No Serious Person Accepts Protectionism’s Implications

(Don Boudreaux)

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In my latest column for AIER I trace out some implications of protectionism in order to reveal that protectionism – insofar as this policy is intended to enrich the people of a country – is “illogical stupidity, pure and simple.” (As a policy of enriching the politically influential few at the larger cost of the many, protectionism is brilliantly effective.) A slice:

But what if a clever protectionist answers “yes” to the question about requiring those who ‘win’ from increased access to steel produced in Alabama to compensate those who ‘lose?’ This protectionist should then be presented with a second hypothetical scenario and question: “Suppose an entrepreneur creates an innovation that enables a given amount of inputs used in American steel mills to produce 50 percent more output than was possible before the innovation. Do you, Mr. Protectionist, believe that this entrepreneur, as a condition of being permitted to implement her innovation, should first agree to join with her customers in compensating the steel workers who would lose jobs as a result of this innovation?”

Very few protectionists would endorse conditioning implementation of such an innovation on a requirement that the ‘winners’ compensate the ‘losers.’ But of course from the perspective of workers who lose jobs in steel mills, nothing economically distinguishes Americans gaining greater access to steel as a result of technological innovation from Americans gaining greater access to steel as a result of lower barriers to trade. Both developments ‘destroy’ some jobs in American steel mills.

Let us, however, imagine that the protectionist with whom you’re arguing fancies himself to possess an intellect singularly adroit and wily. Determined not to get trapped by what he believes to be your market-fundamentalist, neoliberal, and ideology-blinded legerdemain, the protectionist agrees that, yes, implementation of any such innovation ought to be conditioned on the ‘winners’ compensating the ‘losers.’

After pointing out to your protectionist adversary that abandoning a policy of what the Mercatus Center’s Adam Thierer calls “permissionless innovation” would inflict significant economic harm on ordinary people, you have a third question to put to the protectionist. It’s this: “Do you believe that consumers should be forcibly prevented from acting on changes in their tastes and preferences until and unless they first compensate the ‘losers’?”

Your protectionist adversary looks at you quizzically. Sympathetically understanding that the protectionist’s mind is really neither very adroit nor wily when it comes to questions of economics, you elaborate: “Whenever consumers’ tastes change, some jobs are destroyed. For example, about 25 years ago many Americans became enamored with the Atkins diet. They lost much of their taste for high-carb foods and intensified their preferences for foods high in protein. As a result, many brewers and bakers lost jobs while many vintners, butchers, and ranchers enjoyed higher incomes. Should government have prevented Americans from reducing their purchases of beer, pasta, and donuts until and unless these Americans, along with vintners, butchers, and ranchers, agreed to compensate brewers and bakers?”

Were your protectionist adversary to countenance such a use of government coercion, he would thereby expose himself as differing little from Stalin or Mao in his utter disdain for private spheres of action, combined with his utter faith in the godlike powers and authority of the state. But in reality the protectionist would surely avoid being so exposed. He would instead attempt to distinguish changes in consumer tastes and preferences from increased consumer access to imports.

But your knowledge of economics enables you to explain why each such attempted distinction fails. Although aware that the chances of your protectionist adversary admitting intellectual defeat range from slim to none, you nevertheless explain that because all jobs created in market economies ultimately depend upon choices freely made by consumers, all jobs lost in market economies are equally the result of choices freely made by consumers. Economically speaking, absolutely nothing distinguishes jobs lost to imports from jobs lost to innovation or to changes in consumers’ tastes.

A notable implication of this fact is that protectionism, at root, is an ideology opposed to consumers. It’s a doctrine that treats with contempt the desires of ordinary men and women peacefully to pursue prosperity and happiness as they so judge. Protectionism, consistently followed, strips each person of his or her freedom to make economic choices as it enslaves each person to existing, politically powerful producers. Under protectionism, the economy is a process not for satisfying maximum possible human wants but, instead, for subsidizing the performance of activities that are of value chiefly to the relatively few individuals who are subsidized to perform these activities and of no or little value to the vast majority of people who are compelled to pay these subsidies.