Restrain the Navy to Save Domestic Jobs
Stop subsidizing the security of corporations outside U.S. territorial waters
With all the focus on tariffs and trade deficits, ostensibly imposed to bring jobs back into the United States, it may be time to examine the imbalances created by the production of international security. American taxpayers suffer an overwhelming disparity from subsidizing security outside the jurisdiction of the United States relative to risks to their domestic tranquility. Alleviating the burden of foreign security assistance, protecting shipping lanes, and other international interventions is an underappreciated field for balancing accounts between relative tax-payers and tax-consumers.
The often-heard complaint of “shipping jobs overseas” while domestic manufacturing and production languish only looks at one manifestation of the political manipulation of international trade. Economist Murray Rothbard decried the North American Free Trade Agreement (NAFTA) as not only favoring politically connected “Big Businesses” at the expense of average market players, but also acting as a vehicle for cartelizing industries and entrenching a government led interventionist economy. For Rothbard and other free market advocates, international agreements are not merely about domestic jobs and trade balances but about subjecting all economic affairs to political control.
https://mises.org/mises-daily/nafta-myth
Following World War II, trade policies involved rebuilding devastated friendly nations in Europe and Japan while building an alliance against communist and other out of favor nation-states. Access to capital, the American consumer market, and technology transfers were a means of “spreading democracy” by having taxpayers subsidize politically connected export firms, financial institutions, and multinational corporations. These arrangements were also a means for American and globalist elites to control international political regimes to ensure compliance with the new, U.S. led, global order.
There is nothing new about this type of arrangement. It has gone by many names in the past, most notably mercantilism. However, the salient features of interventionism, no matter what it is called, involve the alignment of political officials and politically connected economic actors. Mercantilism and interventionism both involve the marriage of the force of law with the moneyed elite in a way that shapes the economic landscape to favor the few at the expense of the individual or smaller, less politically influential organizations. It is a regression to a centralized leviathan state dictating policy over ever-increasing swaths of private life.
The United States, as a federation, was never immune from the tendency of cunning individuals to use the power of government for their own ambitions. Among the American founding generation, according to economist Tom DiLorenzo, Alexander Hamilton was an “old-fashioned mercantilist” who wanted to pervert the newly formed general government into a mechanism that centralized power, subsidized internal public works, indulged in banking, accumulated debt, and imposed oppressive taxes to benefit the wealthy while buying their loyalty through a spoils system. Many of these impulses were held in check by the Jeffersonian-Jacksonian influence that largely dominated the United States until the middle of the 19th Century.
https://mises.org/library/book/hamiltons-curse
The United States military has historically been at the forefront of foreign mercantilist interventionism. Not only did Army troops help expand the territorial borders of the United States upon the North American Continent, but the Navy also helped secure shipping lanes and facilitate access to foreign ports, whether welcomed or not. The infamous case of Commodore Perry in 1853 forcibly demanding Japan open to trade with the United States and offer coaling stations for U.S. merchant vessels transiting to China, offers one point of illustration.
https://mises.org/mises-wire/free-trade-japan-circa-1853
In the early part of the 20th Century, the U.S. military was used to directly support well-connected American businesses operating on foreign soil. Retired Marine Corps Major General, and two-time winner of the Congressional Medal of Honor, Smedley D. Butler conveyed in his 1935 book War is a Racket, conveyed how his units were involved in providing tax-subsidized security services for Rockefeller Oil in China, and the United Fruit Company, among others, in the Caribbean and South and Central America.
The pace of military led foreign intervention to the benefit of politically connected multinational corporations has only accelerated post-World War II. Murray Rothbard highlighted the “war for oil” thesis in the runup to the first Iraq War, noting that it was an “effort on behalf of Rockefeller control of {the} Middle East.” The subsequent Global War on Terror only expanded the range of beneficiaries, the area of operations, and scope of the industrial complexes involved. The vast array of foreign aid, military assistance, and international development contracts issued by governments and globalist institutions needs to also be included in such tallies.
For now, I’d like to focus on the United States Navy’s (USN) role in securing international shipping lanes and also envision what the world would look like if taxpayers were let off the hook for subsidizing the security of multinational corporations operating outside the jurisdiction of the United States. Not only does the USN have a long history of waste and corruption, but even if it was operating at maximum efficiency and with complete integrity the fact that is dispatched around the world creates a moral hazard that distorts the global political economy and harms the “American jobs” today’s tariffs are intended to assist.
https://mises.org/mises-wire/us-navy-history-waste-and-corruption
First, the general government of the United States is chartered to arrange for the common defense of the United States and, to this end, can lay and collect taxes to provide and maintain a navy, as well as define and punish piracies and felonies committed on the high seas or against the law of nations. According to maritime law customs, a coastal state’s sovereignty extends twelve nautical miles from its baselines and includes the airspace above as well as the seabed below. However, the high seas are defined as the maritime areas that lie beyond the jurisdiction of a political state.
