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No, Tariffs In Practice Cannot Be Useful (Except to Rent-Seekers)

Here’s a letter to the Wall Street Journal:

Arguing that “tariffs can be useful if they’re used wisely” (Letters, August 20), Paul Matten commits several errors. Among these is his blithe assumption that China’s economic growth during the post-Mao era was promoted by Beijing’s use of tariffs and other trade obstructions. In fact, as the late Nobel laureate Ronald Coase and Ning Wang document in their 2012 book, How China Became Capitalist, China’s post-Mao economic growth occurred only insofar as state direction of China’s economy was replaced by market direction.

For further evidence that China’s post-Mao growth occurred only insofar as the Chinese people turned away from state direction and toward market direction of the economy, ask this: If state direction of the economy is key to China’s economic success, why have the Chinese people done so much better economically since Mao died than they did when he was still alive? After all, during Mao’s reign the Chinese imported far less than they import today. From 1960 through 1976, the average annual value of Chinese imports was 3.3 percent of its GDP, while in 2017 the value of Chinese imports was 18 percent of its GDP. And this growth of Chinese imports is all the more impressive in light of the fact that China’s real GDP today is multiple times higher than it was under Mao.

If a government’s obstruction of its citizens’ access to foreign goods and services fuels economic growth, then Chinese growth under Mao should have been what it emphatically was not – namely, far faster than it is today. Therefore, the fact that the Chinese today are faring much better economically – and are importing far more – than they did during Mao’s lifetime is powerful evidence against Mr. Matten’s assertion that government policies that discourage imports promote economic growth.

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


Note that Mr. Matten’s argument cannot be salvaged with the retort that Mao’s ‘management’ of China’s economy was an overall calamity. The reason is that, precisely because the fact to which this retort points is correct, attributing China’s post-Mao economic growth to Chinese mercantilism rather than to its retreat from Maoism becomes ridiculous.