No law or legislation prevents businesses from demanding, as a term of their selling outputs to consumers, that consumers continue to patronize these same businesses for a minimum number of years – or, indeed, until death (or bankruptcy) do them part. No law or legislation prevents workers from demanding, as a term of their agreeing to work for employers, that employers continue to employ these same workers for a minimum number of years – or, indeed, until death (or bankruptcy) do them part.
[…] too often when buyers shift some of their patronage from domestic producers to foreign producers, domestic producers – both firm owners and workers – insist that the state is morally obliged to force buyers to continue to purchase their products and their labor without any reduction in the prices and wages charged by sellers. These producers greedily and falsely insist that it’s bad policy for the state to allow buyers to shift their patronage to other sellers. Because those other sellers happen to be located abroad – or in the case of immigrants happen not to have passports issued by the domestic sovereign – such greedy and false insistence by domestic producers and workers is remarkably seen as legitimate, despite the fact that there’s nothing remotely legitimate about such insistence.
Tariffs and other forms of “protectionism” are means of forcing buyers to act and to pay as if they agreed to terms of contracts with sellers that these buyers never agreed to and that the sellers who benefit from the protectionism were unwilling to pay for in their contractual dealings with their customers.
Protectionism is akin to changing the rules of a game in the middle of a game. It’s unfair. It’s unproductive. It’s theft wrapped in flags, and too-often faux-sanctified by specious theorizing.
Don Boudreaux, “Protectionism Is a Means of Stealing That Which Suppliers Are Unwilling to Purchase”, Café Hayek, 2016-09-10.
October 26, 2022
QotD: Protectionism forces buyers to take worse deals
September 15, 2022
QotD: Protectionism
At the other end of the spectrum, government officials have no discretion in doling out the privilege of tariffs because all industries are equally protected, to the same degree, by tariffs from import competition. Here, everyone robs everyone.
Pick any point along this spectrum, and you’ll find – in practice – some people robbing others but not themselves being robbed; other people robbing others while they themselves also are robbed; and yet other people who do no robbing but who are robbed.
What you’ll not find anywhere along this spectrum is a point at which no robbery occurs, for protectionism is in essence a scheme of organized theft.
Protectionists, as has often been observed, have the ethics of thugs. Regardless of their legerdemain or their excuses – or even their felt intent – they are all apologists for plunderers.
Don Boudreaux, “Bonus Quotation of the Day…”, Café Hayek, 2019-03-17.
November 27, 2021
Americans fear the power of “Big Oil” and other cartels. Canadians rejoice under the buttery thumb of “Big Dairy”
Jen Gerson hates Canada’s supply management “system” with the heat of a thousand suns. And she’s perfectly right to do so:
Former federal Conservative Party leader Andrew Scheer, paid tool of Big Dairy, chugs some milk during a Press Gallery speech in 2017. I’ve called him the “Milk Dud” ever since.
Screencapture from a CTV video uploaded to YouTube.
Many of you readers have listened to the likes of me complain about supply management over the years, but for those of you whose eyes glazed over until you started to notice your rent money disappearing into your grocery bill, here’s a very quick primer.
The supply management system insulates eggs, dairy, and poultry from the vicissitudes of the free market, assuring established farmers in these few sectors a guaranteed return to produce a pre-ordained supply of these products. The federal and provincial governments oversee the system via various dairy commissions.
Some government involvement in dairy has been a feature of our agricultural system since the late 19th century, however the system as it exists today came into effect in the ’70s. It consists, broadly, of three policy mechanisms. Prices are set internally to assure farmers receive a healthy profit for their labour, farmers are protected from competition though ruinous import tariffs, and then supply is managed via a quota system.
As one might expect, this has created extraordinary economic distortions, assuring that a container of milk in Canada is radically more expensive than an identical product south of the border. (Yes, American milk is subsidized too, although less than it once was. And from a consumer’s perspective, so what? If the Americans want to subsidize cheap milk to send north, all the better for shoppers.)
In order to keep production at a steady level, the system has to keep newer, cheaper players from entering the market, and this is accomplished via a quota system that has led to absurd economic incentives and outcomes. According to this report from the Canadian West Foundation from 2016, the quota was valued at about $28,000 per cow. That means that the value of the right to own one milk-producing cow far outweighed the actual value of the animal — and someone seeking to start a dairy farm would need to pay for millions of dollars worth of quota in addition to cows, land, food, and farm equipment.
The quotas themselves are a multi-billion dollar racket; this is roughly akin to the way a license to run a taxi costs hundreds of thousands of dollars in some cities, many multiples of the value of the car itself. When a government creates a regulatory system that imposes artificial scarcity, the value of the thing regulated radically increases.
