The most credible exception to the case for free trade policy is rooted in concerns about national security. If complete freedom of trade jeopardizes our national security, some protectionism arguably is justified because, as even Adam Smith insisted, although free trade is enriching and important, “defence … is of much more importance than opulence.”

As Smith’s statement implies, protectionism pursued for purposes of national defense will reduce the country’s material well-being, but this cost is worth paying if the protectionist measures result in a large enough enhancement of national security. (Caleb Petitt argues, not implausibly, that Smith really didn’t believe that national-security concerns justify a retreat from free trade. But that’s a topic for another time.)

While most free traders today admit the national-security exception, they also warn that it’s very easy to abuse, as shouts of “national security!” are given enormous deference by the public and politicians. Free traders also warn that, even when the national-security exception isn’t intentionally abused, extraordinary care is required to prevent its application from undermining its goal of promoting national security. The surprising practical difficulty of identifying trade-policy measures that are most likely to adequately protect national security is revealed by two recent developments regarding US trade with China.

Semiconductors

The Trump administration lifted controls that restricted Nvidia’s exports of its H200 chips to China. (The administration made this move in exchange for the US government getting 25 percent of Nvidia’s revenues from these sales — an unjustifiable condition, but also a topic for another time.) The Editorial Board of the Wall Street Journal worries that China’s access to these chips will boost that country’s prospects of surpassing the US in AI technology. The reason, as described by the Journal’s Editors, is that advanced chips such as the H200s “are needed to train advanced AI models.” Unable so far to develop their own advanced chips, the Chinese will now use Nvidia’s chips to further “Beijing’s ambitions to dominate biotech, quantum computing and military power.”

Quite possibly, the Trump administration’s lifting of these controls will indeed undermine US national security. But also, quite possibly not. By supplying the bigger market opened to it by access to China, Nvidia can perhaps take advantage of larger economies of scale that will further improve its chip-making efficiency. And more-efficient advanced microchip production by a company such as Nvidia will, in turn, strengthen US national security.

In addition, Nvidia officials and the White House argue that Chinese dependence on non-Chinese advanced chips diminishes China’s prospects of developing its own advanced chips — an effect that also plausibly promotes US national security by retarding Chinese chip technology. Although acknowledging that this argument has some merit, the Journal believes that it doesn’t carry the day. The Journal worries that the improved computing power that China gains as a result of its access to the H200 chips will further, rather than frustrate, Beijing’s quest for AI dominance.

I have no idea which of these two arguments — to not restrict Nvidia’s sales of H200 chips to China or to restrict these sales — is correct. Not only do both have merit, neither argument seems strong enough to clearly defeat the other. And that’s the point. 

Economic arrangements and interdependence today are so enormously complex that the apparent, indisputable validity of simple statements about the need to impose import or export restrictions in the name of national defense often dissolves upon inspection.

Critical Minerals

So-called “rare-earth” minerals present another such conundrum. Rare-earth minerals aren’t rare; they exist all over the globe, including in the United States, where new deposits of such minerals continue to be discovered. China, however, has become the world’s leading producer of these minerals, many of which have military significance. But guess which country is the world’s second-leading producer: the United States.

So why is the White House boasting of its recent deal with the Chinese government,  committing China to avoid restricting its exports of rare earths? The conventional national-security exception to the case for free trade would have the US government impose restrictions on US imports of rare earths in order to stimulate more domestic production of these critical minerals. Therefore, when the Chinese government imposed restrictions on that country’s exports of rare earths, it did for the US economy precisely what conventional national-security trade policy would have the US government do: protect the US market from foreign supplies of these critical minerals as a means of encouraging more US production.

And yet, even on narrow national-security grounds, the White House might here be correct.

The most obvious defense of the White House’s position is that ramping up US production of rare earths would take too long. Perhaps restricted access now to Chinese-supplied rare earths would weaken US national security in the short run so severely as to outweigh any long-run benefits. This possibility is both real and not remote, yet it is typically ignored by most people who invoke the national-security exception to the case for free trade. Tariff-induced expansion of any industry takes time. This reality surely means that, even for resources and outputs that are indisputably vital for national defense, national security sometimes is better served by continuing, without tariffs, our reliance on foreigners.

