The sub-title of this book is "How American Sovereignty and Social Justice Are Being Sacrificed to the Gods [sic] of the Global Economy." Its fifteen chapters are divided into three parts:
Section 1: "A Tale of Two Nations," in which the author states that "free trade" has pitted high-wage American workers against extremely low-wage workers in less-developed countries (LDCs).
Mr. Buchanan points out that there are now two classes in America, the so-called "Third Wave," which is made up of bankers, lawyers, diplomats, investors, lobbyists, academics, journalists, executives, professionals, high-tech entrepreneurs, all of whom are "prospering beyond their dreams" (p. 6). The other group is the "Second Wave," who are the "forgotten Americans left behind." This group is made up of white- and blue-collar people who work for someone else, "many with hands, tools, and machines in factories soon to be hoisted onto the chopping block of some corporate downsizer in some distant city or foreign country" (p. 7). "Free trade," the author claims, has led to the closing of factories in the USA and shipping them overseas. This leads to rising profits and high salaries and stock options for top management of big, international corporations; but it leads to lost jobs and despair for middle-class America. The cause of this disturbing scenario is wrong government policies, low-cost loans by the World Bank, and subsidies and bailouts for foreign nations (recent examples being the Mexican bailout in 1994 and the current bailouts of the so-called "Asian Tiger" nations whose economies have gone sour).
In this section the author also gives the history of so-called "free trade" policies, which in reality, opened up one-way trade to foreign countries which themselves practice protectionist policies at the expense of the United States. He does, in fairness, relate some other causes: high domestic taxes, militant labor unions, and onerous government regulations. (Note: My own evaluation is that wrong government policy, even verging on treason, and not true free trade, is what has caused the sorry debacle that Mr. Buchanan so aptly describes.) On p. 48 the author correctly points out:
In the name of "free trade" we let foreign companies — abetted by the regimes that own them — collude and kill U.S. companies, using tactics that would have brought criminal indictments if done by such a conspiracy in the United States.... The corruption of thought begins in the corruption of language. Politicians talk of "trading partners" as though the relationship between the United States and China, or the United States and Japan, is comparable to that between Fred Astaire and Ginger Rogers. Such language does not clarify; it distorts. Toyota and Ford, Boeing and Airbus are not partners; they are adversaries. They may enter into alliances, as even hostile nations do, but added market share for one means diminished market share for the other. Victory for one can mean the death of the other.
Mr. Buchanan also points out (pp. 49-50) that countries like Japan, France, and South Korea may be military allies, but that each has a budget for industrial espionage and technology theft; and that China and India require, for instance, that Boeing transfer aircraft technology in contracting to build plants in their countries. In short, he points out that a vicious form of industrial warfare is going on under the guise of "free trade." He states (p. 66) that:
Postwar Japan listened to our discourse on open markets and went its own mercantilist way. As long as Western wealth, technology, and jobs are moving eastward — through foreign aid, loan guarantees, and huge U.S. trade deficits — China will go along. But when wealth and its all-important by-product, power, no longer move eastward, China will walk away from this global system as casually as the Europeans walked away from their war debts....
The author stresses that, when large transnational corporations set up overseas plants to ship goods into the United States, there arises a conflict of interest between the transnational corporation and the country, for the corporation becomes a potential loser from policies designed to preserve and protect production inside the country (p. 102). Then he goes on to point out a working collusion between large international firms and both the Democratic and Republican Parties. Transnational firms control the Advisory Committee for Trade Policy and Negotiations (ACTPN), which was established by the Trade Act of 1974. The ACTPN employs high-pressure political lobbyists in Washington, D.C., to achieve the goals of the transnational corporations.
Section 2: "Where and How We Lost the Way" contains seven lengthy chapters.
This is a review of America's past experience under both "free trade" and "protectionist" policies. While it is the longest section and makes for interesting reading, it can be summarized thus: Mr. Buchanan claims that America prospered economically when our political leaders followed protectionist, i.e., high-tariff, policies; but that we suffered economically whenever our country followed "free-trade" policies. One example given, for instance, was when Britain tried to nip young American industries in the bud, after the War of 1812, by flooding us with low-priced imports from Britain. He claims that historic high-tariff, protectionist Republican policy led to high economic growth while low-tariff, "free-trade" policy followed by the Democratic party tended to lead to low economic growth.