Since the supply management system was introduced, much of the agriculture has consolidated; this, combined with the value of the quotas they possess mean that most dairy farms — far from being quaint, picturesque family homesteads — are multi-million dollar operations, with farmers themselves making six-figure profits after paying their own wages.
The system has also proved a obstacle in multiple free-trade deals, arguably making it difficult for other agriculture sectors to compete globally.
And who pays for all of this?
Well, of course, you do.
April 12, 2021
QotD: Four lessons on free trade
Below are the lessons, taken almost entirely verbatim from the bank’s online lesson (except where I’ve provided a bit of additional description). It’s a terrific lesson and all within a mere 1,400 words and a short video.
Lesson 1: All parties reap the rewards of free trade.
Specialization means focusing on what each country produces most efficiently and trading for the rest. And because specialization is more efficient, it creates more wealth than if each country tried to do it all on its own. International trade is no different from domestic specialization and internal trade — few of us grow our own food or do our own dry cleaning. Instead, we specialize and trade. The lesson includes a short cartoon video featuring “Mark and Lucy” — aimed at kids but worth a presidential view — that explains the concepts of comparative advantage and opportunity costs.
Lesson 2: Trade protectionism makes everyone worse off.
While freer trade — in both exports and imports — makes us better off, the opposite is also true. Barriers to free trade, such as tariffs, have a negative impact on our economic well being.
Lesson 3: The pie isn’t divided equally.
Freer trade has raised incomes across the global economy, but it has not benefited everyone. Countries engaged in free trade are better off overall, but some sectors and communities within countries have suffered. Governments have used policies such as ongoing learning and retraining programs to help affected workers adjust. This a better approach than shrinking the pie through trade protection. That would be worse for everyone.
Lesson 4: Trade deficits and surpluses are not a scorecard.
It’s important to debunk the myth that cheap imports are the cause of all the pain and that a trade deficit with another country is a bad thing. Looking at trade balances between a country and its trade partners, we should expect to see surpluses with some and deficits with others. This is specialization in action.
Terence Corcoran, “Amazing! Canada has one government department that actually comprehends free trade!”, Financial Post, 2018-10-04.
February 17, 2021
QotD: Protectionists, left and right
“Progressives” who embrace protectionism share conservatives’ low opinion of their country’s businesses, entrepreneurs, and workers, but also mistakenly believe that protectionism “sticks it to” corporate oligarchs when, in fact, it creates corporate oligarchs.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2018-09-10.
November 24, 2020
The History of Fabric Is the History of Civilization
ReasonTV
Published 23 Nov 2020Virginia Postrel’s new book explores economics, politics, and technology through textiles.
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Full text and links: https://reason.com/video/2020/11/23/t…Follow us on Twitter: https://twitter.com/reason
Reason is the planet’s leading source of news, politics, and culture from a libertarian perspective. Go to reason.com for a point of view you won’t get from legacy media and old left-right opinion magazines.
—————-The Fabric of Civilization: How Textiles Made the World, a new book by former Reason editor in chief Virginia Postrel, is a rich, endlessly fascinating history of the remarkable luck, invention, and innovation that made our fabric-rich world possible.
The book aims to make the mundane miraculous. Consider cotton. Most of the cotton we grow today is descended in part from a plant species that evolved in Africa and somehow got over to what is now Peru, where it mixed with New World strains.
“The fact that we have cotton at all, that it exists anywhere, is amazing,” says Postrel. “It happened long before there were human beings, but much more recently than when the continents were together. So we don’t know. It could have gotten caught up in a hurricane. It could have floated on a piece of pumice. So it’s this random, very unlikely happening that had tremendous world-changing consequences.”
The story of textiles is rife with attempts at protectionism and prohibition. In 17th and 18th century Europe, countries banned the importation of super-soft, super-colorful cotton prints from India known as calicos because they threatened domestic producers of everything from lower-quality cotton fabric to luxury silks. “For 73 years, France treated calico the way the U.S. treats cocaine,” Postrel says. “There was this huge amount of smuggling, and they were constantly ratcheting up the penalties [so] that they got quite grotesque, at least for the major traffic.” Some of “the earliest writings of classical liberalism are in this context, people saying not only is this not working, but … it is unjust to be sentencing people to the galleys in order to protect silk makers’ profits.”
Postrel also documents how the Luddites, the 19th century English textile workers famous for smashing the power looms threatening to put them out of work, owed their jobs to an earlier technological breakthrough: the spinning machines that emerged in the late 1700s.
