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Crying Crocodile Tears

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The following post is inspired by this report in the Wall Street Journal [2].

Suppose that Willy, who owns a neighborhood candy store, issues the following complaint against Frank:

Frank isn’t playing by the rules!  Frank keeps stealing children’s money.  He uses a .44 magnum to hold children up.  Frank threatens to shoot them if they don’t give him their money.  Frank’s actions are bad because they result in me selling less candy than otherwise.  Frank harms me!  Until and unless Frank stops robbing children, government should adopt a policy that protects me from the harm that Frank’s actions impose on me.

What would you think of Willy?  I’m pretty sure that you’d regard Willy’s priorities as being disgustingly – and perhaps criminally – out of order.  And, of course, you’re right to so regard Willy’s priorities.  While it’s true that Frank’s actions do indeed result in Willy suffering harm, clearly the chief wrong – the only wrong in this situation worth mentioning – is Frank’s practice of robbing children of their money.

‘So what?,’ you ask.  So lots.

When a government, such as Uncle Sam, does what nearly all governments do – namely, tax citizens in order to bestow subsidies on politically powerful interest groups – that government is effectively an armed robber.  It’s ethically no better than Frank (although, unlike Frank, each government typically has legions of smooth-talking and statistics-wielding apologists who mask with pretty words and pictures the government’s ugly deeds).  Such actions ought to be condemned loudly and unconditionally by all decent people.

But such actions, of course, are too rarely condemned.  When “our” government is the armed robber, such actions are typically excused as wise “public policy” – as when Uncle Sam artificially gooses American exports with subsidies issued by that great geyser of cronyism, the U.S. Export-Import Bank.

Bizarrely, when a foreign government similarly robs its own citizens in order to subsidize exporters within its jurisdiction, complaints about the morality of that government’s action are sometime heard.  But these complaints are akin to those issued above by Willy.  If, say, the Chinese government subsidizes exports from China, Americans complain.  But they complain not of the root, chief evil – which is the Chinese government’s forcible transfer of resources from Chinese taxpayers and consumers to Chinese exporters.  The complaint is instead a collateral – and relatively insignificant – consequence of that evil – namely, the harm that such armed robbery imposes on American producers!

An American steel producer who complains about Beijing-enforced subsidies given to the American steel producer’s competitors in China is no better ethically than is Willy in the above hypothetical example.

….

An implication of the above identification of an American producer’s disgustingly out-of-order priorities is that domestic-producers’ complaints about foreign subsidies should be ignored.

Economists rightly and correctly point out that foreign-government subsidies of exports destined for the American market enrich rather than impoverish Americans as a group.  Just as free sunlight makes us richer [3] than we’d be if the sun charged us for the useful light and warmth that it daily sends our way (even if it makes light-bulb producers less well off), below-cost steel and shoes and sugar and other subsidized exports from abroad make us Americans richer than we’d be if their producers charged us higher prices for these products.

One response to this point is to say “Yeah, well, you economists say you favor free markets, but you then look the other way when a foreign government unjustly raises taxes on its own citizens.”  This response (usually by a business person pleading for higher tariffs on the imports against which his or her firm competes) is intended to undermine the case for unilateral free trade.  The complaining domestic businessperson or domestic pundit or politician, unable to dispute the reality that foreign-government subsidies almost surely enrich rather than impoverish Americans, dons the hat of someone who allegedly is looking out for the interests of the true victims of the subsidies (that is, foreign taxpayers).

Of course, in nearly all cases such expressed concern for the well-being of foreigners is insincere.  It’s camouflage for the American interest-group’s rent-seeking efforts.  One way to tell that it’s camouflage is to recognize that, if American businesspeople and politicians really are so morally outraged by the harm that foreign-government subsidies do to the citizens of those foreign countries, American businesspeople would express such moral outrage not only in those relatively rare instances when foreign taxation has effects on the American market but also in those far more numerous instances when foreign taxation has no effects on the American market.

The fact that American businesspeople and politicians remain silent about the ethical outrages of all foreign-government economic interventions except those that shrink some American producers’ customer bases is yet another reason to ignore their pleas for protectionism and other government-issued privileges.

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