President Donald Trump’s tariff agreements with the EU, Japan and other countries have changed the economics of world trade; they have also revolutionized global politics. Far from the “New World Order” trumpeted by such Marxist-globalists as Klaus Schwab, late of the World Economic Forum, we are now returning to a much healthier late-19th century existence, of multiple major powers competing, with few central organizations and the occasional political/economic genius of an Otto von Bismarck (1815-98). This Old World Order promises to increase human happiness a great deal more than Schwab’s failed Great Reset.

The proposed New World Order rested on a number of fallacies. One, born out of the catastrophes of World Wars I and II, was that world agencies, eventually a world government, could prevent disputes and force policies into a rational template acceptable to all. The League of Nations and the United Nations had been built on this theory, and their almost complete failure did not prevent such institutions as the World Economic Forum from attempting to increase the scope and power of globalist top-down policies.

This noxious dream of world government fell down on what I have called the Keynesian Bureaucrat Fallacy: that bureaucrats given unchecked power can be relied upon to pursue policies in the interests of all. In practice, as Nobel Laureate James Buchanan taught, bureaucrats follow their own interests, which may either derive from anti-market fanaticism or from substantial side-payments by large vested interests. Either way, there is no escape from their ruling; no effective method has ever been found to ensure proper democratic control over global bodies, and without such control, they are purely a bureaucrats’ playground. Since bureaucrats are naturally people who avoid the rough and tumble of competing in a free market, global governments are inevitably socialist if not worse. Overall, global government is by definition tyrannical and economically illiterate and should thus be rejected.

International institutions are damaging because of their lack of democratic control, even if they do not aspire to be world governments. The United Nations institutions are nests of subversion of Western civilization, whereas the Hague Court exists solely to harass any leader who attempts to thwart the wishes of the global left. Thus, the indictment of Benjamin Netanyahu and the recently expressed wish of a leader of Jeremy Corbyn’s new leftist party to bring the British government before the Hague – for what it is unclear. One could imagine an idealized court that would arraign John Major, Tony Blair, Theresa May, Boris Johnson and “Squishy” Rishi Sunak for destroying a once proud culture and economy, but the Hague Court is the opposite of such a body.

Another shibboleth of the New World Order was the fetishization of free trade and free immigration, under the assumption that if national borders were broken down for both goods and people, everyone would sing “kumbaya” (Wikipedia describes that phrase as a “thought-terminating cliché” but this column proposes to carry on thinking, thank you!) In practice, of course, free immigration wrecks the living standards of countries into which immigration is free; the illegal immigrants are inevitably the dregs of the societies they have left and so have an immense impoverishing and criminalizing effect on the countries to which they move.

As for free trade, that is less damaging than free immigration, because it leaves providers of domestic services relatively untouched – with free trade the barber in Boston can continue to make more than the barber in Benin, whereas with free immigration he cannot. Nevertheless, the arguments for free trade work only in a world in which exchange rates are fixed and all countries are mutually friendly. Once we accept the fact that exchange rates fluctuate and that some of our trading partners may wish us ill, the argument for tariffs, at least at a low level, becomes overwhelming.

I wrote in January about the three economic policy possibilities open to the incoming Trump administration.

Of the three policy approaches outlined there, the Trump administration has clearly abandoned Reagan (though Reagan was somewhat more protectionist than his acolytes admit). The rhetoric has all been in the direction of McKinley – or of the infamous Smoot-Hawley Tariff, as Trump’s opponents would maintain. However, the practice has been that Trump, while not “Always Chickening Out” as his opponents claim, has been satisfied with a standard tariff rate of around 15%, with only the recalcitrant (Canada, under the odious Mark Carney) or the hostile (China, Brazil under its present government) tariffed at a higher rate.

