Why Is Protectionism Demonized?

Upon rummaging through my favorite trolling haunts, I happened upon an article written by a misguided individual that couldn’t grasp why protectionism is a bad idea.

David9176 writes:

Could someone tell me what is WRONG with Protectionism? What exactly is WRONG with protecting American wages? What exactly is WRONG with protecting our small businesses? What exactly is WRONG with protecting our manufacturing base? (which is all but gone BECAUSE of our trade policies) What exactly is WRONG with trying to correct our overly unbalanced import/export ratio?

ANYONE?

Well David, I’m here to answer your question and save you from a life of misguided fascism and self-imposed poverty.

If there is one thing the Keynesian idiots and Austrians agree on, its free trade.

In fact, you’ll be hard pressed to find any economist, who isn’t an outright Marxist, that believes tariffs and other protectionist measures are a good idea.

About.com sums up the standard argument in favor of fascism for us:

Tariffs are a boon to domestic producers who now face reduced competition in their home market. The reduced competition causes prices to rise. The sales of domestic producers should also rise, all else being equal. The increased production and price causes domestic producers to hire more workers which causes consumer spending to rise. The tariffs also increase government revenues that can be used to the benefit of the economy.

Of course, that is only one part of the equation.  One must look at all the economic effects that arise from this as well.

The article continues:

There are costs to tariffs, however. Now the price of the good with the tariff has increased, the consumer is forced to either buy less of this good or less of some other good. The price increase can be thought of as a reduction in consumer income. Since consumers are purchasing less, domestic producers in other industries are selling less, causing a decline in the economy.

Study after study has shown that tariffs cause reduced economic growth to the country imposing them. A few of examples:

The essay on Free Trade at The Concise Encyclopedia of Economics looks at the issue of international trade policy. In the essay, Alan Blinder states that “one study estimated that in 1984 U.S. consumers paid $42,000 annually for each textile job that was preserved by import quotas, a sum that greatly exceeded the average earnings of a textile worker. That same study estimated that restricting foreign imports cost $105,000 annually for each automobile worker’s job that was saved, $420,000 for each job in TV manufacturing, and $750,000 for every job saved in the steel industry.

In the year 2000 President Bush raised tariffs on imported steel goods between 8 and 30 percent. The Mackinac Center for Public Policy cites a study which indicates that the tariff will reduce U.S. national income by between 0.5 to 1.4 billion dollars. The study estimates that less than 10,000 jobs in the steel industry will be saved by the measure at a cost of over $400,000 per job saved. For every job saved by this measure, 8 will be lost.

The cost of protecting these jobs is not unique to the steel industry or to the United States. The National Center For Policy Analysis estimates that in 1994 tariffs cost the U.S. economy 32.3 billion dollars or $170,000 for every job saved. Tariffs in Europe cost European consumers $70,000 per job saved while Japanese consumers lost $600,000 per job saved through Japanese tariffs.

Tariffs serve as a transfer of wealth from domestic consumers to domestic producers.

Of course, such articles are written by Keynesian retards, thus I must also provide sources that are non-communist in nature.

Now, I know what you’re thinking – “but Michael, if we don’t have tariffs China will shit on our face!”  Sir, I am here to tell you that tariffs are not the cause of our problems with China nor are they a solution.

Robert Murphy provides us some insight:

Unfortunately, there is another possibility. If the Federal Reserve creates hundreds of billions in new dollars out of thin air, and the foreign “investors” are other central banks that gobble up the dollars because their own rules treat them as reserves, then this increase in the foreign demand for “American assets” is of a much-different character.

In particular, the low US interest rates that accompany such a gusher of new dollars will encourage domestic consumption and will discourage foreigners in the private sector from investing in the United States. The rest of the world will acquire American assets all right, but they will be more heavily tilted toward debt (rather than equity in growing companies). The physical goods flowing into the United States will be consumer goods such as TVs and iPods.

From this we can see the real problem of our “trade imbalance” is not caused by cheap Chinese labor, but from our criminal fiat system of fraudulent currency.  The Federal Reserve and its criminal counterparts are the primary cause of our manufacturing job losses here in the US.

For more on the history of tariffs in the United States, listen to John Sophocleus of the Mises Institute lecture on the subject: mises.org…

For more audio and video on the effects of tariffs, look here:  mises.org…