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… is from page 235 of the 1936 English-language edition (translated from German by Alfred Stonier and Frederic Benham) of Gottfried Haberler [2]’s classic 1933 work, The Theory of International Trade With Its Application to Commercial Policy [3]:
Every tariff on a means of production which raises its price thereby raises the cost of every production process in which it is employed. Thus tariffs on iron and steel raise the costs of all industries which use iron and steel; tariffs on machinery raise the costs of all branches of production using machinery; tariffs on grain and fodder raise the costs of stock-raising and dairy-farming. When the industry which is damaged in this way exports its products, the tariff may result in a diminution of exports; and it may so happen that this equals the diminution in imports, so that the tariff does not disturb the balance of trade.
DBx: This reality, as explained by Haberler, is not only basic economics, it’s also common sense – or, rather, it’s common sense to anyone of sense who bothers to think of tariffs beyond their immediate consequence of protecting particular domestic producers from foreign competition.
Politicians and pundits who bray to “make America great” with tariffs imposed here and subsidies doled out there fancy themselves as occupying the moral high ground. The low ground is swamped, these politicians and pundits believe, by those of us who, either because of insufficient patriotism or ideology-induced blindness, are willing to “surrender” jobs and industrial might to foreigners.
Not only are these braying politicians and pundits utterly ignorant of the facts [4], they apparently believe that rabbits really can be pulled from empty top hats. These politicians and pundits see the increased output and employment of protected and subsidized firms, but they don’t see the necessarily reduced output and employment elsewhere in the domestic economy. They see the higher incomes of owners, workers, and other suppliers of protected and subsidized firms; they don’t see the lower incomes of owners, workers, and other suppliers of other firms throughout the domestic economy.
These politicians and pundits not only rely for their applause upon the public’s poor grasp of basic economics, they encourage this grasp to remain poor by accusing those who challenge their fallacies of being in “ivory towers” or of being “elitist” or, again, of being deficient in patriotism or excessive in ideology. Why bother to listen to the case for free trade and free markets if those of us who make it thereby reveal that we are “cosmopolitan elites” out of touch with the real world and content to sacrifice the welfare of our fellow citizens to that of foreigners?
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Because familiarity with even basic economics renders silly the childish “us vs. them” narrative, protectionists – so fond of this narrative – reject basic economics. For them, it’s better to bluster stupidly and to win the cheers and power that such blustering often brings than to reason soundly and get matters right.