The “mercantile system” is […] what we today commonly call “protectionism” or “economic nationalism.” By duping the general public into believing that the artificially promoted and protected profits and wages reaped by a handful of highly visible and politically powerful firms and workers are the same as — or are evidence of — a high standard of living for ordinary people nationwide, mercantilists convince members of the general public to accept government-imposed restrictions on their freedom to trade with foreigners. More succinctly, protectionists pull off the rather amazing feat of convincing ordinary people that their standard of living rises when government artificially increases the scarcity of the goods and services that they wish to consume.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2017-12-17.
What is a strong economy? How do we measure it? Most economists agree on GDP as the measure of a country’s economy: the total value of the goods and services produced in that country. The key word is Produced. A tariff-free trade would be great in a libertarian world, but such a world has never existed. All governments interfere with their economies. Modern countries have environmental laws, tax laws, worker safety and child labor laws which restrict the operations of private enterprise. However well meant, such laws restrict their own production to the benefit of those who do not enact such restrictions. Such laws actually encourage bad practices such as child labor, environmental damage, and tax evasion in foreign countries. Import duties are an attempt to at least minimize the damage to the home country’s economy. We do not measure the strength of our economy by low prices at WalMart.
Comment by Craig Hamilton — March 6, 2020 @ 23:59
Tariffs are not paid by foreign companies and individuals, they’re paid by domestic consumers. How do you make your own consumers better off by forcing them to pay more for goods and services? Environmental laws, worker safety and child labour laws are all things that only can be implemented in economies that are producing well above survival level … Canada, the USA, and Britain all implemented these kinds of rules well after the start of the industrial revolution, because they could afford the luxury of protecting children, workers, and the environment. Poorer countries can’t do that and we’re imposing additional hardships on developing nations when we try to force our post-industrial views on their still-industrializing economies.
Comment by Nicholas — March 7, 2020 @ 10:58
How do you think western economies became wealthy enough to afford these protections? It was not through over-consumption. High employment is at least as important as low prices. The objective of any tariff is not to make consumers better off, it is to soften the blow of these protections on producers. It doesn’t matter if the goods are produced privately or in government factories, schools, and hospitals. They must have a level playing field to succeed. Otherwise, we may end up with all our critical medical supplies and equipment manufactured by people who are not our friends.
Comment by Craig Hamilton — March 7, 2020 @ 22:31