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“Low” is Not “High”

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Here’s yet another letter to my daily e-mail assailant, Nolan McKinney:

Mr. McKinney:

Unhappy with my response to “Bureau of Censorship [2],” you scold me for “miss[ing] his main complaint” about the way the Chinese invest dollars they earn on their export sales. This main complaint is that, as Mr. Censorship himself put it, “the Chinese government controls where that investment goes, which is to low productive government bonds with capital controlled by the government instead of highly productive private-sector investment from private individuals to private individuals.”

Frankly, I thought that the problem with Mr. Censorship’s “main complaint” is too obvious to bother mentioning. Attempting to justify U.S. government retaliation against Beijing’s trade practices, Mr. Censorship explicitly argues that those practices force Chinese citizens to settle for returns on their capital that are artificially low.

While we can, and should, pity the Chinese people for being subject to a government that prevents them from getting the most for their money, we would be insane to follow Mr. Censorship in demanding that the U.S. government thereby ‘retaliate’ with trade restrictions which prevent us from getting the most for our money.

No informed person denies that Beijing imposes many destructive policies on the Chinese people. But nor does any informed person (who isn’t seeking merely to line his or her pockets) deny that we Americans are made poorer whenever Washington ‘retaliates’ by restricting our freedom to trade.

I conclude by noting that your agreeing with Mr. Censorship that Beijing actively diverts the Chinese people’s capital from more- to less-productive uses should cause you to abandon your incessantly expressed fear that Beijing’s trade interventions artificially enrich the Chinese people at Americans’ expense. It should be clear from Mr. Censorship’s own description – one that you endorse – that Beijing’s interventions make the Chinese people poorer.

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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