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He doth Reason Mistakkenly

Here’s a letter to the Seattle Times:

You report that “Obama has instructed the federal Export-Import Bank to offer matching financing to United to buy Boeing’s 737s” (“Obama sets up sweet bank deals to aid Boeing, other manufacturers,” Feb. 18).  So, American taxpayers will be forced to help pay for one corporation’s (United Airlines’s) operating equipment in order to protect another corporation (Boeing) from foreign competition.

This move is consistent with Mr. Obama’s obsession with increasing America’s exports.  Like misguided mercantilists throughout history, Mr. Obama believes that a people benefit from trade not by receiving actual goods and services (such as airliners) from foreigners but, rather, by receiving money (what mercantilists called “treasure”).

But policies that encourage exports and the accumulation of foreign exchange for the sake of exporting and accumulating foreign exchange pave the road to poverty.  Here’s the great economic historian Joel Mokyr explaining the illogic of 18th-century mercantilist notions which slowed growth in Europe, especially on the continent: “Trade created wealth in many ways, not all of which were fully understood by contemporaries, and quite a few still bought into the mercantilist belief that trade was necessary above all because [quoting now an 18-century mercantilist] ‘we have no other means to get Treasure but by foreign trade….  [I]t is done by making our Commodities which are exported, to over-ballance in Value the foreign Wares which we consume.'”*

Sadly, the only difference separating Mr. Obama from the long-dead mistaken mercantilist quoted by Mokyr lies in how each spells and capitalizes words.

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

* Joel Mokyr, The Enlightened Economy: An Economic History of Britain 1700-1850 (New Haven: Yale University Press, 2009), p. 19.