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I had occasion yesterday to search for a link to a paper of mine, and in my search I discovered a weeks-old email from an occasional correspondent. (In this paper I argue that no compensation is owed to workers who lose incomes as a result of a freeing of trade.)
Mr. L__:
Thanks for your late January e-mail, and please forgive me for finding it only now. I apologize for the tardiness of my reply.
You ask, in response to this paper of mine [2]: “Aren’t there losers if government cuts tariffs? Can’t it be said that workers that depend on tariffs for jobs lose what they relied on when tariffs are cut?…. Aren’t these workers at least in principle owed compensation for their loss?”
No.
One justification for my ‘no’ answer rests on a value judgment, one that I’m prepared to defend – namely, protective tariffs are unethical. Therefore, when workers are prevented from continuing to enjoy the fruits of this unethical privilege, what they lose is something to which they were never entitled in the first place. Your labeling as “victims of free trade” those workers whose incomes fall when trade becomes freer is no more appropriate than would be someone else labeling as “victims of law enforcement” those thieves whose incomes fall when law enforcement becomes stronger. In both cases, the “losses” suffered are to streams of incomes to which the ‘losers’ never possessed ethically defensible titles.
But I understand that you’re likely reluctant to join me in regarding incomes earned only as a result of protective tariffs as illegitimate. There is nevertheless a second justification for my answering your question with a ‘no’ – which is this: No compensation was paid to the (very real) losers from the tariffs when the tariffs were first imposed.
Imposition of tariffs results in consumers paying prices unnecessarily high. Imposition of tariffs results also in some fellow citizens losing particular jobs (jobs, by the way, that were held legitimately, unlike the illegitimately held jobs that are lost when tariffs are cut).
And so even if I were to agree – contrary to fact – that free trade “has both winners and losers,” I see no reason, when tariffs are cut, to compensate these “losers” given that no one compensated the losers who were created when the tariffs were earlier raised. Put differently, if “losers” are to be compensated when trade policy changes in one direction (becoming more free), then “losers” must also be compensated when trade policy changes in the opposite direction (becoming less free).
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