Suppose that Jones is a dyed-in-the-wool protectionist who believes all of the many claims that protectionists make about how artificially restricting domestic citizens’ access to goods and services supplied by foreigners results in those same domestic citizens having greater access to goods and services. And suppose that Jones owns and runs a business – say, a supermarket. Being a sincere protectionist, Jones should see that, if his theory of the marvels of protectionism is valid, he can – and should – use it to run his own business. What would such an attempt look like?
Jones would not buy buildings from building contractors. He would build his own buildings. Jones would assign his cashiers, bag boys, accountants, store managers, and other employees the tasks of designing his supermarket buildings and then actually doing the construction. Not only that, Jones would have these same cashiers, bag boys, accountants, store managers, and other employees explore for iron ore and learn to convert that iron ore into the beams and other steel parts that are used to build his supermarkets.
Jones would also – again, being a consistent protectionist – have his employees also grow broccoli, corn, tomatoes, potatoes, blueberries, strawberries, onions, okra, parsley, thyme, and all the other vegetables and herbs that he offers for sale in his supermarket. Jones also assigns to his workers the task of raising cows, milking them, and turning their milk into yogurt and butter. After all, why buy such things from suppliers outside of Jones & Co. when it is physically possible for Jones & Co. to produce those things for itself?! And one added benefit of Jones’s business plan is that he’ll no longer run trade deficits with steel mills and farmers!
One day while driving very near to work Jones notices a road sign that reads: “Student Farm: Free Produce!” A local vocational school teaches students to raise vegetables and, being community-minded, gives those vegetables away free of charge. Jones immediately telephones Jackson, his second-in-command, and warns Jackson not to be tempted to take any of this free produce from the nearby vocational-school farm. “We can’t let those vocational-school farmers dump their produce into our stores!” proclaims Jones. “If we do so we’ll lose the all-valuable opportunity to make our produce ourselves. It’s bad enough that other farmers produce farm products and offer to sell them to us, but it’s downright evil for some farmers to offer to supply us with goods a zero price, or at any prices below the costs of production!”
……
Obviously, if Jones were an actual person, he wouldn’t ever really open up a supermarket because his moronic ideas of how to run a company would bankrupt him the moment he embarks on his enterprise. No successful business firm in a market economy practices protectionism for itself. Each firm produces for itself only those goods and services that it can produce for itself at lower costs than the prices it would have to pay to others to buy those goods and services. Because most of the goods and services that a firm uses in its operation can be purchased from others at lower prices than it would cost that firm to produce in-house, each firm imports from other suppliers lots of goods and services. Each firm does so because doing so increases the efficiency and prospects of survival of each firm. (Remember, even Trump as businessman imported – and from foreign countries no less! – many of the goods he purchased in order to run his firm with the greatest prospect for profits.)
It’s a myth that the instincts and skills that make someone a good business person make that person also a protectionist when he or she ponders the country as a whole. The very same instincts and skills that prompt successful business people to buy lots of their supplies from suppliers outside of their firms should prompt them to understand that the country, too, should import from foreign suppliers any and all goods and services that foreigners offer at prices lower than are the costs to the country of producing those things at home.
What is true is that too many (but certainly not all) business people think – as Donald Trump thinks – about international trade only half-assedly. What they see is that when the home economy imports, money is sent abroad, and when the home economy exports, money comes in from abroad. They see also that if that which is imported were instead produced in the home economy, more workers in the home economy would be employed producing those goods and services.
Well duh. Both of these things are true, but contrary to the belief of protectionists, these two things do not add up to a case for protectionism. To see why, again notice that no successful business firm operates – or could possibly operate – according to such an outlandishly idiotic doctrine.