Section 3: "The Counterrevolution and the Coming of a New Populism" comprises three chapters in which the author summarizes and makes a final pitch extolling the economic and political benefits of high-tariff protectionism.
Buchanan says that, after World War II, "New Deal Democrats" resurrected the dream of Woodrow Wilson in creating the International Trade Organization (ITO) "with the power to enforce worldwide free trade over which no nation would be granted veto power" (p. 258). He refers to the "collapse" of the Soviet empire (p. 259), thereby not explicitly recognizing that the engineered "collapse" there did not end communist control of that nation, but was just a dialectic tactic used to cover up the still-existing communist goal of world domination. He correctly stresses the point that 60 years of following present government policy, which he calls "free-trade" policy, has left the United States "dependent on foreign imports, foreign markets, and foreign capital as it had been in the infant days of the new republic" (p. 259).
Again (on p. 261) Mr. Buchanan refers to the communists, "After all, it took the communists decades after the failure of their idea was manifest for them to give up on it." In truth, the communists have not given up on their ideal of centralized statist hegemony over their own economy and over the entire world. Any temporary appearance to the contrary is simply a surface dialectic maneuver. I don't doubt that Mr. Buchanan knows that this is so, but he should state it clearly, because such knowledge is important for political leaders to have. To his credit, Mr. Buchanan correctly points to the truth when he states that the Mexican bailout in 1994 (and all other bailouts, for that matter) help the large banks and financial institutions that make shaky loans to LDCs (pp. 268-269). And his following quote is a gem that should be taught to every student in our schools, because it is a truth that America's politicians seem incapable of learning:
Ultimately, NAFTA and the peso devaluation were about larceny on a global scale. Mexico's good people were robbed of half the dollar-purchasing power of the pesos they had sweated for and saved. American border towns lost loyal Mexican customers. American workers saw factories and jobs go south. All so a Mexican regime could run a $15 billion trade surplus with the United States — and raise the cash to pay off its New York creditors. Mexican and American workers lost, but the big banks were made whole, and the wages the transnationals pay their Mexican labor were sliced in half. No wonder America's financial elite finds a lot to like in Bill Clinton. (p. 273)
In writing about giving the president "fast track" authority in negotiating trade treaties, Mr. Buchanan states (correctly) that, like NAFTA and GATT, it was heavily supported by all the ex-presidents, all the major newspapers in the New York-Washington corridor, all the major think tanks, as well as the Business Roundtable, whose membership had lavished millions of dollars in "soft money" on both political parties to get the measure passed. He states that Republican House members, who were called to a midnight conference by the speaker of the House, had to pass through a gauntlet of corporate lobbyists demanding that they support "fast track." (This, dear readers, shows government-big business collusion on a grand scale!) Finally, Mr. Buchanan shows the results of NAFTA: 1) an expanded flood of illegal aliens, 2) a great increase in the flow of drugs being trucked into our country for the benefit of the drug cartels (Remember, drugs used to be flown in to the Mena, Arkansas, airport during Clinton's governorship era!), and 3) An increase in tainted foods because of lower health and sanitary standards in LDCs.
In the last chapter of his book, Mr. Buchanan calls for a "new nationalism" of high, protective tariffs. He has the integrity to quote some free traders, von Mises, for instance:
A nation's policy forms an integral whole. Foreign policy and domestic policy are closely linked together, they are but one system. Economic nationalism is the corollary of the present-day domestic policies of government interference with business and of national planning as free trade was the complement of domestic economic freedom.... The trend towards protectionism is ... the outcome of the endeavors to make the state paramount in economic matters. (p. 295)
To this, Buchanan's reply is "Intending no disrespect, this is nonsense."
