… is from page 321 of the 1936 English-language edition (translated from German by Alfred Stonier and Frederic Benham) of Gottfried Haberler’s magnificent 1933 work, The Theory of International Trade: With Its Application to Commercial Policy:
The decisive argument against pure export bounties, stated by Adam Smith and in a still better form by Ricardo, is the same as that against tariffs. Export bounties divert trade away from the lines indicated by comparative costs. Such bounties are a gift to the foreigner. Either they induce the economy to produce goods which could be obtained at less expense from abroad in exchange for others, or they induce subsidized industries to expand their production beyond the point at which (owing to diminishing returns) it ceases, from the rational standpoint of comparative costs, to be profitable.
DBx: Indeed so. Yet this reality is lost on the many politicians and pundits who assert that Beijing, by subsidizing Chinese producers who export to the United States, is harming Americans as it enriches China. In reality, such Chinese subsidies put America first and, simultaneously, make the Chinese people poorer than they would otherwise be, and the Chinese economy less productive.
And it’s insane that these complaining politicians and pundits in the U.S. demand that, to counter China’s self-damaging efforts, we Americans should inflict similar, or perhaps even worse, damage on ourselves.
Encountering the yammering or writing about trade by any randomly selected politician or pundit is akin to encountering yammering or writing by people who treat it as axiomatic that up is down, left is right, hot is cold, less is more, small is big, and 10-3=15. In the bizarro alternative universe of the protectionist, Jones, by wasting ever more of his resources and energy, enriches himself both absolutely and relatively to Smith, and at the exclusive expense of Smith – and Smith’s only hope of reversing this fate is to mimic (or, better, outdo) Jones at wasting ever more of his resources.
