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Quotation of the Day…

… is from page 116 of the 1992 collection of some of William Graham Sumner’s best essays, On Liberty, Society, and Politics (Roger C. Bannister, ed.); specifically, this quotation is from Sumner’s January 1881 Princeton Review essay, “The Argument against Protective Taxes”:

Any favor or encouragement which the protective system exerts on one group of its population must be won by an equivalent oppression exerted on some other group….  If the legislation did not simply transfer capital it would have to make capital out of nothing.  Now the transfer is not simply an equal redistribution; there is loss and waste in the case of any tax whatsoever.  There is especial loss and waste in the case of a protective tax.  We cannot collect taxes and redistribute them without loss; much less can we produce forced monopolies and distorted industrial relations without loss.  It follows that if a nation could come into some temporary industrial compression or arrested growth, a protective tariff not only would not help it out, but would contribute to still further limit its powers of self-development and to restrain its recuperative energies.

There are many lessons summarized above – the most timely of which is that any resources ‘successfully’ diverted by that great geyser of cronyism, the U.S. Export-Import Bank, to improve the business prospects of some U.S.-based firms come necessarily at the expense of other U.S. enterprises, both existing and potential.

Another lesson in the above quotation is that its an error – one committed by J.M. Keynes and Paul Krugman (among many other people) – to suppose that an economy in a recession can be helped to recover by higher tariffs, export subsidies, and other mercantilist quack remedies.


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