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Donald J. Boudreaux's Economics in Many Lessons: Ask the protectionist

| Saturday, April 25, 2009

Protectionism is a disease that feeds on fear and ignorance.

With an unusual amount of economic uncertainty sparking an unusual amount of economic fear, protectionist sentiments today are growing. Blatant protectionist pundits such as Lou Dobbs, and blatant protectionist politicians such as Sen. Sherrod Brown (D-Ohio) and Sen. Byron Dorgan (D-N.D.), enjoy larger platforms than they had even just a few years ago.

Protectionism's allure is understandable. "If we make it harder for Americans to buy foreign-made goods," alleges the protectionist, "we increase the demand for American-made goods. With more goods being made in America, more Americans will find jobs. QED."

In this case, though, "QED" should be read as standing for "Quite Especially Dumb."

Every protectionist, before he or she attracts your allegiance, should answer the following questions.

1. You, Mr. Protectionist, say that low-priced imports harm us. Can you explain why access to low-cost goods and services makes us poorer?

2. You answer question No. 1 by saying that allowing American consumers to buy low-priced goods and services from abroad causes American producers -- who can produce those things only at uncompetitively higher costs -- to lose their markets. When these high-cost American producers lose their markets, high-wage American workers lose their jobs. You insist that it's this displacement of high-cost producers in the U.S. by low-cost producers abroad that must be stopped.

So do you, Mr. Protectionist, also believe that Uncle Sam should force us Americans to pay a high tariff on sunlight before we are allowed to use it• After all, sunlight is an enormously beneficial product that Americans routinely import at no cost at all! (The sun charges us nothing for the valuable heat and light that it exports to us daily.) Don't you worry that this dirt-cheap import that floods our market every day unfairly shrinks the market for American-made goods such as light bulbs, flashlights, central-heating units and down blankets?

If you don't support blocking sunlight with a tariff or with some other government restriction -- why not• Please explain how one low-cost yet valuable import (sunlight) differs from other low-cost yet valuable imports (such as steel from China or textiles from Malaysia).

3. If you insist that the example of sunlight is irrelevant, try this example: Would you oppose the invention and sale of an inexpensive pill that safely cures people of colds, flu, impotence and acne• Such a pill, after all, would displace many high-wage American workers, such as physicians, nurses and pharmacists.

If you would not oppose such a pill, why do you oppose low-cost imports?

4. Like all protectionists, you repeatedly assert that high-wage countries such as America can't "compete" against low-wage countries. Because Americans buy imports with dollars -- and because dollars generally can be spent only in America -- what do you think foreign producers do with all of the dollars they earn by selling their wares to Americans• Do you think, say, that foreigners wallpaper their pagodas with U.S. dollars, or stuff these dollars permanently into their mattresses• Or do you realize that foreigners sell things to us only because they want to buy things from us?

Perhaps you do understand correctly that foreigners intend to spend in America all the dollars that they receive in payment for the goods and services they supply to Americans. If so, though, what becomes of your assertion that America can't "compete" with lower-wage foreign countries• Clearly, that assertion must be mistaken. If foreigners sell things to Americans only because these foreigners seek dollars to spend in America, then Americans must be pretty darn "competitive" at producing lots of things -- all those things foreigners buy from America, including opportunities to invest in America.

5. Many of you protectionists hyperventilate about America's alleged loss of manufacturing prowess. Are you aware that your worries on this front arise solely because you confuse manufacturing jobs with manufacturing output • Manufacturing jobs, as a percentage of all jobs in America, are indeed declining. And you hysterically interpret this fact as somehow proving that foreign producers are undermining America's economy.

But are you aware that America's manufacturing output today is near its all-time high• Are you aware also that America is by far the world's largest exporter of manufactured goods?

Are you aware that the reason manufacturing jobs are declining as a share of all jobs has far more to do with increased productivity of American industry -- that is, increased strength of American industry -- than it has to do with increased foreign trade• Manufacturing jobs are being lost to technology and improved efficiencies. Do you think that this trend is undesirable?

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