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Is Artificially Engineered Abundance Impoverishing … or Enriching?

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Here’s a letter to Kerry Traeger, a new visitor to Cafe Hayek:

Mr. Traeger:

Thanks for your e-mail.

You offer two reasons for your support of Trump’s punitive tariffs on Americans who buy goods imported from China. The first reason is China’s alleged theft of Americans’ intellectual property. The second reason is Beijing’s “subsidies which let Chinese firms dump [goods] on us at prices which are unjustified, artificially and unfairly low.”

Your argument – which isn’t uncommon – is very curious. Your hostility to subsidies doled out by Beijing to Chinese exporters reveals your belief that we Americans are harmed if Chinese firms are able to sell to us at prices that are artificially low – that is, if Chinese firms don’t have to pay market prices for all of the inputs that they use to bring their goods to the American market.

But if you’re correct that we Americans are harmed by being able to buy Chinese-made goods at prices insufficient to cover the true, full costs of making these goods available to us, then aren’t the Chinese harmed by being able to buy Chinese-made goods at prices insufficient to cover the full costs of making those goods available to them? To the extent that the Chinese do steal our IP, we Americans effectively, if involuntarily, subsidize Chinese production, the great bulk of which is purchased by buyers in China.

If – as you imply by your fear of Beijing’s subsidization of Chinese exports – the American people are impoverished by the availability of goods sold here at prices made artificially low by property being forcibly transferred from its rightful owners (that is, from Chinese taxpayers) to favored Chinese producers, it must also be true that the Chinese people are impoverished by the availability of goods sold there at prices made artificially low by property being forcibly transferred from its rightful owners (that is, from American IP owners) to favored Chinese producers.

Asked differently, if we Americans are impoverished by being able to partially free-ride on property confiscated from its rightful Chinese owners, aren’t the Chinese impoverished by being able to partially free-ride on property confiscated from its rightful American owners?

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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