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Quotation of the Day…

… is from page 59 of AIER’s just-published collection – Historical Impromptus – of many of Deirdre McCloskey’s articles and essays (available on page 55 here) specifically, it’s from Deirdre’s “Thurow’s The Zero-Sum Solution,” a review that she published in the January 9th, 1986, edition of the Des Moines Register:

The trade of soybeans for Toyotas is similarly cooperative. The danger is that sports talk might persuade Iowans that subsidizing the U.S. auto industry with more than $100,000 annually for each job saved will indirectly help American farmers, as the other members of the “American team.” But Iowans are not interior linemen for running backs in Detroit.

The other danger is worse than protectionism. The sports talk encourages an attitude of Us vs. Them (remember the Iowa/Iowa State game?) We’ve fought a lot of real wars in this century that started with such talk, about the Huns and the Yankee Imperialists.

DBx: The late Lester Thurow was quite popular in the 1980s and 1990s for his incessant warnings that America was losing at the game of trade with other countries. Most ominous, Thurow (and others) warned, was our failure to compete effectively against the clever Japanese who, unlike us naive and complacent Americans, had the foresight to practice industrial policy, including the use of tariffs targeted skillfully and with precision. Trade, you see, said Thurow (and others) is indeed a contest in which the gains of the ‘winners’ are the loses of the ‘losers.’ Denials of this alleged reality come only from those who are bewitched by free-market ideology or blinded by economic orthodoxy.

And so – advised Thurow (and others) – we Americans really should step up our game by taking many production and consumption decisions out of the hands of short-sighted and selfish entrepreneurs, businesses, investors, and consumers and putting these decisions into the hands of the Potomac-residing wise and genius-filled faithful stewards of Americans’ interest.

Sound familiar? It should. While some of the details from decades ago of the news-making proponents of protectionism and industrial policy differ from the details harped on by today’s proponents of protectionism and industrial policy, the essence of the hostility to free trade and free markets of decades ago is, in most – maybe all – essential respects identical to the hostility that reigns today.

Markets in which prices, profits, and losses guide the decisions of producers and consumers were then – as they are today – asserted to be stupid, akin to a drunk donkey, while government officials (from the correct party, of course) alone have the knowledge, capacity, willpower, and power to allocate resources efficiently and in the national interest.

Nothing much changes but the names. Three or four decades ago protectionism and industrial policy in the name of the national interest was peddled by people with names such as Lester Thurow, Barry Bluestone, and Felix Rohatyn. Today protectionism and industrial policy in the name of the national interest is peddled by people with different names. Three or four decades ago the myriad fallacies that infect the case for protectionism and industrial policy in the name of the national interest were exposed by scholars such as Milton and Rose Friedman, Thomas Sowell, Don Lavoie, Charles Schultze, Jim Miller, and Deirdre McCloskey. Today, McCloskey thankfully is still at it and is joined by other, younger scholars such as Arvind Panagariya, Adam Thierer, Ryan Bourne, and Veronique de Rugy.

It is dismaying that today’s champions of protectionism and industrial policy write in what appears to be complete ignorance of the scholarly case against such policies. Today’s champions of protectionism and industrial policy slay only straw men; they expose fallacies believed by no serious scholar and debunk myths swallowed only by poorly schooled sophomores, excessively schooled graduate students, and lazy pundits.