… is from this August 17th, 1970, Newsweek column by Milton Friedman:
The proponents of [tariffs and import] quotas say, “Free trade is fine in theory but it must be reciprocal. We cannot open our markets to foreign products if foreigners close their markets to us.” Japan, they argue, to use their favorite whipping boy, “keeps her vast internal market for the private domain of Japanese industry but then pushes her products into the U.S. market and complains when we try to prevent this unfair tactic.”
The argument sounds reasonable. It is, in fact, utter nonsense. Exports are the cost of trade, imports the return from trade, not the other way around.
DBx: Only by falsely supposing that a country is a company does the absurd notion that imports are a cost and exports a benefit continue to persist.
Of course, producers who seek government-enforced protection from foreign competition have every interest in perpetuating this myth. (Indeed, some of these producers might even come to believe this myth to be true.) The greater are the number of people who believe that imports are a cost and exports are a benefit, the greater are the number of people who are easily duped into supporting protectionist policies that actually harm them as these policies artificially enrich a handful of domestic producers.
Domestic producers who get, or who sniff that they might be able to get, the government to harass their fellow citizens who wish to buy imports are an astonishingly greedy and anti-social lot. They believe themselves to be superior to their fellow citizens; they believe themselves to be entitled to a portion of their fellow citizens’ incomes; and they are shameless at concocting ridiculous excuses and hypothetical tales in their attempts to connive the public to endorse their plunder.
Share
What individualism teaches us is that society is greater than the individual only in so far as it is free. In so far as it is controlled and directed, it is limited to the powers of the individual minds which control or direct it. If the presumption of the modern mind, which will not accept anything that is not consciously controlled by individual reason, does not learn in time were to stop, we may, as Edmund Burke warned us, “be well assured that everything about us will dwindle by degrees until at length our concerns are shrunk to the dimensions of our minds.”
There can be many reasons why someone might think some modicum of force might be necessary to maintain good civil order. It is impossible, however, to guarantee that force will be limited to maintaining good civil order. Force will be deployed as its holders choose to deploy it. This is a basic, irremediable quality of human nature.
First, the trade deficit reflects only one side of a national accounting ledger. Whereas a homeowner might never see his money or house again after repaying the bank for a reverse mortgage, that’s not true for nation-states. When Americans send dollars abroad to buy Chinese shoes, those dollars will likely come back in the form of capital inflows.
Without a constitutional requirement of uniformity in taxation, post-constitutional politics will generate increasingly complex revenue systems as tax favors are granted and removed within the political marketplace. The resulting narrowing of the tax base warps processes of collective choice. For instance, those who are favored by the resulting fiscal discrimination will support more collective activity than they would otherwise support. With the continual churning of the tax code that results, however, most participants may end up worse off than they would have been under a simple system of tax uniformity.
