In hindsight this probably wasn’t the best day to buy stocks from my Florida beach house. Though thinking about vertical red arrows on the equity trackers and horizontal red puddles on Wall Street got me thinking about the economy. And that got me thinking about tariffs.
Most people don’t have an understanding of tariffs’ fundamental purpose. To borrow a mythological metaphor, tariffs are the vagina dentata of a nation’s economy. As it implies, they serve as a formidable disincentive against the merchant’s predations. That’s why one should always consider the speaker when tariffs are maligned in the financial press. Those wanting to do the fucking will always have a different perspective from those not wanting be fucked.
Of course forcible economic intercourse has a euphemism like everything else. In this case it’s called ‘free enterprise’. You may be assured your postings on social media aren’t the freedoms they’re looking for. Though what CEOs are looking for is primarily these three sacred pillars.
1. To live and operate within America’s safe, lawful and very expensive social infrastructure.
2. To avoid paying the personnel costs of that social infrastructure by insourcing labor and outsourcing manufacturing.
3. To get very rich from selling into the same lucrative American market they shun for wages and investment.
It’s easy to see how tariffs introduce viscosity to this model. High tariffs incentivize
making things where you hope to sell them. That incentivizes investment in domestic labor and technology. These investments fund the expensive infrastructure and institutions that businesses require to incubate.
Ideally this would be a symbiotic relationship. Society shelters its merchants, and those subsequently profitable merchants then reinvest in society’s capacity to shelter. Instead, merchants avail themselves of American society’s shelter, and then reinvest in Chinese plants, Indian engineers, and inebriated Mexican landscapers. That means they get the gold and you get the shaft. “And why not, if the public is dumb enough to go along with it?” they must surely ask themselves. Not that any such obligation would ever be publicly acknowledged.
Despite the ignorance feigned on economics blogs, executives understand this moral template perfectly. They are generally not stupid men. They simply don’t care for the weight of its reciprocal burden. That’s especially true when the counterparty to any implicit bargain becomes too gullible and obtuse to even understand it exists.
And what kind of reinvestment is the American public missing? From the perspective of insourcing, a great deal indeed. Here’s a link to median (not mean) salaries at prominent technology firms. I found it quite illuminating; a few samples (all in thousands per year) appear below.
Alphabet (Google): $197
Those are quite handsome salaries for a mid-tier employee. Is tech cube-farming for a quarter-million a job Americans won’t do? Should the Americans who maintain the infrastructure upon which these enterprises sit have an expectation to benefit from their profitability? I always hear how many jobs a company brings to an area, though I rarely hear how many jobs for Americans. If that number is significantly less, then perhaps Zuckerberg should take his morning jog in Dhaka rather than Menlo Park. But he won’t do that because he knows only you can maintain the society he finds most comfortable. He just doesn’t want to pay you the cost of that comfort. The scientific symbol for this ethical chasm is expressed as: H-1B.
Aside from the opportunity costs of foreign investment, there are also more direct costs. As you likely have read, China has apparently used its computer manufacturing facilities as seeding operations for international espionage. This completely unsurprising revelation highlights the vast difference between their perspective and America’s on the matter of business’s role within the nation. Chinese plainly view domestic industry as a national strategic asset, to be nurtured, protected, and used as a weapon where warranted. The thought that Americans would blithely allow critical technology and capacity to leave the country merely so a few plutocrats can add an extra billion to their bank account must cause sedge hats to spin into outer space by the force of amazement alone. Though I imagine that amazement would dissolve quickly upon learning who underwrites election campaigns.
In any event, I suppose tariffs will decline in personal importance once I acquire a controlling interest in Apple. I’ve prepared a hostile bid for when the share price reaches 3/8s of a penny, which might occur by next Wednesday at this rate. Given the reputed dynamism of a maximum diversity workforce I will likely move corporate HQ from Cupertino to Kinshasa. I think you’ll be amazed by next year’s retro iPhone.