I’m a bit slow in this field. Could someone explain how this quote relates to tariffs? I’ve re-read it three times now, looking for the connection to a tax on imported goods, but I just can’t see it.
I think it’s saying that the US population is crowing about how well we’ve done, and so we should be able to tax whatever imports we want? But what an odd way to say that if so. How well we’ve done seems completely unrelated to tariffs.
Then the quote caps off with some back-patting about how we’ve only been around 250 years, and that our rise is unprecedented. Again seemingly unrelated to tariffs.
Part of the justification for tarriffs is that America is somehow being 'taken advantage' of by the rest of the world and the tarriffs are the rest of the world finally paying their fair share. The reality is that (until now) America has had a uniquely privileged position in the world economy that got America, in general, very beneficial trade deals.
He's commenting on the attitude driving the tariffs.
The only unique thing about America is free markets. Any country can become highly successful by enacting free markets. The only thing in the way is their disbelief that they work.
There's a common thread across the world and history. The more free market a country is, the more it prospers.
This is only true if you ignore the important material and historical factors that go into the success of a country. Like for example, the immense wealth of natural resources and variation in climates that the US has. Or how about escaping much of the devastation that Europe faced in WW2 and benefiting immensely from helping them rebuild. Or having (for the most part) incredibly safe and stable relationships with neighbors to the north and south. Free markets have certainly contributed to success, but to say it's the only unique thing about America is just wrong.
The Sovied Union and Communist China all had vast natural resources. But a third world economy.
Japan, S Korea and Hong Kong have next to no natural resources. Great prosperity.
Germany turned to free markets after WW2 and enjoyed the "German Miracle". (Germany has since turned to socialism, with predictable results.) Germany received far, far less Marshall Plan money than Britain and France, who had no miracle.
> but to say it's the only unique thing about America is just wrong
Consider, for a moment, the state that China was in at the conclusion of WW2. It hadn't even industrialized yet. The British and the Japanese absolutely trashed China for over a hundred years!
Russia was also not industrialized until after their revolution in ~1920, and suffered horrific losses in the homeland during WW2.
The US emerged from WW2 fully industrialized and nearly unscathed. The US mainland remained untouched throughout both world wars.
The starting positions were far from equal. You attribute too much to free markets.
China didn't industrialize until after 1978, when they gave up on communism and began a transition to capitalism. Over 30 years after WW2 concluded.
Russia did not industrialize in the 1920s. They did collectivize agriculture, famine ensued. They turned back to free market farming, famine went away. They turned again to collectivization, and farming collapsed again. Eventually, the Soviets allowed farmers to farm small plots and sell what they could raise. These small free market plots kept the country from starving.
Russia did work hard at industrializing during WW2, but it was propped up by the US, who heavily supplied the Soviets. The US actually built factories in the US, dismantled them, and shipped them to the Soviet Union during the war. US engineers and craftsmen taught them.
When WW2 ended, the Soviets looted everything industrial they could find from the Soviet sector. Whole factories were moved east. Soviet industrial output grew during the war.
British industry was also untouched, because the German bomber fleet did not have the range to cover much of Britain, and because Hitler stupidly decided to bomb houses instead of factories. Britain had a pretty anemic recovery from the war - despite getting far more Marshall Plan money than Germany.
Japan did not have a free market before the war, and not much of an industrial economy. Curtis LeMay had a hard time finding industrial targets to bomb, as Japanese industry was characterized as "a drill press in every home". Japan turned to free markets after the war, and we know what happened next. Recall that Japan was burned into ash in WW2. They went from utter defeat to economic superpower, despite not having any natural resources, in just 30 years.
How much more of an "unequal" starting point could there possibly be?
The only common characteristic of prosperity is free markets. And the more free market an economy is, the more prosperous it is. Over and over. It goes back to the middle ages.
The other common characteristic is when countries turn towards socialism, things just get worse and worse for them.
The difference between the US and smaller countries is that the US government is powerful enough to stop powerful corporations from destroying it by enacting labor laws, environmental protection laws, and anti-monopoly laws with teeth. No other country is advocating for a Soviet style economy. You're fighting a strawman.