On page 298 the author makes a good case for a "revenue tariff" of 15% (as opposed to a much higher "protective tariff"). He says that a revenue tariff "should be high enough to generate a powerful stream of revenue, but low enough not to destroy trade." (Note: I can certainly agree with his statement, as I can with the author's earlier claim that use of a tariff for revenue purposes would allow American citizens freedom from the existing tyranny of the IRS, which could then be disbanded!) In this section he seems to mildly favor both the proposed "flat tax" and the "national sales tax," both of which would extend the need for the IRS. (I cannot understand Mr. Buchanan's endorsement of these tax proposals. If our founding fathers made one mistake in drafting the Constitution of 1787, and I believe they did, it was giving the Congress power to levy direct taxes on citizens. This was something that the Anti-federalists vigorously opposed! If we have any hope of ending the growing tax and control tyranny in Washington, D.C., it is to emasculate the ability of our central government to levy direct taxes on citizens. A sound method of taxing imports, i.e., a revenue tariff rather than a regime of protective tariffs, is the economic answer to restore lost liberty.)
Buchanan calls for eliminating the corporate income tax and replacing it with a corporate revenue tax as a means of equalizing the taxes that domestic and foreign corporations pay, thus eliminating the incentive for domestic firms to relocate in Mexico or overseas. He shows that too many foreign corporations engage in "transfer pricing" through which they can artificially generate losses at their domestic American subsidiaries and artificially raise profits in their out-of-the-United States facilities. For instance, European subsidiaries in our country report only about 50% of the profits that domestic American corporations report, while Asian subsidiaries here report only about 10% as the result of hanky-panky bookkeeping (p. 322).
Lastly, Mr. Buchanan confronts his readers with the frightening truth that foreigners today control U.S. companies responsible for such defense items as the D-5 Trident missile, the flight controls of the B-2 bomber, the F-117 Stealth, and the F-22. He also points out that overseas factories are far more susceptible to espionage, sabotage, political dictation, and attacks by terrorists or enemy forces (all of which is true). And he boldly declares that the U.S. income tax code does not need reform, but needs to be ripped out by the roots (p. 324). This stance alone would win him the presidency if he were to run again for that office; but he would have to rescind the endorsement of the flat tax, which he endorses on the same page, lest he lose the votes of citizens who are anxious to be relieved of the present IRS tyranny. As I said in a paragraph above, there can be no restoration of freedom in our Republic unless we eliminate the power of the federal government to tax American citizens directly!
Summary and Evaluation
The Great Betrayal makes for interesting reading. In some respects the book is a challenge to a review because the book covers so many topics, and the terminology changes. For instance, in one place the author pans the term "free trade," meaning the type of international trade that is currently taking place under NAFTA and the WTO, which is really not true free trade at all, but rather bureaucratically managed trade. But in other places he admits that trade under NAFTA and the WTO is managed trade. But, in general, he presents his case well, and does so in such a way as to catch the attention of the special interest groups to whom he appeals for support. He is evidently an astute and able politician. He appeals directly to the large voting blocs that generate enough votes to win an election: blue- and white-collar workers, Blacks, and Mexican-Americans. He forthrightly admits that he is a populist, a word that I personally don't like because the word means "people's socialism." And herein is the danger: A populist stance is inherently a play to empower the civil government to assume powers in society that God does not give it.
The book, as good as it is in covering important points of economic and political history, would be even better if Mr. Buchanan would approach the topic of civil government from an explicitly Biblical viewpoint (but doing so would no doubt alienate an important percentage of those to whom he is appealing). The second most important question in life, the answer to which will determine the degree of freedom or slavery that people will enjoy or suffer while here on earth is this: What is the proper role of civil government in society? This is the crucially important question that Mr. Buchanan fails to do intellectual battle with. Without starting from a consideration of what God's plan is for the role of civil government in society, it is very unlikely that one will be able to develop a plan of government that will truly protect citizens' liberty. Any other approach is more likely than not to concentrate too much arbitrary power in the hands of the civil authority and thus lead to the oppression of the very people whom God raised up civil rulers to protect.
- Tom Rose
Tom is a retired professor of economics, Grove City College, Pennsylvania. He is author of seven books and hundreds of articles dealing with economic and political issues. His articles have regularly appeared in The Christian Statesman, published by the National Reform Association, Pittsburgh, PA, and in many other publications. He and his wife, Ruth, raise registered Barzona cattle on a farm near Mercer, PA, where they also write and publish economic textbooks for use by Christian colleges, high schools, and home educators. Rose’s latest books are: Free Enterprise Economics in America and God, Gold and Civil Government.