An Open Letter to Fred Hochberg

(Don Boudreaux)

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Mr. Fred Hochberg
Former Chairman and President, U.S. Export-Import Bank

Mr. Hochberg:

Unhappy with my Mercatus Center colleague Veronique de Rugy’s recent piece in the New York Times exposing the depth of cronyism at the Ex-Im Bank, you tweet:

There she goes again — same old arguments and selective use of facts when it comes to @EXIMBankUS.

@veroderugy will use any argument to disarm America in a way that will move jobs overseas. Enough!

With respect, the hawker of hackneyed arguments is you. No contention about trade is more tired than is the centuries-old claim that nations compete against each other economically. And no statement is more ridiculous than that which implies that foreigners who offer to sell to us low-priced goods are akin to foreigners who attempt to kill us with high-powered weapons.

More specifically, because export subsidies transfer resources from more-valuable to less-valuable uses, they generate in countries that use them, not economic benefit, but economic harm. As for the jobs that subsidies ‘create,’ because these exist only by being subsidized they are less productive than are the jobs destroyed when government directs resources away from other industries in order to subsidize favored ones.

Why should our government inflict such harm on us simply because other governments inflict such harm on their citizens?

On page 262 of his 1991 book, The Fair Trade Fraud, James Bovard replaces the absurd unilateral-disarmament analogy with a correct one. He notes there that for us Americans to unilaterally abolish import tariffs and export subsidies is not for us to leave ourselves unprotected from harm that might be inflicted on us by foreigners but, instead, “to unilaterally diffuse old bombs that have been left scattered across our industrial landscape. If foreign nations refuse to sever the ball and chain on their economies, is the U.S. obliged in self-defense to continue hobbling the American economy?”

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030