There’s a second reason why the White House might be justified in bragging of its rare-earths deal with Beijing (although this reason is unlikely actually to have occurred to today’s White House officials). Were China to continue to severely restrict its exports of rare earths to the US, the resulting expansion of the US rare-earths industry would necessarily entail a shrinkage of some other US industries. Even if this expansion in rare-earths production were fully achieved overnight, if the US industries that, as a result, shrink are industries that produce militarily significant outputs, the net effect on US national defense might well be neutral or negative.

This possibility is also one that’s not remote. The specialized knowledge and labor skills that are best used to mine and process rare-earth minerals are likely to be found in disproportionately large numbers in related industries, such as petroleum and ore production, rather than in economically distant industries such as leisure and entertainment. A tariff-induced expansion of US rare-earths production, therefore, might well come at too high a price in terms of the contraction of other militarily important US industries.

I write “might” attentively. This ambiguity is real and has relevance for policy-making. It should always be taken into account. No one knows if the national-security benefits of increased domestic production of rare earths will exceed, or be exceeded by, the national-security detriments of reduced domestic production of other outputs. 

Even if in any particular case the trade-policy decision proves to weaken rather than strengthen national security, greater recognition of such ambiguity would, over time, result not only in improved trade policy but also a stronger national defense.

Security Requires Humility

The above observations are offered not to render the national-security exception to the case for free trade null, but to caution against its overuse. The Trump administration’s recent treatment of the exportation of American-made advanced microchips, along with its actions regarding rare-earth minerals, each in its own way demonstrates (if unintentionally) the shallowness of the conventional advice to protect any and all industries that produce outputs judged to be important for national security.

Zohran Mamdani garnered a bit more than 50 percent of the vote in the recent New York City mayoral election. Have voters learned nothing from history? Apparently not. As Nobel laureate F.A. Hayek quipped, “if socialists understood economics, they wouldn’t be socialists.”

In the past six months, I count no fewer than twelve pieces in The Daily Economy that discuss — directly or indirectly — Mamdani’s socialist policies. Rent controls will decrease the quantity and quality of housing. Millionaire taxes would accelerate the exodus to more friendly states, to the great glee of Texas and Florida real estate agents. City-owned grocery stores would end in a bungle of Soviet proportions, increasing food deserts and raising prices. The drop in tax revenue from increased taxes (Laffer Curve, anyone?), combined with increased expenditures, would lead to another debt crisis. 

Things aren’t looking good for the Big Apple. I remember walking through Manhattan with the late, great economist Jim Gwartney, an early mentor who introduced me to Frédéric Bastiat. He said, “you know, Nikolai… I like to visit New York City once a year to remind myself why I don’t live here.” I don’t think I’d like living in New York City, but I do enjoy visiting a few times a year. The skyline, the commerce, the energy, the Metropolitan Opera, the museums, the restaurants (from posh and exotic to a slice of the world’s best pizza)… and that’s just Manhattan, with less than 20 percent of the population and, with eight percent of total surface, the smallest borough.

I’m going to scramble to make it to New York one last time before it goes to the dogs. Lag effects being what they are, I figure I have a good six to twelve months before things get bad. It will take a while for food and hotel prices to rise, or for the inevitable debt crisis to arrive. The poorest will feel the pain quickly; my tourist bill can take the hit. But it’s the crime that really worries me.

I’m not old enough to remember the 1970s in New York. But I am old enough to remember the late 1980s, which were still pretty gnarly. My family had just returned from a leafy suburb of Paris to leafy Princeton, New Jersey. I missed the café life and the French wines and cheeses — but Princeton is a quiet and peaceful slice of this green Earth. I still remember my first trip to Manhattan in the winter of 1988. I forget if we first arrived at Penn Station or the Port Authority Bus Terminal. Both were ghastly visions of Third World poverty, with hints of Mad Max. Bums were everywhere, in various states of dress — or undress — zonked-out druggies on the streets, sidewalks thick with hobos begging for money. I remember a visceral mix of horror — the memory still makes me reel, even after traveling to 70-plus countries — and pity, as I felt the urge to give something, anything, to every beggar.

