Protectionism is a disease that feeds on fear and ignorance.
With an unusual amount of economic uncertainty sparking an unusual
amount of economic fear, protectionist sentiments today are growing.
Blatant protectionist pundits such as Lou Dobbs, and blatant
protectionist politicians such as Sen. Sherrod Brown (D-Ohio) and Sen.
Byron Dorgan (D-N.D.), enjoy larger platforms than they had even just a
few years ago.
Protectionism's allure is understandable. "If we make it harder for
Americans to buy foreign-made goods," alleges the protectionist, "we
increase the demand for American-made goods. With more goods being made
in America, more Americans will find jobs. QED."
In this case, though, "QED" should be read as standing for "Quite Especially Dumb."
That's the opening to my latest piece in the Pittsburgh Tribune-Review, in which I then goes on to pose some "Bastiatian" questions to protectionists, such as,
1. You, Mr. Protectionist, say that low-priced imports harm us. Can
you explain why access to low-cost goods and services makes us poorer?
2. You answer question No. 1 by saying that allowing American
consumers to buy low-priced goods and services from abroad causes
American producers — who can produce those things only at
uncompetitively higher costs — to lose their markets. When these
high-cost American producers lose their markets, high-wage American
workers lose their jobs. You insist that it's this displacement of
high-cost producers in the U.S. by low-cost producers abroad that must
be stopped.
So do you, Mr. Protectionist, also believe that Uncle Sam should
force us Americans to pay a high tariff on sunlight before we are
allowed to use it? After all, sunlight is an enormously beneficial
product that Americans routinely import at no cost at all! (The sun
charges us nothing for the valuable heat and light that it
exports to us daily.) Don't you worry that this dirt-cheap import that
floods our market every day unfairly shrinks the market for
American-made goods such as light bulbs, flashlights, central-heating
units and down blankets?
If you don't support blocking sunlight with a tariff or
with some other government restriction — why not? Please explain how
one low-cost yet valuable import (sunlight) differs from other low-cost
yet valuable imports (such as steel from China or textiles from
Malaysia).
Podcast RSS Feed
Full EconTalk Text
{ 50 comments }
← Previous Comments
Now you've done it! They'll be taxing sunlight for sure!
I'd pose an even more fundamental question:
What justifies the notion that some individuals have the right to initiate the use of physical force to veto the voluntary decisions of other individuals to engage in an exchange of values — and instead force one of the parties to exchange values with the force-initiating group or with those whom the force-initiating group favors?
The short answer is that nothing on earth justifies it — not if one believes that all individuals possess equal rights — not if one rejects the notion that some individuals have the right to claim and enforce some amount of involuntary servitude on the part of others.
There is no right to demand that others be forced to trade with you, against their will and against their judgment. Whatever values others may have to offer in trade belong to them, not to the protectionist, not to society and not to the government. They, and they alone, possess the sole right to decide with whom and on what terms they will trade those values.
Your question is so inane and facetious, it doesn't really deserve an answer. But here is one anyways. Sunlight is different from steel in that:
* Putting a tariff on foreign steel would result in new American jobs to produce steel domestically.
* Putting a tariff on Sunlight would not result in new America jobs to produce sunlight.
Simple enough for you?
A Protectionist,
What you CALL the goods or services in question is irrelevant. The sun supplies warmth — so, too, do down comforters, woolen socks, central-heating units, etc.
The sun supplies light — so, too, do electricity, light bulbs, flash lights, candles, etc.
Restricting Americans' use of sunlight will increase the demand for workers who produce warmth and light — which means, for workers who produce and service the likes of central-heating units, electricity-generating plants, down comforters, etc.
A Protectionist wrote:
Simple enough for you?
No. You didn't answer my question: What gives you — or anyone else — the right to dictate to me whom I may or may not buy steel from?
P.S. What about the American jobs that will be lost when I am forced to spend less on purchasing some American products because I'm now forced to spend more on steel? Those jobs don't count?
Yes, you are quite simple enough.
A protectionist:
"Putting a tariff on Sunlight would not result in new America jobs to produce sunlight."
Ever heard of the term substitutes?
http://en.wikipedia.org/wiki/Substitute_good
You all haven't been reading the news lately, have you? The esteemed congressman from the great state of California has proposed an import tax on second-generation sunlight:
http://hallofrecord.blogspot.com/2009/04/taxing-carbon-imports.html
Maybe he has just had too much moonshine.
Doesn't the current state of the economy after years of "liberalized ""free"" trade" require YOU to answer some questions rather then asking them?
