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The Utter Illogic of Mercantilism

Here’s a letter to the Wall Street Journal:


Your report “Biden Administration’s Big Manufacturing Push Could Transform Global Trade” (Jan. 12) reveals that politicians’ understanding of trade is utterly perverse.

Upset that foreigners sell to Americans lots of goods at low prices, the Biden administration announces that it will force American taxpayers to subsidize the production of more microchips, many of which will be exported. This American gift of artificially low-cost microchips to foreigners so infuriates officials in the E.U., Japan, and South Korea that they hatch schemes to compel their citizens to subsidize the production of microchips, many of which will be exported and made available at artificially low costs to Americans.

Governments, in effect, hurl at each other the following threat: “How dare you force your citizens to give gifts to our citizens! If you don’t stop this gift-giving, we’ll force our citizens to give gifts to yours!”

In the crossfire of this battle of dimwits are each country’s ordinary citizens whose spending power is artificially lowered by their governments’ quest to artificially raise the spending power of foreigners.

Donald J. Boudreaux
Professor of Economics
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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