Adam Smith on Export Restrictions

by Don Boudreaux on March 26, 2014

in Adam Smith, Crony Capitalism, Trade

Here’s a letter to the Wall Street Journal:

Many of your correspondents rightly agree with you that the effort to restrict the exportation of natural gas is lunacy (Letters, March 26).  Sadly, attempts by politically influential corporations, such as Dow Chemical, to use government to secure captive supplies of low-cost inputs for themselves at the expense of the general public are nothing new.

Writing in 1776, Adam Smith roundly condemned British woolen manufacturers for “persuading the legislature that the prosperity of the nation depended upon the success and extension of their particular business” - an extension that was achieved by government prohibition of the exportation of sheep and wool.

Smith explained that such restrictions, of course, damage the economy.  Even worse, in Smith’s view, are the extreme measures that government often uses to prevent suppliers from getting around the export restrictions.  The great Scot explained that the enforcement of export restrictions have the result that “the whole inland commerce … is laid under very burdensome and oppressive restrictions.”  Smith pulled no punches in slamming restrictions of the sort that Dow Chemical is today seeking on the exportation of natural gas: “But the cruellest of our revenue laws, I will venture to affirm, are mild and gentle in comparison of some of those which the clamour of our merchants and manufacturers has extorted from the legislature, for the support of their own absurd and oppressive monopolies.  Like the laws of Draco, these laws may be said to be all written in blood.”*

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (Indianapolis: Liberty Fund, 1981 [1776]), Bk. IV, Ch. vii; pp. 647-649.​​

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