Do you really think there is some market efficiency in catching crab off the coast of Alaska, shipping them all the way to China to be cleaned and canned and then shipping them back to Americans for sale and consumption?
AS I understand Ricardos theories of the utility of comparative advantage required three things for trade to be mutually beneficial.
1) no movement of capital across borders
2) full employment
3) relatively equal trade
Our trade is not free it is exploitative. The other arguments that our trade laws are set up to benefit large corporations by skirting environmental, safety and worker laws to exploit cheap labor also rings true.
Can you explain to me what advantage the American worker has incompeting with massive of communist laborers who have none of the protections our citizens have. Maybe instead of blocking the sunlight we should become communist so we could just have our own cheap labor… that'd save shipping cost and Americans would then have even cheaper products to buy.
The end result of going from a trade surplus during the time a Reagan to the current massive trade deficit is what? The economy I see out the door. Is that your proof of our trade policies success. ChinaMart is doing well… how about the American people?
Lexus/ Toyota as a company would never have existed were it not for protectionism offered to the Toyado Loom Company by its government putting Freidmans Lexus and the Olive book into question.
I think everyone is for open free and fair trade we just don't believe trade rules set up by and for multinational corporations are open, free or fair.
A Protectionist,
In addition to all the great answers to your question preceding me, don't forget that a tariff on sunlight would create hundreds of jobs all over the country- new bureaucrats enforcing and collecting the tariff!
Muirgeo,
Your facts are mistaken (e.g., there were no trade surpluses during Reagan's years in the White House).
Your understanding of Ricardo is mistaken (the principle of comparative advantage is based upon none of the things you list — although in Ricardo's own explanation of this principle, in Chapter 7 of his Principles, he did assume that only goods rather than capital crossed borders — but that assumption is not essential to the principle).
Your other claims are equally uninformed. But rather than reinvent the wheel, I'll suggest again that you read some serious literature on trade — such as Martin Wolf's Why Globalization Works (Yale U. Press, 2004). Until and unless you take the trouble at least to acquaint yourself with credible sources, no one will, or should, take you seriously.
You repeat the same canards, non sequiturs, half-truths, and confusions time and time again.
Nearly ALL respected research on trade refutes your presumptions and your claims. You, no doubt, are so smugly confident in the correctness of your presumptions and "theories" that you feel no need to challenge yourself with serious scholarship — or with serious thinking.
muirgeo (I know MnM, I know),
A trade surplus during the Reagan presidency? Really?
First, a trade surplus in which account- Goods, current or capital?
Second, can you provide evidence of this surplus, because as I remember it, the only decade in US history when the current account (goods and services, IE, not foreign investment in the American economy) was in surplus was the 1930s (You know…the Depression). It doesn't seem to me then that a current account trade surplus is all that great.
"What justifies the notion that some individuals have the right to initiate the use of physical force to veto the voluntary decisions of other individuals to engage in an exchange of values — and instead force one of the parties to exchange values with the force-initiating group or with those whom the force-initiating group favors?"
Good point. So as soon as the Chinese government stops doing that to its people we should open up unfettered trade with them. Well and as soon as we settle all the other trade issues like corrupt monetary systems, corrupt governments, lack of land ownership rights, and huge global corporations, who have corrupt governments and banks in their back pockets then we should proceed full steam ahead.
I think I heard Martin Wolf claim the current financial ehad its roots in problems with global trade and imbalances. I think I heard him say trade needs to be fixed in some ways and needs to be more equal.
Trade needs to be set up to benefit people first and not CEO's of banks and multinational corporations.
I read the FT and Martin Wolfs column all the time and I indeed find him very balanced and rational and pragmatic.
While I likely need to be more educated and more well read on these things you need to admit to a need to plan society, trade rules ect to at least some degree. Martin Wolf by no means assumes you can just have an unplanned system and expect it to work. I like him because s NOT an ideologue but a real world pragmatist. World leaders need to come together and find solutions and your inability and disdain for the practicality and pragmatics of such needs to be gotten over. Just because the process is extremely frustrating and messy doesn't make it useless. Nobody likes it but there is no other way.
A trade surplus during the Reagan presidency? Really?" David
I think we had a surplus in 1981. If I am reading the charts right. But either way it was much more balanced up until the 1970's.
http://www.bea.gov/international/bp_web/simple.cfm?anon=71&table_id=1&area_id=3
Human rights, like environmentalism in Don's Earth Day post, are normal goods (as income rises, so does demand for the goods). The best way for the US to encourage their expansion abroad is to improve the standard of living overseas. The most effective tool we have to accomplish this is through mutually beneficial trade. Barriers to trade only further justify despotic regimes to further oppress their citizens.