“If you go back to that earlier period, when spinning machines were introduced, the same thing happened,” she says. “They had their own period of rebelling against the new technologies and saying they’re putting people out of work.”
The book also upends some contemporary myths, such as the claim that commercial production of hemp for clothing was a casualty of the war on drugs. “Hemp historically was a very coarse kind of fabric for poor people who didn’t have an alternative,” says Postrel. “It was replaced by cotton for good reasons. Cotton was also affordable, but it was soft and washable and just a much better fabric.”
“Human beings live in history and we inherit the legacies, positive and negative, of that history,” says Postrel, whose previous books include The Power of Glamour, The Substance of Style, and The Future and Its Enemies. Discussing the large themes of her work she says, “All you can do is start from where you are and try to do better from where you are.”
Narrated by Nick Gillespie. Edited by Isaac Reese.
Music: “Thoughts,” by ANBR
Photos: World History Archive/Newscom; The Print Collector Heritage Images/Newsroom; The “Réale” returning to port, Med/CC BY-SA 3.0; Smithsonian National Museum of African American History and Culture/CC0; Battle of Grand Port, Rama/Wikimedia Commons/CC BY-SA 2.0 FR; Fine Art Images Heritage Images/Newscom; Seton, M., Müller, R., Zahirovic, S., Gaina, C., Torsvik, T., Shephard, G., Talsma, A., Gurnis, M., Turner, M., Maus, S., and Chandler, M., 2012, Global continental and ocean basin reconstructions since 200 Ma: Earth-Science Reviews, v. 113, no. 3-4, p. 212-270
QotD: Canada’s economic Stockholm Syndrome
We’re stuck with a system in which producer interests — most notoriously the dairy cartel that operates under the name of “supply management” — hold the rest of us hostage. Dismantling the dairy cartel is an act that would significantly increase consumers’ buying power, but this is a measure that the Conservatives have all but ruled out under any circumstances, and the NDP has made maintaining the cartel a condition for supporting any sort of trade agreement.
Why would the [major parties] stubbornly insist on sticking to a policy that makes consumers worse off at the expense of producers? Because it’s a popular position. It’s one of the marvels of the Canadian electorate. Show Canadians a special interest group that uses its government-granted privileges to fleece consumers, and they’ll embrace it as a “national champion,” a “uniquely Canadian way of life” or some equally vapid catch-phrase.
This is from the Wikipedia entry for Stockholm Syndrome:
Stockholm syndrome, or capture–bonding, is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending them.
What we suffer from is the economic policy equivalent. Call it “Canada Syndrome”: a tendency for consumers to identify with the producer interests that are holding them hostage.
Stephen Gordon, “Our Stockholm Syndrome about supply management”, Maclean’s, 2013-03-05.
November 5, 2020
QotD: The idiocy of tariffs
The true sadness here being that the spiral works the other way too. But hugely, vastly, more slowly. GATT was founded in 1947, it became, the process was transferred to, the WTO and it has taken them since then, that two generations, to reduce tariff levels to where they’re not really all that important in trade matters. Something that is being undone in just a couple of months of foolishness. GATT being something of a response to the economic demolition work done by Smoot Hawley of course.
Trade protection does spiral up and spiral down, the sadness being that here’s an asymmetry to the process. The reductions that make us richer take very much longer than the nonsenses that impoverish.
Tim Worstall, “The China, US, Trade War – It’s All Mutual On The Way Down As Well As Up”, Continental Telegraph, 2018-07-11.
October 10, 2020
China’s national memories are oddly inconsistent
At UnHerd, Bill Hayton looks at the one conflict between China and a western nation that bulks disproportionally large in the current Chinese government’s historical grievance-bank:
“The 98th Regiment of Foot at the attack on Chin-Kiang-Foo, 21 July 1842.”
Painting by Richard Simkin (1840-1926) via Wikimedia Commons.
Take three mid-19th century Asian conflicts: one killed 20 million people, one killed well over 100,000 and a third killed 20,000. Which one, despite being barely noticed by the Chinese government at the time, is the most discussed today and has become emblematic of an historic clash between East and West?
The immensely deadly Taiping Rebellion between 1850 and 1864 and the vicious conflict between “Hakka” and “Cantonese” peoples between 1855 and 1867 are barely known outside China, despite their far bloodier impacts on human lives. We know vastly more about the “First Opium War” of 1840 because it has played a totemic role in two political arenas: one in China and one in the UK. And in both places, the origins of the war have been obscured and distorted to suit political agendas.