That is not the McKinley Tariff, which imposed duties of almost 50%, or the Smoot-Hawley Tariff, which imposed duties at a peak rate of 59% (though some items were free from duty). It is much closer to the Tariff of 1857, imposed by the two much-maligned Doughface Presidents, Franklin Pierce and James Buchanan, in which the average tariff rate was about 17%. As I have explained previously, the economic damage done by tariffs varies approximately with the square of the average tariff rate. Hence the Trump administration’s tariffs, at around the same level of the Tariff of 1857, are only around 15% as economically damaging as the McKinley or Smoot-Hawley Tariffs. Since the U.S. did fine under McKinley, we can confidently assume it will do fine under Trump. Now, if Trump could reduce the size of the Federal government to the Pierce-Buchanan norm and like them follow Thomas Jefferson’s mantra of devolving almost all government functions to the states, we would be getting somewhere!

With globalism discredited, tariffs back in favor and countries operating fully independently with varying degrees of friendship and internal freedom, we are back in a world we have been in before: that of the global system of 1870-1914, after British hegemony had effectively ended and Germany and the United States had emerged as major powers. That world ended in the disaster of 1914, but it did not have to do so. With hindsight, we can see that the system of rigid competing alliances begun with the Franco-Russian Alliance of 1894 and intensified by the infamous Entente Cordiale of 1904 was by far the most important cause of the crazed rearmament of 1905-14 and the global disaster to which it led after the assassination of the unfortunate Archduke Franz Ferdinand.

To get a better idea of how such a world might evolve, we should assume that the disaster of competing blocs is avoided (so Vladimir Putin should not be alienated by the West and driven into iron-clad alliance with China). We should look instead at the earlier years of the 1870-1914 period, when German Chancellor Otto von Bismarck steered German economic policy in a direction that was close to optimal, producing massive economic growth and innovation. He also maintained an intermittent Russian and Austrian alliance, the Drei Kaiserbund, that checked France’s revenge fantasies derived from their defeat in the 1870-71 Franco-Prussian War and their loss of Alsace-Lorraine.

Economically, Bismarck introduced Germany’s first protective tariff in 1879, as the flood of grain imports from the U.S. and elsewhere in the mid-1870s had made Prussian landowners uncompetitive and converted them from free trade to protection. The average tariff rate in the 1879 law was only about 5%, but several further tariff increases were imposed until Germany’s 1902 Tariff, which was much more industrially protectionist, with an average rate of 21%, still far below contemporary U.S. tariff rates, though comparable with France’s 1892 Méline Tariff average of 20-25%.

Bismarck’s other distinctive economic policy was his complete rejection of industrial regulation. Not only did he refuse to bring in regulations on child labor and factory conditions, as were already common in other countries, he also refused to obey industry regulations on his own very substantial estates, worrying his rule-following estate managers. In an era when “Progressivism” was beginning to stir in Britain, France and even the United States, Bismarck’s preference to allow German industry to develop freely made building new factories and developing new industries far quicker, cheaper and easier than in other countries.

The result was a huge surge in the German economy. In 1815, Germany was backward, divided and poor, so sluggish in development that the young Karl Marx, growing up in the former Electoral Bishopric of Trier, thought capitalism was a system that benefited only foreigners. By 1914 Germany had the strongest economy in Europe. It had reached that point by growing much faster than its competitors, especially in 1871-96. Chemicals, electric equipment and automobiles constituted the Second Industrial Revolution; those industries were all developed mostly in Germany (Werner von Siemens developed the dynamo several years before Thomas Edison got into the business and took far fewer wrong turnings in building his capability). Bismarck’s mildly protectionist and anti-regulation policies were critical to allowing that economic surge to occur.

Bismarck’s example shows us that deregulation is vital for success in the Old World Order. In that context, EPA Administrator Lee Zeldin’s rescinding of the 2009 Endangerment Finding, that allowed the Environmental Protection Agency to meddle with carbon controls, is a huge step forward, estimated to end $1 trillion in output losses as foolish “climate change” regulations are scrapped.

The “New World Order” was a nightmare Marxist dystopia, in which we would own nothing – no, we would not have been happy! The Old World Order, if implemented fully by the major countries, will lead to a richer, happier, less regulated property-owning future for all of us.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)