Why do so many people (especially politicians) favor high tariffs, “managed trade,” embargoes and domestic subsidies, all of which — first as “mercantilism” and then as “protectionism” — have been debunked, repeatedly (demonstrated as ineffective economic policy), since Adam Smith’s famous 1776 attack?
Economist Donald Boudreaux, in an excellent defense of economic principles, explains why the Bernie Sanderses and Donald Trumps of this world support anti-free trade nostrums — out of sheer ignorance:
The typical politician opposes free trade because he … doesn’t understand that the purpose of trade — any trade — is to enrich people as consumers and not to enrich people as producers. He doesn’t understand that exports are a cost and that imports are a benefit; he thinks that it’s the other way ’round. He doesn’t understand that the specific jobs lost to imports are not the only employment consequences of trade; he doesn’t understand that trade also “creates” jobs in the domestic economy.… He, in short, doesn’t understand the first damn thing about the economics of trade.
But what protectionists do understand are direct appeals to “good results” (like more and better high-paying jobs). The fact that their proposals throw a monkey wrench into the diverse mechanisms of trade, yielding worse results?
They just don’t see them.
Why? Because real economies are complex, and protectionists lack the science that would help them trace the consequences of their policies.
The fact that they’ve focused their whole attention on the business of “governing,” and making simplistic, direct appeals to people who are also uneducated in economic principles, doesn’t help.
This is Common Sense. I’m Paul Jacob.
4 replies on “Why Protectionism”
That the purpose of trade is to ‘enrich people as consumers’ is all well and good — so long as consumers have an income source. Companies are no longer importing just goods — they’re importing workers as well. Americans are losing their jobs to foreign workers and they are forced to transfer their knowledge to those new workers before being summarily dismissed. Many of these same companies are exporting jobs. They are closing facilities in the US and opening them overseas. Free trade might be good — for those who can afford the imports. Many Americans can’t afford them. They have no source of income, thanks to outsourcing and offshoring.
American workers can compete if the government will get out of the way. Current policies supposedly aimed at “protecting” US workers are clearly NOT working.
What politicians see is that a hundred million bucks to an interest is noticed and sought by that interest, but a half-buck from each of two hundred million taxpayers is hardly capable of being seen, let alone being opposed. This is the very same whether the subsidy is direct or from protectionist legislation.
I have two comments.
First, to better understand the fallacy of “protecting jobs” read “Ecnomics in One Lesson,” By Henry Hazlitt. Protecting jobs doesn’t work.
Second, I think that the real reason many people oppose purported “Free Trade Agreements,” is that they are anything but that. The agrements, that can exceed the heft of a phone book for a major metro area (remember those) are really all about picking winners and losers and are in the imortal words of H. L. Menken who, writing about elections, called them “An advance auction on stolen goods.” This is especially true with respect to agreements such as NAFTA.
If your want to have real free trade (staying with the NAFTA analogy) between Canada, Mexico and the US, simply apply this language and save the other 1,000 pages of political pork:
“No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.”
This is from Article I, Section 10 of the US Constitution and effectively created a “free trade zone” in the US. Guess what, it really worked! NAFTA and all the other alleged Free Trade Agreements are no such thing.
OK, there you have my two cents.