Our trade is not free it is exploitative.
Assertion is not argument. What does "exploitative" mean?
So as soon as the Chinese government stops doing that to its people we should open up unfettered trade with them.
So your solution is to have our government do it (initiate force) to us to prevent us from trading with Chinese people?
you need to admit to a need to plan society
Are you ready to admit to your fascistic tendencies?
The Soviets, and many others, have already tried to "plan" society. They end up destroying that which makes society work.
You are a real top down kind of guy.
Muirgeo:
"So as soon as the Chinese government stops doing that to its people we should open up unfettered trade with them."
Response"
"We could say to the rest of the world: We cannot force you to be free. But we believe in freedom and we intend to practice it."
Milton & Rose Friedman, "The case for Free Trade" http://www.hoover.org/publications/digest/3550727.html
Muirgeo:
"I think I heard Martin Wolf claim the current financial ehad its roots in problems with global trade and imbalances. I think I heard him say trade needs to be fixed in some ways and needs to be more equal."
Response:
So you respect the opinion of a financial journalist more than you do Nobel laureates eh?
Muirgeo:
"I think we had a surplus in 1981. If I am reading the charts right."
Response
You are reading the chart wrong. The trade balance is the difference between exports and imports of goods. Look at line 72. The U.S. had a trade deficit in 1981.
MUIRGEO:
It is time for you to confront a central assumption. It is clear from this statement:
"Trade needs to be set up to benefit people first and not CEO's of banks and multinational corporations."
That you somehow believe there is no correlation between the actions of a powerful government and the actions of corporations.
ANY intervention that you allow a government to take, NO MATTER how noble you believe that purpose to be, EMPOWERS the government. The centralized collection of that power emboldens bureaucracy, and makes it a greater target for legislation and lobbying.
When government attempts to coerce businesses and individuals to trade in unnatural manners, it CREATES A MARKET FOR INFLUENCE.
All of your assumptions about "what government ought do" are based on a fallacy of a universal agent of good, who is beyond corruption. By creating a market for influence, you challenge three different classes of agents to alter policy:
1) Corporations, who do in fact have collective muscle and resources to look out for the interests of owners, stakeholders and employees. Because much of American tax policy places corporations in the position of being a Tax Collection Agency at the expense of individuals, the more your central government leans on corporations THE MORE INFLUENTIAL AND POWERFUL THEY BECOME, because they pass the real tariffs and costs to individuals.
2) Individuals, who are essentially powerless. Few have the resources or time allocation available to lobby on their own behalf, unless they are so empowered by positions within corporations. They power of the vote is too little, too removed, and not often enough to act as a meaningful signal in the Marketplace of Influence.
3) Government. Every time the government steps in and creates an unnatural barrier to trade, it creates inefficiencies. It also emboldens and empowers government further.
So — we have corporations and government both in the same position in the Marketplace of Influence. When Government increases power, BOTH corporations and government gain.
Your incorrect premise about the nature of the Influence Markets is that Government is a "tool" of corporations, and each operates in a vacuum. Clearly, since FDR and the New Deal, the Federal Government has embarked on a long love-affair with corporatism, trying to align entire industries for some desired purpose or another. And in those instances where whole economic sectors "fight back," the only entities that gain in influence are Government and Corporations.
Don is right about muirgeo–same tired points repeatedly addressed to no apparent effect.
One comment I would make (I know I wouldn't be the first on this board) is this: When it comes to commercial activity, there is no such thing as an "unplanned system."
All human economic systems are planned. The only question is: Who is doing the planning? The individuals that are party to the transaction? Or a third party choosing to prevent or force a transaction.
It's frustrating how widespread is the sense that a market that is not regulated by central planners in a government is somehow "unregulated."
Yeah, we should force Americans to buy ugly ass fuel-inefficient American cars. It's the American way!
Suppose Robinson Crusoe, Friday, and one other person, call him Saturday, are stranded on an island, with no contact with the outside world. In the agreed-upon division of responsibilities, Saturday is employed full time gathering driftwood and other materials that can be used for fuel and construction of shelter.
Following a storm one day, they discover that the remains of a wrecked ship has washed ashore, providing the trio with a great stock of fuel and building materials. Saturday now can perform his fuel and construction-materials gathering tasks by devoting only one half hour each day to this task.
Much of Saturday's job has been outsourced to the remnants of a storm, with the consequence being that the price of fuel and building materials have fallen drastically.
Is this a bad thing for the stranded companions?
"Do you really think there is some market efficiency in catching crab off the coast of Alaska, shipping them all the way to China to be cleaned and canned and then shipping them back to Americans for sale and consumption?
