Viewing President Trump’s Tariff Wars Through The Wealth of Nations, The Properties of Money, Same As Ever, and Right Kind of Wrong: The Science of Failing Well

1. The Author and Publication Information of The Wealth of Nations

The author of An Inquiry into the Nature and Causes of the Wealth of Nations (The Wealth of Nations) is Adam Smith (1723-1790), a Scottish economist and philosopher.

• First Edition Publication: March 9, 1776
• Republications (During Smith’s Lifetime): The book saw up to the 5th edition republished during Adam Smith’s lifetime. Following the first edition in 1776, revisions led to the 3rd edition in 1784, the 4th in 1786, and the 5th in 1789. Countless editions have been circulated since, and various translated and edited versions are currently being published.

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2. The US Tariff Wars from the Perspective of The Wealth of Nations

The current tariff wars (trade wars) between the United States and other countries directly contradict Adam Smith’s philosophy of free trade. The Wealth of Nations criticized the dominant ideology of Mercantilism at the time and advocated for free trade. Mercantilism viewed a nation’s wealth as the accumulation of gold and silver, thus favoring protectionism, which encouraged exports and severely restricted imports through tariffs.

From Adam Smith’s viewpoint, the current tariff imposition by the US can be interpreted as follows:

• Counterproductive to National Wealth: Smith argued that the essence of national wealth was not the quantity of gold and silver, but the increase in the exchangeable value of the entire nation’s produce (the annual produce of land and labor). The way to increase national wealth is through the division of labor and free exchange (trade), which is maximized through free trade. Tariffs hinder this free exchange, ultimately detrimental to a country’s total output and the increase in its citizens’ annual income.
• Sacrifice of Consumer Interests: Smith criticized the act of imposing tariffs on foreign goods competing with domestic products, stating that “the interest of the domestic consumer is manifestly sacrificed to that of the producer.” Tariffs raise the price of foreign goods, forcing consumers to bear a higher cost, and create an environment where domestic producers can maintain high prices without competition, potentially leading to a decline in efficiency.
• Obstruction of the ‘Invisible Hand’: The principle of the ‘Invisible Hand,’ where individuals’ selfish actions in a free market unintentionally lead to the benefit of the whole society, only presupposes minimal government intervention (such as national defense, justice administration). Government intervention, like tariffs, distorts the market’s autonomous order and hinders the efficient allocation of resources.
• Risk of Retaliation: Tariffs risk provoking retaliatory tariffs from trade partners, leading to a global Zero-sum game and eventually resulting in economic losses for all nations.

Therefore, from Adam Smith’s perspective, the US tariff wars, while perhaps yielding short-term political gains or protecting specific industries, would be considered a Mercantilist error that is detrimental to the long-term increase of national wealth for both the US and the global economy.

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3. Other Books, the Current Global Economy, and South Korea’s Strategy

Let’s connect the perspectives of the other books you read—The Properties of Money, Same As Ever, and Right Kind of Wrong: The Science of Failing Well—with the current global economic situation and explore South Korea’s response strategy. The question of whether the US’s unilateral trade policy is “digging its own grave” is a sharp one.

Analysis of the Current Global Economy: The Side Effects of America’s ‘Super-A’ Behavior

The current situation, where the US acts like a ‘Super-A’ (the overwhelmingly dominant party) in trade negotiations based on its economic power and the dollar’s status as a key currency, can lead to the following side effects:

• Erosion of Trust Capital: The US’s actions of using power unilaterally to pressure allies and partners, and easily reversing trade agreements, causes a loss of Trust in the international community. Similar to the concept of ‘the personality of money’ emphasized in The Properties of Money, trust capital is essential for long-term prosperity in inter-state relations. A breakdown in trust makes long-term cooperation difficult, which could ultimately harm US hegemony.
• Increased Inefficiency and Immutable Human Psychology: The rise of powerful leaders like President Trump and protectionist policies is linked to the ‘Human Psychology’ as presented in Same As Ever.
  • Fear and Greed: The backdrop of the trade war reflects the immutable human psychology of fear (of losing domestic jobs) and greed (to maximize unilateral benefits).
  • Lessons from History: As Same As Ever suggests, the current trade conflict, driven by fundamental human impulses, is a modern manifestation of patterns that have repeated throughout history. The unpredictable, complex nature of this conflict should be anticipated based on historical precedents.

South Korea’s Strategy to Safeguard its Economy

For a middle-power country like South Korea caught between nations with powerful capital and large populations, safeguarding the economy requires applying the lessons from these books:

• Applying The Properties of Money: Financial Independence and Skill Acquisition
  • Understanding the Nature of Capital: Korea must reduce its economic dependence on specific great powers and foster the ‘skill to earn and protect money’ by generating its own wealth through technological innovation and the development of high-value-added industries.
  • Diversified Investment: In terms of diplomacy and trade negotiations, Korea should diversify its dependence on specific countries and strengthen relationships with various partners like Europe, Southeast Asia, and Japan to mitigate economic shocks.
• Applying Same As Ever: Long-Term Vision and Patience
  • Unwavering in Short-Term Volatility: Since human behavior and market cycles are Same As Ever, Korea must uphold the immutable principles (technological prowess, human capital, institutional stability) and invest in long-term growth engines without being swayed by short-term variables like President Trump’s actions.
  • Cost of Short-Term Gain: The country must remember that short-term protectionist gains come with long-term costs, a lesson history has repeatedly shown, and it should not easily abandon the principles of free trade for immediate profit.
• Applying Right Kind of Wrong: Flexibility and Learning Ability
  • Learning Through Failure: The book Right Kind of Wrong: The Science of Failing Well advocates for treating economic shocks (failures) from trade wars or global supply chain realignments as ‘learning experiences.’ Korea needs the flexibility to analyze these ‘wrong’ outcomes and quickly adjust its policy and industrial direction to foster growth.
  • Embracing Calculated Risk: As external uncertainty increases, the government and businesses must lead innovation by taking the ‘right kind of risk’ in new technologies and markets to secure future industrial dominance.

In conclusion, while the US’s use of its superpower status to enforce unilateral trade policies may yield short-term benefits, it is a return to the inefficient protectionism that Adam Smith warned against in the long run, ultimately ‘digging its own grave’ by hindering global economic growth. South Korea must safeguard its national strength through economic independence, trust-based multilateral diplomacy, and flexible innovation amidst the great powers’ rivalry.

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Would you like to focus on any one of these books for a deeper dive into its relevance to the current global economy?

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