President Trump’s announcement that the U.S. would impose tolls on the Straits of Hormuz shocked the usual suspects but makes perfect sense (I hope he re-reverses his subsequent reversal). U.S. taxpayers have been billed for three idiotic Middle East wars in the past 25 years, and this one is only prolonged because of the Straits’ vulnerability to malicious attack. Locally, Dubai’s response is the correct one: constructing new port facilities that avoid the Straits. Meanwhile countries such as the EU that have left themselves vulnerable to this economic blackmail and do nothing to assist the global policing job must expect to pay more for their apathy.

For the last 35 years, the world has been operating on Whiggish assumptions, that the optimal tariff policy is free trade and that tolls on narrow bodies of water, being impediments to free trade, were illegitimate. This idea gained currency in the early 19th century, when economists such as Friedrich List were faced with the remnants of the Holy Roman Empire, with 1,800 independent states, each of which imposed their own tariffs and tolls, so that there were 32 separate tolls on the Rhine from the Swiss border to the mouth. List came up in 1819 with the idea of a Zollverein (customs union) covering as much as possible of Germany to solve this problem.

However, as List pointed out himself in his 1841 masterpiece National System of Political Economy: “Gradually, I satisfied myself that the whole (free trade) doctrine was applicable and sound only when adopted by all nations. Thus, I was led to the idea of nationality; I found that the theorists kept always in view mankind and man, never separate nations.” List’s idea, adopted by Bismarck, became the foundation of Wilhelmine Germany, the most successful economy of the 19th and early 20th centuries.

The time has come again for the United States, run by the German-ancestry Donald Trump, to take its economics from the Kaisers. With China Communist and Russia and Iran hostile, all of them significant players in the world economy, we clearly do not live in the globalist dreamworld postulated by Whiggish and other free trade fanatic economists. Furthermore, the EU’s tendency to impose ever more damaging regulations, for “climate change” and other idiocies, which destroy those countries’ own economies but are increasingly aimed at damaging U.S. interests, brings a new factor into the equation undreamed of in traditional free-trade ideology.

Regulations and embargoes are the most damaging possible interference with free trade, because they impose an infinite cost on it, making it not merely expensive but impossible. Probably the only useful global body would be a “Deregulatory Commission” whose sole purpose was to shoot down national and supranational regulations that immiserate the world’s people – the Commission should not have the power to impose any regulations of its own, of course.

In this light, Trump’s proposed (and subsequently withdrawn) 20% levy on shipping through the Straits of Hormuz is well considered. The United States is being forced to devote huge resources to keeping the Straits open and should be paid for doing so. The U.S. does not need Middle East oil and has little need for anything else that transits through the Straits of Hormuz. Conversely, the EU, China and India have an existential need for Middle East oil, yet pay nothing to protect the Straits, even interfering to obstruct and damage the U.S. work in protecting them.

That is not to say that the Iran War was well conceived; it was not, any more than were the other U.S. interventions in the Middle East that have littered history in the past quarter-century. The Middle East has always been a backward and hostile region, in which the U.S. lacked sufficient understanding to “regime change” successfully, and where every U.S. intervention has ended and is likely to end in a quagmire. The U.S. had some need for Middle East oil between roughly 1970 and 2020, but the invention of “fracking” and the U.S.’s general acquiescence in it (with some utterly foolish exceptions like New York and California, as always) has removed that need. The EU, conversely, is utterly dependent on the Middle East, because of its bigoted regulatory refusal to tolerate fracking in, for example, the Polish/Galicia oil/gas fields, the world’s first, whose development preceded by half a decade Colonel Drake’s activities in Pennsylvania.

One understands the need to defend Israel, but that should be done by supplying arms and defensive support if needed, entirely without offensive operations. Otherwise, Israel far from being America’s “greatest ally,” becomes a highly equivocal one, constantly dragging the U.S. into trouble in a region where it has no interests, without contributing anything at all to solving U.S. problems in other regions.

The most effective way of paying the U.S. for its work in keeping the Straits of Hormuz open is through a toll, which can be shared with Iran and the other Hormuz-bordering states once the cost of the war has been recouped and peace has broken out. This will encourage initiatives such as Dubai’s opening a port outside the bottleneck and other states building pipelines, etc., which is all to the good, removing an economic bottleneck/vulnerability. There is no reason why the oil consumers in the EU, India and China should not bear the cost of assuring their own supply, especially when, as in the EU’s case, the need for Middle East oil is through sheer leftist witlessness.

Tariffs are also an excellent means of recouping costs of military operations, and indeed are better in this respect than embargoes, especially partially-enforced embargoes such as those on Russia. The current ineffectual embargo imposes huge costs on Russia without doing anything to recoup the costs to the West of supporting Ukraine; it would be much more economically efficient to impose a high tariff on both sides, which could be reduced once military costs had been reimbursed. Russia, as a primarily free-market economy with abundant natural resources, should be re-integrated as soon as possible into the global economic system; the sanctions have gone on far too long.

Economic sanctions have shown themselves always ineffectual and politically damaging ever since in 1936 an emotional speech by Emperor Haile Selassie caused the League of Nations to impose sanctions on Mussolini’s Italy, thereby driving him into the arms of the much more dangerous Hitler. When imposed for decades at a time, as on Iran since 1979, they prevent the possible openings to the regime that could have caused it to move in a more Western-friendly direction, greatly improving the lives of 90 million Iranians. I wrote this opinion as a lone voice in August 2001, when the U.S. Iran-Libya Sanctions Act had just been renewed and Iran had the reformist Mohammad Khatami as President. Needless to say a freak terrorist attack shortly thereafter sent U.S. policy idiotically in the opposite direction for what is now a quarter of a century.

The U.S. Supreme Court therefore needs to butt out of the tariff argument, on which it has no expertise (also that on birthright citizenship, on which the Founding Fathers, seeing today’s circumstances, would undoubtedly vote the opposite way to the Justices). The President needs to set tariffs, which are an important tool of foreign policy and a moderately important source of revenue (only not dominant because the Federal government has grown so bloated).

The one control on the President, ideally imposed by Congress, is that he should not be able to grant exemptions to his buddies and the Fortune 500 – such exemptions bias the U.S. economic system even further in favor of large corporate bureaucracies than it is already, damaging the ever-beleaguered entrepreneurship.

With full tariff powers, an economically competent and enlightened administration (and after the last quarter century, let us pray that we get no more examples of the opposite) can manage the world’s difficulties, deploy U.S. forces where they are most needed and apply useful economic pressure to dragoon the world’s bad actors into behaving themselves.

Friedrich List pointed out the idiocies of free trade Whiggery almost two centuries ago. It is time to apply the lessons he taught us, in the intelligent tradition of Otto von Bismarck and the ever to be revered Kaiser Wilhelm I (his grandson, alas was less enlightened).

Hoch der Kaiser! Hoch der Drumpf!

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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.)