Before opening up in 70s, China had acquired the ability to build by itself: huge numbers of machine guns and grenades, tanks, fighter planes, rockets and satellites (aka missiles), nukes.
These minus nukes and missiles plus battleships is pre-WWII Japan.
This may be helpful if you're curious why so many countries that choose free market instead of Communism after WWII are still not industrialized today.
Simple, obvious contradiction: can every country enjoy the benefits of issuing the de facto reserve currency for the world? Just by having free markets?
The US has been incredibly privileged. I’d argue that was earned in some ways and lucky in others. But it’s undeniably true.
Free markets are a choice the US made. Any country can choose to have a free market, and some have. The reserve currency thing has nothing to do with it.
And pray tell, how did it become the de facto global trade currency? You believe the massive development of internal markets, free trade and relatively stable legal system that largely respects private property had little or nothing to do with this?
>And why do you think the dollar is dominant in international trade?
The dollar isn't dominant in international trade because the domestic market is free, like the above user was referencing. The dollar has been the dominant reserve currency and currency for international trade since it overtook the pound for both of those functions in the mid 20th century, which didn't coincide with the US having a free market.
Also, I wasn't make any causal relationship in my comment, like you seem to be implying. The fact that USD is the dominant reserve currency and dominant trade currency is unquestionably more unique than having free markets, considering that the US is truly completely unique in both of these regards, while it is not nearly as unique in having a free market.
Once again, regardless of how free the US market was in the mid-20th century, this is not the most unique privilege about the US today, as you put it in your previous comment. Any country could institute the same market regulations and degrees of freedom as the US, but only one country can have the position of having the dominant reserve currency and dominant trade currency.
The little "thing" or status of having reserve currency has allowed the US to enjoy lower international borrowing costs than anywhere else in the world. This has immensely benefited the US, in facilitating ease of borrowing with relatively low interest rates and by facilitating lower exchange rate risk in borrowing than any other nation.
One of the biggest “services” expenses, i think maybe the biggest, comes in the form of employees.
Afaik the EU is regulated much more heavily in that area than the US, like here in Australia.
It makes sense to me that some amount of the US’ economic advantage comes from their ability to more efficiently match employees with the work currently demanded by the market.
I'm aware, and I'm not contesting this, but this is besides the point. What I'm getting at is that Walter seems to think that prosperity has a 1 to 1 correlation to market freedom. If the GDP of the US started diverging farther away from the EU at a greater rate than prior to the GFC, then to his way of thinking, this must have something to do with how the EU limited market freedom following the GFC.
There are barriers to trade besides tarriffs. That's literally the only sensible part of the nonsense justification for the initial values of Liberation Day tarriffs. The E.U., for example, has barriers to trade like food regulations and PDO and such. Protectionism takes forms besides tarriffs. Tarriffs are probably among the least useful, most damaging, most blunt protectionist tools.
They created one kind of prosperity early on by protecting their markets and letting industries develop. Many other countries have done the same thing.
The unique thing was that they then created another, less broadly shared, kind of prosperity by eliminating those protections and offshoring those industries, and focusing instead on dollar diplomacy.
Real life is rarely as simple as discrete causes and effects. The dollar being a reserve currency is the result of both advantaged position America was in at the end of WWII combined with subsequent economic policy. Economic policy alone would not have resulted in the powerhouse America became, and it certainly could have squandered its post-WWII position with bad policy.
The dollar becoming the reserve currency has given America a lot of power, however. It certainly is a factor in the way America is able to run a trade deficit and yet still benefit.
> Economic policy alone would not have resulted in the powerhouse America became
During WW2, the US was the most powerful economy in the world. It fought WW2 in both hemispheres (which required two navies), and supplied all the allies.
Japan was well aware they could never win a sustained war with the US, and hoped that the attack on Pearl Harbor would get them a negotiated settlement. Hitler, in probably the stupidest miscalculation in history, declared war on the US.
You are getting two things confused here. The original question was what privileges the US had that others do not. The USD being the reserve currency is unquestionably a privilege. That it is not the original cause of American prosperity is completely besides the point.
> Any country can become highly successful by enacting free markets.
