Today, Stephen Redding links the high and changing tariffs levied against US trading partners to diminished US productivity and real income. Rose Gottemoeller reflects on the legacy of US privateer John Manley. And Ross Levine and Amit Seru point out that efforts to make mortgages more affordable have actually made housing more expensive.
Freedom Frequency
Tariffs have driven up trade policy uncertainty to levels not seen in almost a century, writes Stephen Redding in a new post for Freedom Frequency’s Commons Dispatch. These high tariffs do more than interfere with mutually beneficial trade; they also ripple through domestic markets by shifting resources from export-oriented sectors and increasing supply costs for all. Disruption of supply chains adds to the uncertainty, forcing business to add redundancy, diversify suppliers, hoard supplies, build in spare capacity, or reshore parts of the production cycle. In the long run, uncertainty forces firms to be wary of incurring sunk costs for investments that would be costly to reverse—such as building new plants—in an environment where tariffs could lurch from zero to 50 percent. Overall, reluctance to commit to these investments weakens the economy’s productivity and real income. Read more here.
In the early years of the Revolution, the Americans had no navy. British ships offered both military and economic targets, so a makeshift fleet of privateers came forward to do battle. Rose Gottemoeller tells the story of one such captain of the Patriots’ “mosquito navy,” the intrepid John Manley, whose exploits not only cheered the rebels and their sympathizers but also helped fill up General Washington’s arsenals. At the same time, Gottemoeller writes, sea warriors like Manley did well by doing good, because they were able to claim cash prizes for their conquests. Irregular warfare is not just a sea tale from history, she says: Today, Ukraine is waging war much the way Manley and the other Revolutionary privateers did. It remains to be seen whether Kiev, too, can prevail in its struggle. Read more here.
The Economy
In Project Syndicate, Senior Fellows Ross Levine and Amit Seru argue that lower interest rates do not make housing more affordable, and explore ongoing legislative efforts to make housing easier (and faster) to build, such as the 21st Century ROAD to Housing Act, passed by Congress in July. The new law streamlines permitting and zoning processes to get housing built faster. Meanwhile, Seru and Levine point out new research they conducted showing that “expanding mortgage credit increases borrowing and drives up house prices far more than it boosts homeownership.” But there are still ongoing efforts to expand the portfolios of Fannie Mae and Freddie Mac, as well as new proposals to privatize them. Levine and Seru say the focus should be on expanding the housing supply. Read more here.
David R. Henderson recalls how the political drumbeat over “economic equality” arose as a potent campaign talking point when Bill Clinton was first running for president. The notion of inequality, paired with an accusation that the wealthy don’t deserve to be rich, has driven many myths that continue to cloud public discussion of the economy, particularly of taxation, Henderson writes. Entrepreneurs who become billionaires do earn their wealth, he says, by earning it. Beyond that, he argues, people also fail to understand that “as people’s real incomes rise, mortality falls.” In other words, rising income and productivity are what allow a society to invest in its quality of life. Read about it here.
Revitalizing History
In this new book, edited by two Hoover fellows and made available in English for the fist time, Markus Wolf tells the story of how three expatriate Communist families in Moscow find their bonds and beliefs tested as they are scattered by World War II and confront the consequential ideologies of the 20th century. This now-legendary memoir was written by a leader of East Germany’s notorious Stasi secret police. Wolf, known in the West as “the man without a face,” was a notorious shadow figure who had loomed large in the East German intelligence service. The Troika was published in 1989, after his retirement. And with East Germany on the verge of revolution and collapse, it became a sensation with its critical reflections on the taboo subject of the Stalinist purges of the 1930s. Read more here.
On the latest episode of Reflections, Hoover Research Fellow Katharina Friedla tells the story of Jan Karski, the Polish diplomat who, in 1942, infiltrated the Warsaw Ghetto, witnessed the unfolding Holocaust, and tried to warn British and American officials, including President Franklin Roosevelt. Get the Story: Friedla finds that Karski’s warnings were met with deep skepticism, as most of the people he met with could not fathom the scope of the horror the Nazis were perpetrating in Eastern Europe and elsewhere. Watch the video here.
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