In China, the “Opium War” marks the beginning of what the Communist Party currently calls the “century of national humiliation” — a period of unrelenting misery that only ended in 1949 with the Party’s victory in the Chinese Civil War. It is a narrative that underpins both the Party’s right to rule China and its increasingly assertive foreign policy. In Britain, the narrative of the war has been a weapon wielded variously by Liberal critics of a Whig government, puritan campaigners against drugs, leftist opponents of British foreign policy and Twitter-users claiming that white people are inherently racist. All these critiques and narratives caricature the evidence.
In the comic-book version, the British Empire went to war in 1840 to force an illegal and immoral drug, opium, down the respiratory passages of the Chinese people, purely for its own ill-gotten ends. This narrative is oddly patronising. It assumes that the Chinese side were merely naïve dupes, hapless victims to imperial power. It is time to recognise that there were several protagonists in the First Opium War.
On one side were the British free-traders, men who wanted an end to Chinese restrictions on commerce, whether of cotton or opium. There was also an East India Company anxious to maintain its good relations with local officials, and a London government and its critics with their own agendas. On the other was an imperial court in Beijing split between reformers and a clique of Chinese conservative “scholar-officials” intent on keeping foreign influence at bay. In the middle was an Asian financial problem triggered by a European war.
September 2, 2020
Cold War 2.0 — you’re soaking in it
Ted Campbell responds to a recent article in Foreign Affairs by Nadia Schadlow:
Dr Schadlow posits that “A new set of assumptions should underpin U.S. foreign policy … [and, concomitantly, the foreign polices of the US led West, including Canada’s, because] … Contrary to the optimistic predictions made in the wake of the Soviet Union’s collapse, widespread political liberalization and the growth of transnational organizations have not tempered rivalries among countries. Likewise, globalization and economic interdependence have not been unalloyed goods; often, they have generated unanticipated inequalities and vulnerabilities [and] although the proliferation of digital technologies has increased productivity and brought other benefits, it has also eroded the U.S. military’s advantages and posed challenges to democratic societies.”
After outlining the rosy assumption made by leaders and policy makers from Richard Nixon through Bill Clinton to Barack Obama ~ assumption which I shared, Nadia Schadlow says that “China had no intention of converging with the West [because] The Chinese Communist Party never intended to play by the West’s rules; it was determined to control markets rather than open them, and it did so by keeping its exchange rate artificially low, providing unfair advantages to state-owned enterprises, and erecting regulatory barriers against non-Chinese companies. Officials in both the George W. Bush and the Obama administrations worried about China’s intentions. But fundamentally, they remained convinced that the United States needed to engage with China to strengthen the rules-based international system and that China’s economic liberalization would ultimately lead to political liberalization. Instead, China has continued to take advantage of economic interdependence to grow its economy and enhance its military, thereby ensuring the long-term strength of the CCP.” Of course, from a Chinese perspective it might, very reasonably, appear that the liberal, US made (in the late 1940s) “rules based international system” was, in fact, designed to strengthen the US economy and enhance its military and ensure America’s long term strength … and that is not, many would say, a totally unreasonable view.
[…]
America’s allies, including Canada, need to step up and help the USA (and India) with the containment of both China and Russia in several regions: in Asia, Africa, the Middle East and Europe, too. Canada is a G-7 nation. It needs to start acting like one.
Australians, Brits, Canadians and Danes need not share Dr Schadlow’s Trumpian view of the world and of Cold War 2.0 to understand that:
- It is here. We are in it, like it or not; and
- Like its predecessor, it can turn hot if we do not manage it with care.
Now, at this time, the conventional wisdom is that foreign and defence policy must take a back seat to beating COVID-19 and restarting the economy. But, the Chinese and the Russians are not putting their plans on hold while they deal with the pandemic. (Maybe that’s why Justin Trudeau admires China’s “basic dictatorship” so much.) They will both be moving ahead with plans that aim to put the US-led West, including Canada, at a disadvantage. Additionally, now is a good time to announce plans to build more new warships ~ two or three large helicopter carriers, another supply ship (for a total of four) 16 major surface combatants (the new Type 26 ships) and a dozen smaller corvettes … can be and politicians should say will be built here in Canada, by Canadian workers. Defence related projects, when well conceived and directed, can be great long-term job creators. Canada can do both: speed up our recovery from the pandemic and strengthen our global position by making defence procurement a priority for the recovery.
An artist’s rendition of BAE’s Type 26 Global Combat Ship, which was selected as the Canadian Surface Combatant design in 2019, the most recent “largest single expenditure in Canadian government history” (as all major weapon systems purchases tend to be).