Posted by: muirgeo | Apr 25, 2009 9:11:34 AM"
Hey stoooopid duck, the fact that it is being done tells you that there is a market efficiency in that action.
Just as there was market efficiency in cutting timber in the Pacific NW, shipping the raw timber to Japan, where it was cut into usable lumber, and then shipping it back to the USA for sale.
Only a total socialist fool would think that corporations do those things just to avoid hiring an American.
It was your damn socialist unions and your damn socialist government regulations that made all that feasible, a market efficiency.
The U.S. ran a trade surplus in nine of the ten years of the Great Depression.
I wonder why the bothered to call it the 'Great Depression'?
I'm a convinced free trader, but I'll play devil's advocate here.
Suppose nation-state A is not so convinced and so decides to subsidize its automobile industry. It simply taxes the domestic sale of automobiles and does not similarly tax exports. In fact, it spends the domestic tax revenue on a tax credit or other direct subsidy to its automobile industry. In other words, it offers foreign purchasers of its automobiles a discount financed by domestic purchasers. Don presumably agrees that all protectionism essentially has this effect.
Why would nation-state A do this? That's a separate question. Suffice to say that states never represent the interests of "the people" generally, though they typically say they do. States represent narrower interests influential within the state for various reasons, and a domestic automobile industry could be among these interests. Employees, shareholders and other stakeholders in this industry might pay more for their autos, but their subsidy more than compensates for this cost, so the cost of the subsidy falls only on persons outside of this industry who are less influential within the state.
Regardless of the reasons, nation-state A protects its automobile industry, and A's auto industry then has a comparative advantage, not because its industry is more productive but because its output is subsidized. Most subjects of A are poorer as a consequence, but A's auto industry is richer, and the benefits to A's auto industry are sufficient to keep the practice in place.
Nation-state B reacts not by protecting its auto industry but by protecting its production of aviation products. A and B essentially agree to accept one another's protectionist policies to this extent, i.e. a corporatist super-state emerges encompassing both A and B. Nation-state C decides to protect corn and related goods. Nation-state D protects modular housing components, and so on.
By the time we reach the letter Y, these corporative states have divided huge chunks of the international market for all sorts of things amongst themselves. They're all poorer, in some sense, as a consequence, but no nation is poor enough to trigger a collapse of its state, and influential interests within each state a quite rich enough, so this state of the world persists.
Then what happens to nation-state Z that refuses to protect anything? Sure, all of the other nation-states are poorer as a consequence of their protectionist policies, and Z in theory may consume the produce of these other nations more cheaply than it otherwise could, but what does it exchange for this produce?
The conventional answer to this question (from free traders like myself) is "goods that protected nations aren't producing yet and cannot begin to produce effectively because their domestic resources are inefficiently organized to produce other goods".
But can Z really occupy this "bleeding edge" of the creatively destructive development process to the exclusion of all other industry? Is this theoretical role for Z really sustainable?
And if Z does occupy this role, what happens when many other nation-states abandon their own protectionist policies? Doesn't Z's comparative advantage in the "bleeding edge" business then disappear, and doesn't it then lack advantages in more conventional production, advantages that might require decades to recover?
Ike Apr 25, 2009 12:46:04 PM
That's a VERY good post. It really is IMO. It makes a good summary of the tensions between my beliefs and the liberals (classic) beliefs and the real world.
It underscores the tensions between commerce, individuals and government… none of which society can exist without.
I'm kinda gonna leave it at that but I'm going to put it on my blog to digest review and rebut there.
Min-Arch Man (with a government pension) writes;
"Hey stoooopid duck, the fact that it is being done tells you that there is a market efficiency in that action."
So using communist workers to produce something is a market efficiency? Yeah you liberty reveling guy…. you really make me feel stooopid.
" The great multinationals are unwilling to face the moral and economic contradictions of their own behavior – producing in low-wage dictatorships and selling to high-wage democracies. Indeed, the striking quality about global enterprises is how easily free-market capitalism puts aside its supposed values in order to do business. The conditions of human freedom do not matter to them so long as the market demand is robust. The absence of freedom, if anything, lends order and efficiency to their operations."
William Greider, journalist and author
I wrote:
What justifies the notion that some individuals have the right to initiate the use of physical force to veto the voluntary decisions of other individuals to engage in an exchange of values — and instead force one of the parties to exchange values with the force-initiating group or with those whom the force-initiating group favors?
Muirgeo responded:
Good point. So as soon as the Chinese government stops doing that to its people we should open up unfettered trade with them.
