Donald J. Boudreaux: A harsh history lesson
Partly to pressure the British to stop “impressing” American merchant ships' crews into the British Navy, President Thomas Jefferson (with congressional approval) sought to deny the British the benefits of trading with Americans. Starting in December 1807, no U.S. ships were allowed to sail to foreign ports, and no foreign ships were allowed to take on cargo at U.S. ports. Whatever the merits or demerits of Jefferson's embargo, its history offers important lessons.
Few people pliantly forego trade's advantages simply because government orders them to. Embargoes must therefore be enforced with threats. Douglas Irwin — in his new history of U.S. trade policy, “Clashing Over Commerce” — reports that “(g)iven the enormous incentives for merchants to evade the embargo, enforcement was a crucial issue from the start.” Jefferson, although known to us as a limited-government champion, was determined to do all that was necessary to prevent Americans from trading with foreigners.
Unsurprisingly, the embargo caused prices of goods that Americans once exported to fall, and prices of goods they once imported to rise — and they disobeyed with increased smuggling. Some shipped more goods by land to Canada, where these goods could be shipped by sea to foreign ports. In response, Congress in March 1808 prohibited exports over land. But that wasn't all.
Ships in the U.S. coastal trade — sailing directly from one U.S. port to another — became liable to violate the embargo by sailing to Europe. So, Congress passed additional legislation, requiring that all coastal-trade ships, and many fishing vessels, post hefty bonds. And Jefferson instructed Treasury Secretary Albert Gallatin — in charge of enforcement — “to consider every vessel suspicious which has on board any articles of domestic produce in demand in foreign markets.”
So, lessons No. 1 and No. 2: First, individuals are clever and intrepid at evading restrictions on their freedom to trade. Second, government responds to these evasions by further restricting individuals' freedoms with arbitrary measures not anticipated when the initial restrictions were installed. Restrictions on mutually advantageous activities breed ever more restrictions.
A third lesson is found in Gallatin's dismay at Jefferson. He and Congress didn't have to dirty their hands with the necessary details of carrying out their orders. Gallatin was closer to those details, which he rightly abhorred as “dangerous and odious.” Jefferson never saw up close his oppressions' dangers and odiousness. He thus had a biased — almost blinded — view of the embargo: He saw the excellence of his end but not the ugliness of his means.
True to a politician's form, Jefferson blamed his use of oppressive measures on merchants, not himself. As Irwin says, “He concluded that merchants were simply treasonous and therefore even stricter enforcement was required.” So, the most important lesson of all: If even Thomas Jefferson so eagerly used arbitrary and intrusive measures to restrict trade, such power should be entrusted to no one.
Donald J. Boudreaux is a professor of economics and Getchell Chair at George Mason University in Fairfax, Va. His column appears twice monthly.