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Mercantilist Nonsense, Instance #68,594,247,048,331,683,549

Posted By Don Boudreaux On April 13, 2012 @ 10:06 am In Crony Capitalism,Other People's Money,Seen and Unseen,Subsidies,Trade | Comments Disabled

Here’s a letter to Reuters:

Reporting on Bill Clinton “going to bat” for the Export-Import Bank, you quote the former president as saying that “So many of our competitors aggressively use subsidized capital to promote their exports.  As a practical matter, you either meet the competition or you get beat” (“Bill Clinton goes to bat in bid to save Exim Bank [1],” April 12).

Mr. Clinton speaks mercantilist nonsense.

Subsidies “promote” exports only by distorting and weakening the overall economy.  They do so by transferring resources away from private-sector activities that successfully meet market tests to private-sector activities that fail market tests and, hence, survive only if taxpayers are forced to pay for them.  Efficient economic activities are obliged to contract so that inefficient economic activities can artificially expand.  (Never mind that also, in practice, subsidies tend to flow to cronies whose chief qualifications are their political connections.)

For the United States to “meet the competition” on this front, therefore, is for Uncle Sam to ensure that every distorting and weakening measure inflicted by other governments on their economies is matched in the U.S. by equally distorting and weakening measures inflicted by Uncle Sam on the American economy.  This “competition” is one in which we Americans should fervently hope to “get beat.”

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030

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[1] Bill Clinton goes to bat in bid to save Exim Bank: http://uk.reuters.com/article/2012/04/12/usa-eximbank-idUKL2E8FC8JM20120412

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