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Mutual Self-Impoverishment is Foolish

Here’s a letter to a Cafe Hayek reader:

Mr. Larry Clark

Mr. Clark:

Thanks for your e-mail.

You’re correct: I do indeed believe that the United States government has no business “retaliating” against foreign protectionism with U.S. protectionism.

My first objection is based on ethics. It is unethical for Uncle Sam, in an effort to drum up additional sales for some Americans, to obstruct other Americans’ freedom to spend their incomes as they choose and in ways that everyone agrees to be otherwise acceptable. Even if the result of such “retaliation” would be a net gain to Americans collectively – measured in money or utility or both – I know of no principle of ethics that, in the ordinary course of affairs, excuses holding Smith economically hostage for the benefit of Jones.

My second objection is grounded in economics. Contrary to your (and Pres. Trump’s) assumption, foreign-government protectionism weakens rather than strengthens foreign economies that practice it. Why should we “retaliate” by weakening our own economy?

Suppose that your neighbor chooses to make all of his own clothing. He might do so because he gets unusual delight from being his own spinner, weaver, tailor, tanner, and cobbler. Or he might do so because he labors (literally!) under the misimpression that he thereby makes himself materially richer. Whatever his reason, his insistence on making his own clothing makes him materially poorer.

Do you believe that you’d make yourself richer by mimicking your neighbor’s self-impoverishing ways? Do you suppose that your net wealth over time would rise if your following in your neighbor’s ways somehow convinced him to abandon his policy of wardrobe self-sufficiency? I suspect not; you’d regard your copying your neighbor’s policy to be foolish.

And so if my suspicion is correct, you should see that it is equally foolish for Uncle Sam to impose greater self-sufficiency on Americans simply because other governments impose greater self-sufficiency on non-Americans.

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