level.

INTERVIEWER: Central controls have been discredited, the governments seem to have retreated remarkably, but are we becoming increasingly regulated?

MILTON FRIEDMAN: You have to distinguish different areas. Some kinds of regulations have declined. Regulations of prices, particular regulations of industries as a whole have declined. Other kinds of regulations, particularly regulations on personal behavior, have gone up. It's social control which has been taking the place of narrow economic control.

INTERVIEWER: Do you feel some of those regulations are ultimately a threat to the free market?

MILTON FRIEDMAN: They're not a threat to the free market. They're a threat to human freedom.

INTERVIEWER: At the moment, governments everywhere are retreating from the marketplace, or seem to be. Do you think a pendulum could swing back the other way?

MILTON FRIEDMAN: The pendulum easily can swing back the other way. It can swing back the other way not because anybody wants to do it in a positive sense, but simply because as long as you have governments which control a great deal of power, there always [will be] pressure from special interests to intervene. And once you get something in government, it's very hard to get it out. So I think there is a real danger. I don't think we can regard the war as won by any manner of means. I think it still is true that it takes continued effort to keep a society free. What's the saying? "Eternal vigilance is the price of liberty."

"Consumption is the sole end and purpose of all production; and the interest of the ****PRODUCER (manufacturing jobs)**** ought to be attended to only so far as it may be necessary for promoting that of the consumer.

The maxim is so perfectly self evident that it would be absurd to attempt to prove it. But in the mercantile system ****the interest of the consumer is almost constantly sacrificed to that of the producer; (protecting American jobs from outsourcing)**** and it seems to consider production (MANUFACTURING JOBS), and not consumption,(WALMART CHEAP CHINESE ITEMS) as the ultimate end and object of all industry and commerce."

Adam Smith, The Wealth of Nations, 1776

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THE ECONOMIC SYSTEM WE ABANDONED

The American School’s key elements were promoted by John Q. Adams and his National Republican Party, Henry Clay and the Whig Party, and Abraham Lincoln through the early Republican Party which embraced, implemented, and maintained this economic system.

During its American System period the United States grew into the largest economy in the world with the highest standard of living, surpassing the British Empire by the 1880s……..

It is a capitalist economic school based on the Hamiltonian economic program. The American School of capitalism was intended to allow the United States to become economically independent and nationally self-sufficient.

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THE ECONOMIC SYSTEM WE HAVE EMBRACED

The Chicago school of economics describes a neoclassical school of thought within the academic community of economists. The neoclassic approach included the work of Adam Smith.

Although neoclassical theory dominates the economics discipline it is actually a psychological theory:.................

At the core of the theory is a specific reductionist theory of human decision making and rationality that is then applied to economic (and other) phenomena.

**** All human decision making is assumed to be driven by the pursuit of individual pleasure/happiness.***

This pleasure is defined, within the theory, as utility. Thus, the economic man (homo economicus) is a utility maximizer. Market exchanges are defined as simple trades between equally powerless economic men trying to maximize their individual pleasure.

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The only way to have a healthy economy in the long run is to create wealth. But how can America create wealth if our industrial base is being absolutely destroyed? According to Forbes, the United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.