Well, I’m sorry to say, despite my inveterate optimism, these sad images are likely to return. We can expect a dramatic uptick in New York City crime rates over the next five to ten years. To be sure, crime in New York has been falling, along with national trends, for the past 30 years. But localized spikes in specific categories demonstrate the fragility of these gains.

Shrinking tax revenues, rising rents and decaying housing, unemployment from higher minimum wages, and other business-punishing policies are likely to raise poverty dramatically. And, while social workers can be a powerful addition to police, Mamdani is already signaling a softer approach to crime. It doesn’t take a Gary Becker to predict a rise in crime.

Lessons from the 1970s

In a recent weekly AIER research meeting, I wondered aloud who might replace Charles Bronson in the next round of inevitable New York vigilante movies.

This led me to return to his 1974 classic, Death Wish. It was a pleasure to revisit the 1970s — the cinematography seems campy now, but it creates a gritty realism. I did not watch the next four movies, or the 2018 Bruce Willis remake. But the 1974 original contained some fascinating nuggets of political philosophy.

The movie opens with a tender, loving, idyllic scene in Hawaii. Middle-aged architect Paul Kersey (Charles Bronson) is on a beach vacation with his wife (Hope Lange). They are in love and happy. Then they go home to New York City. The tropical paradise immediately gives way to traffic jams and graffiti, in the loud concrete and steel jungle, as they make their way home to their Manhattan apartment from the airport.

Back at the office, a colleague complains about the city’s rising crime: “Decent people are going to have to work here and live somewhere else.”

“You mean people who can afford to live somewhere else,” Kersey retorts.

His colleague rolls his eyes. “You’re such a bleeding-heart liberal, Paul,” he says.

“My heart bleeds a little for the underprivileged, yeah,” Kersey replies.

The conversation turns to policing. His colleague suggests the city will need more cops than people to curb rising crime. Kersey is doubtful. “You’ll have to find other options,” he says. “No one could pay the taxes.”

Then comes the crime. Six minutes into the movie, we see our first act of violence. Two minutes later, it’s vandalism, followed by breaking and entering. Then Kersey’s wife is beaten by thugs in her own home, while their adult daughter is sexually assaulted. Kersey’s wife dies from her injuries. His daughter survives but falls into catatonic mutism and ends up institutionalized.

A grieving Kersey finds solace at the office. One night, he tentatively whaps a would-be robber in the head with a sock filled with quarters. Then work calls him to Arizona. There, we learn that he was a conscientious objector in a medical unit during the Korean War, reinforcing his image as a nerdy, mild-mannered, middle-class Manhattan architect. But we also learn he grew up around guns — and he is a crack shot.

The movie then comments on violence and crime. Kersey’s Arizona host argues that New York’s crime wave is no coincidence, given the city’s gun control laws. 

“Muggers operating out here [in Arizona] just plain get their asses blown up,” he tells Kersey. “If you ever get tired of living in that toilet, you’re welcome here.” Then he slips a gift-wrapped case into Kersey’s suitcase: a .32 revolver with ammunition.

Kersey returns to the grim reality of a graffiti-mottled, lawless New York. There is no progress in finding his family’s assailants. The police are overwhelmed, bureaucratic, and uninterested; the two victims are “statistics on a police blotter… and there is nothing we can do to stop it. Nothing but cut and run.”

Shortly thereafter, Kersey shoots and kills a mugger who attempts to rob him. He returns home to vomit — incidentally, much like James Bond in Ian Fleming’s original novels, who didn’t have the casual nonchalance of the Broccoli movies. Minutes later, Kersey opens fire on three muggers, killing two immediately and executing the third as he tries to escape. By the end of the movie, Kersey will have killed a total of ten muggers in self-defense.

