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Protectionism is Theft

Here’s a letter to a first-time correspondent:

Mr. Ben Kirby

Mr. Kirby:

Thanks for your e-mail.  You dispute my argument that Uncle Sam has no business punishing American buyers of imports in alleged “retaliation” for Beijing’s practice of punishing Chinese people who purchase imports.

I of course agree that restraints imposed by Beijing on the Chinese people’s purchases of imports cause losses to some particular American businesses.  But I disagree – strongly – that these losses justify Uncle Sam imposing similar restraints on the American people.  What system of ethics transforms Lou’s infliction of unjust harm on Lee (in order to help Larry) into a justification for Sam to inflict an identical harm on Sally (in order to help Steve)?

No producer has a right to consumer patronage.  Period.  Business people who wish to sell outputs abroad should reckon the risk of foreign-governments’ import restrictions (or export subsidies) in the same way that they reckon each of countless other risks of enterprise – risks such as changes in consumer tastes that make their products unappealing, and increases in input prices that render their production methods too costly.  In a market economy no business has an ethical right to demand that government protect it from such risks by restricting consumers’ rights.  The same is true for the risks of foreign-government interventions.  By going into business, entrepreneurs and investors agree to accept, among many other risks, the risk that foreign-governments will use trade restrictions that reduce these entrepreneurs’ profits and these investors’ returns, perhaps to the point of bankruptcy.  I can see absolutely no good reason for the home government to shift, in the form of higher prices, the consequences of this risk from entrepreneurs and investors onto consumers (as well as, in the form of diminished economic opportunities, onto those domestic businesses and workers whose livelihoods are destroyed by protectionist policies).

Any domestic producer who seeks protection from foreign competition seeks to steal from fellow citizens.  Ethically, he or she is no better than a thief.

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