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VERY Bad Analogy

Here’s a letter to one of three (!) people who e-mailed me today to complain that those of us who wish to keep the U.S. Export-Import Bank permanently shuttered endorse “economic unilateral disarmament.”  (This term was used by all three correspondents.  It’s almost as if there’s a concerted effort to support that great geyser of cronyism.)

Mr. Richard Ericson

Dear Mr. Ericson:

Unhappy with my opposition to the U.S. Export-Import Bank, you wonder why I’m “eager to unilaterally disarm American industry while our competitors subsidize their exporters.”

First, other countries are not our economic competitors.  Paul Krugman beautifully explains why in his 1997 book, Pop Internationalism.  I highly recommend it to you.

Second, subsidies doled out by governments weaken, not strengthen, their economies.  To see why, suppose that other governments conscript all 22-35 year olds within their borders and force these conscripts to work at subsistence wages for the industries located within those countries.  Further suppose that the results are beneficial for corporate shareholders in those countries: their companies export more and rake in higher profits than they would without such conscription.  Should Uncle Sam therefore follow suit?  Would you describe our government’s failure to conscript the labor of Americans aged 22-35 as “unilateral disarmament”?  Would you describe the greater exports and higher profits of corporations in those other countries as evidence that a policy of conscripting a workforce makes the people as a whole in those countries economically more prosperous?

I trust not.

Economically, the only difference between export subsidies as they exist today in reality and the above hypothetical is that real-world export subsidies are less extreme than is conscription.  Yet no essential economic difference separates real-world subsidies from such hypothetical conscription: each is a government policy of forcibly seizing resources from some people in order to bloat the purses and wallets of other people.

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

See also this 2003 essay by Dwight Lee and me.


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