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Protectionism Assaults Producers

Here’s another letter to a now-regular correspondent:

Mr. C__:

Thanks for your e-mail.

Irritated by my latest AIER column, you write that I and others who argue against economic nationalism “ignore that real people have interests as producers as well as as consumers.” You’re “incredulous that free traders deny this.”

With respect, you misunderstand the argument. No serious advocate of free trade denies that individuals as entrepreneurs, investors, and workers have interests as producers. These interests should indeed be respected, and the contents of this respect are easily summarized: Individuals should be allowed to produce goods and services for sale to the public in whatever peaceful ways they choose, and to keep the fruits of their successes as producers. Protectionism, however, undermines this interest. It does so in at least two ways.

First, protectionism erects artificial barriers to entrepreneurship, investing, and working. By constricting the market open to domestic producers, tariffs and other protectionist measures protect some particular firms and jobs only by destroying other firms and jobs – firms and jobs that would have, in the absence of protectionism, been created or supported by foreigners buying more of our exports or investing more in the domestic economy, and by fellow citizens spending and investing in the domestic economy the money they save as a result of their ability to buy lower-priced imports. Protectionism helps some producers only by harming others. Where is the economic rationale or justice in government artificially protecting some home-country producers by assaulting other home-country producers?

Second, by restricting the freedom of entrepreneurs, investors, and workers to spend on lower-priced imports the incomes they earn from their successes as producers, protectionism seizes from these people some of the fruits of their successes as producers. Can you explain to me how a policy of artificially reducing the spending power of the incomes earned by producers is a policy that promotes the interests of producers?

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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