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The Blobs vs. the Blibs and the Blubs

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Here’s a letter to a regular correspondent:

Mr. McKinney:

I disagree that Pres. Trump’s “long game is a free trade world” of the sort that I and other free traders desire.

Every word out of Trump’s mouth reveals that he’s an unreconstructed mercantilist who sees international trade as a zero-sum competition in which some countries “win” and other countries “lose” – and that the countries that win are those that export as much as possible relative to their imports while the countries that lose are those that import more than they export. Therefore, I can only assume that if Trump really does want a tariff-free world it is only because he believes that in such a world America will be one of these “winners” that exports far more than it imports.

But such an outcome would not be truly a “win” for us Americans. Producing more for foreigners and receiving less in return would, in fact, be a loss. Moreover, because it is almost a certainty that in a tariff-free world America would (contrary to Trump’s expectation) continue to run trade deficits, it is almost a certainty that Trump would then conclude that a tariff-free world is not good for America. Upon noticing the continued destruction of some jobs in America by imports, as well as America’s continuing trade deficits, Trump would, you can be sure, raise tariffs unilaterally.

I’ve searched for a good analogy, but have yet to come up with one that is fully satisfactory. The one below is okay, although not ideal. It falls short of ideal largely because, unlike in my analogy below, the violence deployed in the conduct of real-world trade policy is directed against one’s own people rather than against others. Still, I think this analogy is worthwhile enough to share.

Suppose that there are three rival crime families in Chicago during the era of alcohol prohibition: the Blibs, the Blobs, and the Blubs. Each family fights against the others to sell as much booze as possible. And each family, to increase its market share, often resorts to deadly violence against members of the other families.

One day, Don Blob, the confident head honcho of the Blob family, proposes to the Blibs and the Blubs that all three families mutually agree to stop killing each other. “No killings, no violence, that’s the way it should be,” are Don Blob’s exact words. Incidentally, upon hearing of this proposal by Don Blob, many in the general public conclude that Don Blob is truly a man of peace – a man who abhors violence.

When Don Blob’s lieutenant asks the Don why he proposes a city-wide halt to the violence, Don Blob responds that, with the violence ended, he is so confident in the quality of the Blobs’ booze and in the skill of the Blob’s bootleggers that he’s sure that the Blobs will out-sell the Blibs and the Blubs. “Our sales and profits will be higher without the violence than with it,” Don Blob assures his lieutenant. The Don adds with a smile: “We’ll be great winners!”

And so all three families agree to end the violence. Months later, the Blobs’ sales and profits turn out not to have increased by as much, and in the ways, that Don Blob anticipated. Don Blob overestimated the quality of his products and of his bootleggers, and he underestimated that of the other families.

Don Blob will surely judge the mutually agreed non-violence pact to be a failure. He will resume, unilaterally, the practice of gunning down members of the Blibs and the Blubs. And the Blibs and the Blubs will, of course, respond in kind.

Again, I see no reason to believe that Trump wants what genuine free trade will deliver.

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

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