Mercantilist Superstitions Fuel Cronyism

by Don Boudreaux on July 13, 2014

in Competition, Crony Capitalism, Trade

Here’s a letter to the Wall Street Journal:

Uncle Sam is closer to imposing punitive taxes on Americans who buy Korean-made steel pipe (“U.S. Slaps Tariffs on Korean Steel Pipe Because of Alleged Unfair Pricing,” July 12).  The stated justification for so taxing these Americans is that they insist on buying steel pipe from Korea at prices that U.S. steelmakers (surprise!) assert are “artificially low.”  Such taxes will indeed be imposed if the U.S. Trade Commission finds that these low prices “hurt American steelmakers.”

The ostensible principle behind Uncle Sam’s action is that we Americans are made poorer when non-Americans act especially vigorously to increase our access to foreign-made products.  But this principle is economically insane.  People grow prosperous, not by rejecting, but by embracing enhanced access to goods and services, regardless of the sources of this enhanced access.

If the principle that motivates Uncle Sam to tax Americans who buy inexpensive imports were valid, then, for example, my household would be made poorer whenever I buy - rather than make myself - my own furniture and clothing.  After all, Ethan Allen and Nordstrom charge prices so low that they not only “hurt,” they destroy, my capacity to make for myself the goods that they offer for sale.  Should I perhaps, in my quest to grow more prosperous, hire my neighbor to threaten to shoot me whenever I seek out merchants willing to sell to me especially low-priced sofas and shirts?

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

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