From Hollywood to Philosophy

The movie raises a core question: If the police don’t do it, should we not do it ourselves? 

What, really, is “civilized”? Cutting and running, to live among others who have the means to stay safe? Or does a gentleman — or a lady, for that matter — defend himself as an armed citizen, protecting both himself and his community?

It’s notable how the fictionalized NYPD changes its tune when a numbing, overwhelming crime wave sparks vigilante action. Initially, they were apathetic about Kersey’s assault, assigning only a patrolman to the case. But when it becomes clear that the government’s monopoly on violence is being challenged, the case is bumped up — fast — to an inspector. Think of the leap from a single private to a colonel, complete with a task force of about 20 police officers and detectives. 

A crime wave is one thing, but “Murder is no answer to crime in our city; crime is a police responsibility,” complains the Police Commissioner as he pours resources into tracking the vigilante.

I note an important detail. The movie is billed as a vigilante film. I was expecting naqam (biblical vengeance, as taught to me by my late Jesuit mentor). But Kersey doesn’t seek out criminals to execute. In a crime-infested city, it may look like he’s taunting criminals, simply by walking alone after dark. But he is going about his business as anybody would in a functional city, with a functional government and functional police. He just happens to exercise his natural right to self-defense, where the Lockean Commonwealth has failed.

This brings us back to the big question. We’re all uncomfortable with vigilantism. As a good Lockean, I return to Chapter II, Section 13, of the Second Treatise of Government.

To this strange doctrine, viz. That in the state of nature everyone has the executive power of the law of nature, I doubt not but it will be objected, that it is unreasonable for men to be judges in their own cases, that self-love will make men partial to themselves and their friends: and on the other side, that ill nature, passion and revenge will carry them too far in punishing others; and hence nothing but confusion and disorder will follow, and that therefore God hath certainly appointed government to restrain the partiality and violence of men. I easily grant, that civil government is the proper remedy for the inconveniencies of the state of nature, which must certainly be great, where men may be judges in their own case, since it is easy to be imagined, that he who was so unjust as to do his brother an injury, will scarce be so just as to condemn himself for it…

And yet. And yet…

Around the world, long-distance competition, then cellphone competition, replaced state telephone monopolies. Federal Express and UPS have replaced an inefficient monopoly postal service. Even Denmark — a country that has traditionally been enamored of state solutions — recently ended the state’s collection and delivery of letters. Bitcoin is increasingly replacing failed fiat currencies. Private, tax-deferred retirement accounts (IRAs) arrived in the US 50 years ago; they have astronomically higher returns than Social Security.

So, why not security?

In America today, private security guards outnumber police two to one. To be sure, the latter enjoy a vast number of monopoly privileges, from use of force and arrest powers to qualified immunity that shields them from liability for actions committed behind the badge.

Returning to political theory, the anarcho-capitalist argues that security can and should be private, as the state can never be neutral and will inevitably serve its own interests. The minarchist and the Hayek/Friedman/Buchanan super-minimalists have crafted strong arguments for the necessity of neutral state-enforcement of rights. James M. Buchanan was uncharacteristically blunt: “The libertarian anarchists who dream of markets without states are romantic fools who have read neither Hobbes nor history.” 

But what if the state is demonstrably incapable of providing security? This was clearly the case in New York City in the 1970s. Adding insult to injury, the city, at least according to Death Wish, was more interested in protecting its monopoly on force than providing security.

The half of New Yorkers who didn’t vote for Commissar Mamdani don’t deserve the hell he is about to unleash on them. As to the 50 percent of economically illiterate, naïve, and rapacious New Yorkers who voted for socialism, do they deserve what they asked for? Was H.L. Mencken right when he opined that “democracy is the theory that the common people know what they want, and deserve to get it good and hard”? Or can we hope for forgiveness, for they know not what they do?

I hope I’m wrong. I really do. I wish all the best for New York City. I fervently hope Mayor Mamdani’s policies are squarely thwarted by Albany. But I don’t think I am wrong. And this invites a final question. 

Who will replace Charles Bronson in the next round of Death Wish movies?