Bonus Quotation of the Day…

by Don Boudreaux on January 24, 2020

in Crony Capitalism, Trade

… is from page 75 of the original edition of Lee Francis Lybarger’s 1914 book, The Tariff (original emphases):

If you would understand the Motives and Philosophy of Protection, you must realize that it is simply a conflict between the Producer and Consumer. In other words, it is an effort on the part of the producer to secure by law a higher price from the consumer than he is able to obtain in the open market. The Producer is against an open market and in favor of a closed market. Therefore the Tariff causes an increase of price wholly in the interest of the Producer and at the expense of the Consumer. What it gives to one it must take from the other.

DBx: Yes.

Pedants will pounce! They’ll declare that some of the costs of tariffs are typically borne by foreign suppliers in the form of lost profits on foregone export sales. This declaration is true. But it’s also irrelevant.

Because the very purpose of a protective tariff is to artificially divert sales from imports to domestically produced goods and services sold in competition with imports, a protective tariff has its intended effect of so increasing these domestic sales only to the extent that the prices confronted by domestic consumers rise. If and insofar as foreign suppliers absorb – “pay” – the cost of the tariff, price hikes in the domestic market are lower than they would otherwise be and domestic producers who compete against those foreign suppliers aren’t helped as much as they would otherwise be.

In the extreme case, in which foreign suppliers absorb the entire cost of the tariff, the prices of imports don’t rise at all. As a result, no sales are diverted from imports to domestic sellers. But, obviously, such an outcome is not the one sought by industry lobbyists who plead for the protection of tariffs. Such lobbyists – and their principals, as well as the politicians who heed their pleas – want to harm domestic consumers by making them pay higher prices. That is the goal.

Every protective tariffs is by its very nature an attack by agents of particular domestic producers against domestic consumers. It is an attack no less real, no less venal, and no less unjustified – economically and ethically – than would be a seller’s threat to shoot out the brains of customers who refuse to pay higher prices for that seller’s offerings.

And apologists for protectionists are apologists for predators. Period.

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