This creates several problems. First, punishing felonious acts and piracies that occur on the high seas does not necessarily require funding patrol services that venture outside a state’s territorial waters. The general government of the United States could simply prosecute cases that are reported within its jurisdiction and issue arrest warrants for bounty hunters, without sovereign immunity or privileges, to pursue the accused.
However, that has not been the interpretation put into practice. During the campaigns against piracy in the so-called Barbary Wars of 1801-1805 and 1815-1816, Congress never formally issued a declaration of war but authorized the USN to protect “American” commerce and seamen. President James Madison even requested a formal war declaration but instead congress deferred to the chief executive’s judgement and authorized operations in the Atlantic Ocean, the Mediterranean and adjoining seas.
Herein lies a second problem. Congress started dispatching the USN outside of its jurisdiction during the first generation after the U.S. Constitution’s ratification. It was a descent into the same pattern of empire that the American Revolution sought to escape.
Congress has the power to declare war or issue letters of marque and reprisal but, in the case of piracy from the Barbary Coast, they did neither. Instead, Congress granted the commander-in-chief an authorization to use military force based on the chief executive’s discretion. To exercise military force, congress can either declare war or issues letters of marque and reprisal. There is no delegated authority in the Constitution for Congress to grant ambiguous military force authorizations to the executive branch. This unconstitutional legislative action was repeated after the 9/11 attacks and gave rise to the disastrous Global War of Terrorism (GWOT) that marred the first two decades of the 21st Century.
The situation creates a moral hazard wherein American taxpayers are compelled to subsidize patrol services, security escorts, and prosecute crimes anywhere in the world. It also opens the door to empire building through “gunboat diplomacy” and other foreign interventions, like those described by Major General Smedley Butler. Furthermore, returning to the domestic economy implications, it subsidizes the security of American corporations operating outside the United States.
Consumers, in general, only assess the value of a product based on the price at the point of sale. Entrepreneurs and firms, on the other hand, must calculate the profitability of a business line by imputing costs for the factors of production. Allowing political intervention to socialize the costs of operating overseas by leveraging the tax-funded navy to secure international shipping routes, for instance, only distorts the signals conveyed through market signals. Absent the crucial feedback provided by unhampered market transactions, there is no way to accurately know if consumers authentically value a product or service procured from overseas at a level that justifies the entrepreneurial risk.
Without the USN patrolling the high seas, would domestic producers operate outside the United States at the same levels witnessed today? It is impossible to provide empirical data given the current arrangement of state-based navies dominating the globe. However, sound political-economic reasoning dictates that subsidies incentivize human and institutional behavior. Corporations are encouraged to operate overseas because the United States Navy is largely providing for their maritime transportation security. Consequently, more businesses move across international waters than would otherwise, if securing foreign corporate operations came at their own expense.
https://mises.org/online-book/new-liberty-libertarian-manifesto/chapter-14-war-and-foreign-policy/foreign-policy-program
Retired Marine Corps Major General Smedley R. Butler advocated a policy of restricting the USN, and all the other U.S. armed service branches, from operating over five hundred miles from the shores of the United States. However, even this geographic zone may leave entirely too much latitude for free riding and geopolitical mischief. After all, many of the “Banana Wars” Butler participated in occurred in South and Central America, right in the American backyard. Five hundred miles of American imperialism still presents a threat to Mexico, Cuba, the Caribbean, Canada, the Arctic, and Russia.
Instead, politically controlled, tax-funded military bureaucracies should be kept within territorial boundaries and leave protective services in unincorporated seas to a free market of competitive providers. The maritime domain has a rich history of spurring entrepreneurial innovations, such as insurance, re-insurance, lighthouses and other positioning systems, intelligence products, piloting services, and a variety of risk-management practices, as well as privateering.
Entrepreneurial security production should be encouraged through a policy of restraining the U.S. Navy to solely patrolling territorial waters. Private companies should be kicked off of the taxpayers’ dole and compelled by circumstances to arrange for their own security when operating outside the United States. Only then will consumers be able to signal an authentic demand for overseas materials and goods. Rather than imposing tariffs, simply cease subsidizing the security of multinational corporations and let the market process inform consumptive and business choices through undistorted price discovery.
In an environment where tax-funded protective services are restricted to politically incorporated territories and multinational corporations are required to secure their foreign operations via contractual arrangements, what do you think the impact would be on the amount of jobs shipped overseas?