Positive Action Against Communism
JULY 01, 1958 by YALE BROZEN
Dr. Brozen is a Professor of Economics in the
Some of the major problems we face today are those in the international arena. Among other things, our foreign aid program is directed toward assisting in the solution of our problems in foreign relations. Our agricultural program is bound by restrictions stemming from the necessity of avoiding actions which harm and alienate our allies whose markets are influenced by our policies in this sphere. Everywhere we turn, the international problem intrudes. Even a domestic recession in business and employment has international overtones since "when the
Foreign trade is our most effective device for winning friends, influencing nations, and developing their resistance to Soviet blandishments and threats. Trade has the double advantage of being a device for accomplishing our international objectives, and at the same time increasing the employment and real wage income of American workers.
First, let us look at what trade does in accomplishing our international objectives. We are wooing other nations by many devices — foreign aid, military assistance, treaties of assistance, alliance and mutual defense, information services — all directed toward the end of enlisting their support in maintaining a free world and containing the totalitarian threat. However, our firmest friend in
In North America, our firmest friend is
Our ties with the
This list of friends whose regard has been fostered by our purchases could be extended. The important point is that trade creates friendships which are usually firmer than those based on other ties. In trade there is mutual gain to both sides. Where there is a mutual gain, a mutual regard usually follows.
The importance of trade as a means of winning friends and gaining allies has also been recognized by the communists. They courted
This has exceedingly important implications for our trade policy. By reducing barriers to imports, we gain both in terms of accomplishing our international objectives and in terms of increasing wages, employment, and American national income.
The exports whose volume would increase are the very ones produced by the industries which are in trouble now. Machinery and construction and mining equipment — capital goods — are wanted by areas which now lack the means to purchase. These are now among our softest industries employment-wise.
An unappreciated aspect of international trade is the fact that it is our high wage industries which export abroad and compete very effectively with low wage labor abroad. They are the export industries because they are relatively our most productive. Since wages depend on productivity, they are also our high wage industries.
The industries which ask for protection are our relatively less productive industries. Because wage rates are driven up by the competition for labor of the very productive, export industries, the less efficient industries suffer, inasmuch as they are not productive enough to afford high wage rates. By getting tariffs imposed, foreign buying is reduced since foreign dollar earnings are cut down.
The high wage industries are thus forced to cut back and release labor to the low wage industries.
Wage rates in the machinery industry (an export industry) in July 1956 were $91.96 per week. In the leather industry, one which asks protection, wage rates were $56.47 per week in July 1956.
Reduce Defense Burdens
Actions to improve international trade would reduce our defense burdens in three ways. The firmer our allies, the less the level of expenditures for national defense required to provide any given degree of security. Secondly, the higher our national income, the more capable we become in carrying the defense burden, and the greater our mobilization potential in case of war. Thirdly, an increase in trade strengthens our allies and gives them greater defense capability just as it increases our defense capabilities. To this extent, they become capable of carrying a greater share of the mutual defense burden.
If, in the process of reducing our own import barriers, we also succeed in obtaining agreement from other nations to reduce their barriers, then trade will increase all the more and our benefit will be even greater. We would benefit by a unilateral reduction of tariffs. This would pay out for us even though foreign tariffs were not reduced. But bilateral reductions give us even greater yields in trade, friendship, allies, and defense.
Aid through Trade
We can reduce tariffs, simultaneously cut foreign aid, and end by accomplishing more than the present foreign aid program. To illustrate this, we might consider the experience of
What was it that brought about the economic revolution which occurred in the last half of the nineteenth century? In the 1840′s
Reductions in our own tariffs would similarly open markets to other areas of the world in need of development. It could similarly provide economic opportunities which would develop business and businessmen. These are the men who will provide the backbone of resistance to communism. If we want economic development abroad in ways which will win allies, this is the way to do it.