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Mercantilist Myths Lead to the Most Bizarre Conclusions

Here’s a letter to former New Hampshire governor (and U.S. senator) Judd Gregg:

Mr. Judd Gregg (R-NH)

Dear Mr. Gregg:

Your The Hill article defending the U.S. Export-Import Bank is full of mercantilist fallacies that my freshmen students would be embarrassed to commit (“We need Ex-Im in real world,” July 28).  Because my Mercatus Center colleague Veronique de Rugy, in this essay,* exposed many of your fallacies, I write here to reinforce only one of Vero’s points.

You claim that the Ex-Im Bank’s practice of paying foreigners to consume American exports, “does not, in fact, aid foreign countries, governments or businesses.”  The Ex-Im Bank, you say in celebration, “plays precisely the opposite role….  [T]he Ex-Im Bank in fact represents an American commercial threat to foreign companies.”

So your view is that, by artificially increasing the amount of valuable goods owned and enjoyed by foreigners (through a policy of paying foreigners to acquire goods made with scarce resources in America – resources that would, in many instances, otherwise be used to produce goods for Americans to own and enjoy), Uncle Sam weakens foreign countries and strengthens America.  How bizarre.

Do you also, then, believe that Uncle Sam would strengthen foreign countries by, say, bombing their people’s homes?  Do you believe that foreign governments would strengthen America by bombing our homes?  If you are intellectually consistent, you must believe such things.  By your logic, each existing home is a “commercial threat” to building contractors, construction workers, and other producers because it no longer requires the paid services of these producers.  So, if your economics is correct, a government policy of destroying existing homes eliminates these “commercial threats” and, therefore, enriches the country.

I conclude that your economics is incorrect.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* “Judd Gregg’s Export-Import Bank Fantasy World,” The Corner, July 29, 2014.