The fact that the Chinese government is violating its own citizen’s right to engage in free trade does not justify the U.S. government similarly violating a U.S. citizen’s right to engage in free trade by prohibiting him from trading with the Chinese. One violation of rights cannot be cited as justification for a second violation of rights — any more than one robbery can be cited as justification for a second robbery. Two wrongs don’t make a right — they simply comprise two wrongs.
reductio ad absurdum is never a pretty way to argue…
so cheap
I noticed muirdiot is spamming the comment section again, literally half the text belongs to it.
One has to understand that muirTHING doesn't see China's protectionism as morally bad. He approves of it, as he thinks all countries should be 100% isolationist, because trade is BAD!!!
William Greider, author, journalist.
So what are HIS premises and what are his economic chops…given that his statement is nothing but assertion, lacking any argument, but revealing of his politics.
That's hittin' it out of the park!
Sam Grove – I think the debate about sweatshops is one we should be having as a nation.
Now you see why I hate to distract him. The rest of us can squabble over the mechanics of pitching, but no one else throws heat like that.
Michael Smith,
There's the old story many of us have told in our trade classes, during discussions of "leveling the playing field"(attributable to Don's colleague, Walter Williams), about the two guys out fishing in a boat. One fellow mishandles a firearm he is examining and shoots a hole in the boat, endangering the safety of both men. The other fellow, upset with his companion's actions decides to get even ("level the playing field"?). He pulls out his pistol and shoots another hole in the bottom of the boat.
Bronc – the left is obsessed with "get even-ism" for its own sake. Its why the embrace socialism – sure it bankrupts the nation but at least the rich get screwed and that gives them some temporary pleasure.
Bronc, Crusader…
To be fair, real socialists aren't interested in screwing the rich just to make themselves happy.
They are under the illusion that rich people only get rich through immoral inheritance, or active undertakings which make poor people poorer.
For them, there is a winner and a loser in every transaction. This fallacy ignores the possibility of win-win and even lose-lose scenarios. (And dismisses the notion that rational, free individuals will in fact choose exchanges that benefit themselves, with no regard to external calculus, projection, or analysis.)
Yes — the socialist's path WILL lead to bringing all to a lower-but-equal standard of misery… but "screwing the rich" is a byproduct of faulty math, not schadenfreude.
Bronc:
I've heard Dr Williams tell that story on the radio. It is hilarious. I remember laughing all day after hearing it and the way he tells it. It's a perfect analogy.
An economist could do worse than to glean ideas for posts from The Simpsons.
When I first read it, Boudreaux' analogy seemed like a real stretch, but then…
The whole complex of emotional responses aroused by competition from trade makes about as much sense as anger at the sun for ruining the electric-blanket business. The actions in a free economy are so dispersed, so enriching for the majority, that it's no more silly to say, "God Damn You, Sun!" than it is to say, "God Damn You, Asia, and your profitable labor!"
I think the debate about sweatshops is one we should be having as a nation.
I'm opposed to collectivism, so I'm not interested in having a debate "as a nation".
Either I am free to trade with anyone, or I am not.
Muirduck,
Just allowing you the freedom to post here is sufficient for you to show yourself as stoooopid! Actually viewing the intellectual caliber of the response below, it is obvious that stooopid is a step up for you. Brain dead is a better description of your style. LOL.
"So using communist workers to produce something is a market efficiency? Yeah you liberty reveling guy…. you really make me feel stooopid.
Posted by: muirgeo | Apr 25, 2009 5:53:58 PM"
Sam,
Totally agree with your last.
Sam Grove – should you be free to trade with the dictators of the world? I don't think so.
bronc: "The other fellow, upset with his companion's actions decides to get even. He pulls out his pistol and shoots another hole in the bottom of the boat."
I think it was decades ago that Joan Robinson exposed the folly of getting even:
"If your trading partner throws rocks into his harbor, that is no reason to throw rocks into your own"
crusader: "should you be free to trade with the dictators of the world? I don't think so."
Why should such trade be anything other than an individual decision? If a group of American consumers does not wish to purchase an item made in a dictator-led country, they are free to boycott that product. But why should those consumers have the right to force their boycott on other consumers?
should you be free to trade with the dictators of the world? I don't think so.
Common ground with George?
Not that I'm interested in trading with dictators, but either I'm free to trade with anyone or I'm not.
If I'm not, then I am subject to the will of another. I don't think much of people who see fit to decide that for me.
Are you trying to have a foot on the side of liberty and a toe on the side against?
But why should those consumers have the right to force their boycott on other consumers?
Because they aspire to dictator like power themselves?
…dictatorial power themselves.
{ 3 trackbacks }