And the existence proof for that assertion is which country, exactly? Lots of nations lack regulation of some form or another, many of them are "freer" than the US. The US isn't entirely "free" of trade barriers either (c.f. tariffpocalype).
Basically this sounds like a no-true-scotsman in the making. No, it's not that simple.
Worse for who? The US outcomes have been very good for the wealthy, especially the ultra-wealthy, but less good for other people than outcomes in many other wealthy countries.
During the 19th century, the US elevated scores of millions of immigrants from poverty to the middle class and beyond. The newly wealthy "aristocracy" sprang from the poor, much to the disdain of European royalty.
Poverty in the US continued going down until 1968, when it began edging up again. 1968 was the advent of the "Great Society" programs.
> Poverty in the US continued going down until 1968, when it began edging up again. 1968 was the advent of the "Great Society" programs.
Poverty rates are significantly lower in the industrial world outside the US, even (especially!) in the "socialist" countries you seem to liken to LBJ policies. Seems like the same data you're referring to above cuts directly and strongly against this point.
The current wealth disparity, at historic levels, began growing mostly in the 1980s.
> 1968 was the advent of the "Great Society" programs.
1968 was when Nixon was elected.
> During the 19th century, the US elevated scores of millions of immigrants from poverty to the middle class and beyond. The newly wealthy "aristocracy" sprang from the poor
I don't grasp the relevance of these 19th century events to today. How does it address the fact that today, for most of the population, US outcomes are worse than many peer countries?
Who are you quoting with "aristocracy" and did they really come from poor people or from the middle class?
The US was not settled by wealthy people, or even middle class people. The poor people came by the scores of millions. Many came as indentured servants. The Irish came here because of the potato famine. And so on.
If you like, name a wealthy American who came from royalty. I can't think of any.
Fun fact: the Titanic was not built to transport rich people to the US. Quite the contrary, the bulk of it was for poor people immigrating to the US. The first class section was for status and marketing. The money came from the rest of the human cargo.
> If you like, name a wealthy American who came from royalty. I can't think of any.
You can play the opposite game too: name a wealthy American who did not come from a multigenerational-upper-middle-class background (i.e. someone who's parents and grandparents were all well above median income).
Of the big names, the only one I can think of is Bezos (his adoptive father was an engineer, but a first generation immigrant with no established wealth). Everyone else, all of them AFAICT, came from backgrounds where they never had to worry about money or support through the early parts of their careers.
That doesn't matter anymore. The wealthy class might not be called "royalty" (yet?), but they effectively are. The chances today for someone who starts in a poor family to reach middle class, let alone become rich, are very slim. Pretending that the current system in the US is catering to anyone else except the rich is disingenuous.
That said, I agree that the economy of such a society has a better chance of succeeding, but it's at the cost of suffering of lots of people. Actually both extremes are bad - socialism has its problems, but so does the unchecked capitalism.
Besides the many factors (e.g. reserve currency) others have already mentioned, here's another one:
Digital services not being taxed/tariffed when exported whereas physical goods are, is purely a historical artifact. The US has managed to get the whole world addicted to their doomscrolling dopamine algorithms, raking in trillions of dollars. If these were physical goods, this would've been entirely different.
The heroine dealer of the world. So far they've been allowed this position, which is incredibly privileged. And now that the EU sometimes takes a (paltry) step towards slightly taxing the drugs, the dealer screams and kicks, "it's unfair! They're targeting just me!".
America was uniquely positioned due to the dollar being the world's most desired reserve currency. This enabled the USA to spend far beyond what it produced.
Good question, and I think the misunderstanding is Buffett is speaking against, not for, tariffs here. I’m surprised none of the responses have spelled that out clearly yet.
He’s saying tariffs are making 7.5 billion people dislike us even more, and that jeopardizes our unique position in the world.
I think it’s saying that the US population is crowing about how well we’ve done, and so we should be able to tax whatever imports we want? But what an odd way to say that if so. How well we’ve done seems completely unrelated to tariffs.
Then the quote caps off with some back-patting about how we’ve only been around 250 years, and that our rise is unprecedented. Again seemingly unrelated to tariffs.