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Although my son, Thomas, is studying to be a computational astrophysicist, he’s also a naturally good economist. I love talking with him about economics; he helps me to sharpen my ideas and arguments. Earlier today he and I spoke on the telephone about so-called “economic nationalism” – a conversation that prompted the letter below.

Dear Thomas,

Reflecting on our conversation earlier today, I have become quite unsatisfied with the term “economic nationalism” to describe either the philosophy that drives the likes of Trump’s protectionism or those protectionist policies themselves. My dissatisfaction springs from the fact that describing protectionists as “economic nationalists” seems to grant the protectionists’ conceit that their policies are indeed best for the nation – that their policies put the nation first – that their protectionist obstructions enrich the nation and serve the nation better than would a policy of free trade.

But of course this conceit is completely false. Protectionist policies damage the nation. These policies protect a handful of politically potent existing producers from having to best serve the interests of consumers in the nation. These policies are sand in the gears of economic competition and progress; they slow – and in some cases prevent altogether – resources in the nation from moving from less-valued uses to higher-valued uses.  And protectionism diverts executive, managerial, and entrepreneurial talent away from activities that fuel economic growth and toward the seeking of special privileges from venal state officials.

So-called “economic nationalist” policies undermine the welfare of the nation; they make the people of the nation poorer; they choke and encumber the national market even as their champions, such as Trump, snooker the public into swallowing the fraudulent narrative that all these taxes and obstructions are in the national interest.

“Economic nationalism,” in short, is simply a set of crackpot ideas that delude people into believing that their economic self-immolation is really their economic salvation.

Love,
Dad

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In my latest essay for AIER, I argue that free trade is fair trade. Tariffs imposed in the home county – regardless of actual or ostensible reason – tilt the playing field in the home country unfairly against the many and in favor of the politically powerful few. A slice:

Nearly all protectionists today express support for free trade. But there’s always a “but,” as in “but it must also be fair trade.” Appearing to be an unobjectionable qualification to the case for free trade, such a “but” is in fact not only a wholesale rejection of the case for free trade, it is also a stealthy endorsement of unfair trade.

Protectionists typically pull off this deception by inappropriately using the metaphor of the level playing field. Protectionists assume that, just as a football game is played ultimately for the benefit of the players and for the pride of each team’s fans, economic competition is carried out ultimately for the benefit of the producers and for the pride of each country’s citizens.

If this protectionist assumption were correct, then it would indeed be true that the imposition by country A of tariffs on imports it receives from country B would unfairly tilt the playing field in favor of country A. It would also be true that fairness would be served — the playing field would be leveled — if country B retaliated by imposing tariffs on imports from country A.

But the protectionists’ assumption is invalid. Economic activity and the competition it sparks are not contests carried out for the benefit of producers or to discover which country will win and which will lose on the merits. Instead, economic activity is a process whereby all people try as best as they can to improve their and their families’ standards of living.

It’s true, of course, that in this process producers compete against each other to assist consumers in their efforts. It’s true also that this competitive process means continually discovering which producers have the appropriate talent and game plan to excel and which don’t. But unlike in a sporting event, enabling these discoveries is not among the ultimate purposes of the competition. Discovering which producers best serve consumers is merely a byproduct of consumers’ striving to improve their living standards and producers’ competing to be of the greatest possible assistance to consumers.

To grasp this reality is to understand that tariffs imposed by, say, the Chinese government on imports into China are not unfair to Americans. Yes, Chinese tariffs and other trade restrictions do make it more difficult for some American producers to sell in China. But these tariffs have almost no effect on what ultimately matters to Americans — namely, the ability of American consumers to improve their living standards.

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Here’s a letter to one of my regular correspondents:

Mr. Nolan McKinney

Mr. McKinney:

You’re very impressed with Walt Greenway’s comment (on Mark Perry’s blog) that countries have tariffs “[f]or the same reasons you probably have locks on the doors to your house: to decide what and who to let in and under what conditions you will allow entry.”

I’m very unimpressed.

Precisely because I am indeed able and willing – in fact, eager – to decide for myself what and who to let in to my house and under what conditions, I don’t need a third party to make such decisions for me. Tariffs diminish my ability to make such decisions. Tariffs are a means used by third parties to override my choices with their commands.

To use Mr. Greenway’s analogy, tariffs are locks imperiously put on my doors against my will by state officials and to which only they, and not I, have the keys.

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

UPDATE: After reading the above letter, Warren Smith e-mailed me to say that he certainly would not want to lock Santa Claus out of his house!

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