(BAE Systems, via Flickr)
July 20, 2020
QotD: Protectionists misunderstand the role of money
The Econ 101 teacher typically draws on the white board a diagram of two countries trading with each other. Country A is shown exporting (say) steel to country B in exchange for dollars, and then using those dollars to buy lumber from country B. The Econ 101 teacher informs his or her class that, while these exchanges are mediated by dollars, what ultimately is going on in this diagram is that the people of country A produce steel and send some of that steel to the people of country B because the people of country A want lumber from country B. Likewise, the people of country B produce lumber and send some of it to the people of country A because the people of country B want steel from country A. “The money that you see, class,” explains the Econ 101 teacher, “merely facilitates the exchange of steel for lumber. What’s important here is the getting of steel and of lumber. Money is a tool used by the people of country A to transform some of the steel they produce into lumber that they want to consume. Likewise, money is a tool used by the people of country B to transform some of the lumber they produce into steel that they want to consume.”
The protectionist thinks of this hypothetical two-country exchange entirely differently from the way that the Econ 101 teacher thinks of it. For the protectionist, the people of country A produce steel as a means of getting money; that is the ultimate goal. And the people of country B produce lumber as a means of getting money; that – the getting of money – is the ultimate goal. While for the Econ 101 teacher the two-country diagram that he or she draws is meant to show how money facilitates the ultimate acquisition by the peoples of each country of real goods, for the protectionist the diagram seems to show that the production of real goods is a means of facilitating the ultimate acquisition by the peoples of each country of money.
Don Boudreaux, “A Protectionist is Someone Who…”, Café Hayek, 2018-04-10.
June 14, 2020
QotD: The seen gains and unseen losses of high tariffs
It’s easy to rejoice when a wall, literal or figurative, enriches you. And it’s even easier when the destruction wrought elsewhere by that wall is invisible. When a tariff wall causes people in Louisiana and Oregon to pay higher prices for steel made in Pittsburgh, no one can know how they would otherwise have used the extra funds they now pay to Pennsylvania steel producers. But those funds must be diverted from somewhere.
Yet because those somewheres are many, no one domestic industry suffers any great loss from higher steel tariffs. The destruction wrought by tariff walls is dispersed and, hence, invisible. But the sum of the losses is greater than the gain to domestic steel producers.
Americans on the whole are made poorer.
Don Boudreaux, “Mr. Trump, don’t build those walls!”, Pittsburgh Tribune-Review, 2016-11-22.
May 24, 2020
QotD: The “balance of trade”
The first thing to observe about this concept [of the balance of trade] is that it is in fact an analytic tool. The balance of trade is not a concrete thing like a price or a load of merchandise.
Yes (although it is even more accurate to describe the balance of trade as an accounting convention). If, for example, it had been decided to record purchases and sales of real estate on the current account rather than on the capital account, the size of each country’s current-account deficit or surplus would be different even though absolutely nothing real in the national or global economy would be changed. And yet to hear any of the many protectionists bemoan their country’s trade- or current-account deficit is to hear people who typically mistake this accounting convention for a concrete thing. Such complaints almost always reflect utter misunderstanding of so-called “trade balances.”
Don Boudreaux, “Bonus Quotation of the Day…”, Café Hayek, 2018-01-21.
May 14, 2020
QotD: Anti-dumping laws
As a result, antidumping law as it currently exists routinely punishes normal competitive business practices — practices commonly engaged in by American companies at home and abroad. It is therefore not the case that the law guarantees a level playing field for American companies and their foreign competitors. On the contrary, it actively discriminates against foreign goods by subjecting them to requirements not applicable to American products.
Brink Lindsey and Dan Ikenson, Antidumping Exposed: The Devilish Details of Unfair Trade Laws, 2003.
March 10, 2020
QotD: Free trade versus protectionism
People trade freely countless times, each and every day. Yes, yes, I’m well aware that such trade isn’t ideally free. Occupational-licensing restrictions, for example, unjustly and harmfully obstruct domestic trade. But the fact remains that today within each country – including within the U.S. – trade is not typically obstructed based on geographic location or political boundaries. And therefore people buy and sell freely within countries. If the case for a policy of free trade were not practical – if it were only a theoretical curiosity – then it would be true that ordinary people would be even richer if the state obstructed their abilities to trade with each other domestically.
It’s a myth also that the economic case for a policy of free trade in any one country requires that other governments also practice free trade. The case for a policy of free trade is, at bottom, a case for unilateral free trade: while nearly everyone in the world would be better off if all governments adopted policies of free trade, nearly everyone in the home country would be better off if the home government adopts a policy of free trade regardless of the policies of other governments.
Protectionism is a nasty mash of logical fallacies, half-truths, hubris, economic ignorance, and cronyist apologetics.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2017-12-18.
