Quotation of the Day…

by Don Boudreaux on December 16, 2017

in History, Hubris and humility, Man of System, Politics, Reality Is Not Optional, Trade, Virginia Political Economy

… is from page 158 of Douglas Irwin’s exhaustive and important 2017 book, Clashing Over Commerce (footnote excluded; link added); the “American System” to which Doug refers was the economic-nationalism ‘movement,’ led by Henry Clay (1777-1852), that featured, as central projects, discretionary protective tariffs and other efforts by government to forcibly direct resources toward particular projects and industries somehow divined by politicians to be vital for economic growth in the United States:

The great failure of American System advocates was their inability to enact a comprehensive plan for either internal improvement or the encouragement of manufacturers.  Instead, internal improvement projects proceeded in a piecemeal fashion, in which politicians get to pick and choose which canal or road proposal to support.  The result was an ad hoc process in which Congress set about [as John Larson put it] “advancing pet projects with increasingly dubious claims of national significance and indulging in ever more bitter attacks on each other.”  Proponents also failed to develop a comprehensive plan for protecting domestic industries with import duties.  As seen in the debates regarding the Tariff of Abominations, the process by which Congress set import duties was deeply political rather than based on some rational design.

DBx: Even if theory informed us that reality is far more likely than we now believe it to be to offer sets of circumstances for an apolitical, ‘science’-guided state to increase the nation’s overall economic welfare by using carefully calibrated tariffs, subsidies, and other interventions, theory continues to inform us also that no state is or ever will be sufficiently apolitical to be trusted with such authority.  (I am here writing exclusively about the narrow economics of the matter and not the ethics.)  The state is neither god nor god-like.  And the refusal of the faithful to cast off their belief in this fictional superhuman being does nothing to make this phantasm of devout minds any more real than are Santa Claus, Superman, or the presidential administration of Jed Bartlet.

When the unavoidable reality of politics combines with the unavoidable reality of dispersed and ever-changing knowledge, the case for using tariffs, subsidies, and other interventions to “grow” the economy becomes even more ludicrous.  Regular readers of Cafe Hayek know that I often quote from my late GMU Econ colleague Don Lavoie’s brilliant 1985 book National Economic Planning: What Is Left?.  Although written more than three decades ago, Don’s book is no less relevant today than it was in the mid-1980s.  In this book, Don describes in great detail the various schemes and plans that were then bandied about by the likes of Michael Harrington, Robert Reich, and Felix Rohatyn for how government ‘should’ intervene to invigorate and improve the American economy.  Remarkably, the pretensions and notions of these scheme-peddlers of the 1980s differ in no essential ways from the pretensions and notions of Henry Clay and other scheme-peddlers of a century and a half earlier.  Such scheme-peddlers always fancy themselves to be forward-looking thinkers – “progressive” – when, in fact, they are simply carriers of old, foolish, and dangerous superstitions regarding the power of people invested with state power.


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