Rejecting the Nonsense of Protectionism
Since the 2008 election battles are already well under way, pressures toward protectionism to steal from others to line constituents' pockets are intensifying. Through their patrons in Washington, industries and unions are pushing even harder for what amounts to delegated government taxing power over their consumers, using the offer of election year resources as a lure.
Of course, the conspiracies between special interests and their pet politicians must make at least minimally plausible sounding arguments for why the blatant favoritism at others' expense is really even-handed. As a result , each such cabal tries mightily to formulate "new and improved" rhetoric for why free trade may be a good idea in general, but just not in their particular case. However, those efforts simply recycle confusion or bad ideas that were debunked long ago. That is why classic analyses of such arguments are often helpful in refuting the most recent claims.
One of the most powerful such analyses comes from William Graham Sumner, who died April 12, almost a century ago. His "The Argument Against Protective Taxes," originally published in 1881(reprinted in his On Liberty, Society, and Politics), is as appropriate today as when he wrote it.
"The most absurd assertion which can be put into language is that a thing (e.g., free trade) is true in theory but is false in practice. For, if free trade is not true in practice, something else, viz., restricted trade, is alleged to be true and beneficial in practice … Any one, therefore, who makes this assertion is either guilty of very loose thinking, or else he seeks an escape, at all hazards, from rational conclusions against which he can no longer contend."
"[The controversy over protectionism] … its fruitlessness has been due, in large measure, to the ambiguities, false definitions, and confusion which has prevailed in it … [and] the glib commonplaces by which people get rid of the trouble of thinking…"
" … my point of attack is protection under any form or in any degree … "
"I maintain against any system of restriction whatsoever that it renders that ratio [of material good to sacrifice] less favorable to men than it would be under freedom … Instead of increasing wealth, it is mathematically demonstrable that it lessens wealth … by taking away one man's earnings to give them to another. I mean to say that a man must work harder and longer to get a given amount of product under protection than under free trade…this state of things is due to the statute law, which steps in and takes away part of his product and gives it to another man."
"The economic question about [protectionism] is: Does it enable the population of the country to command greater material good for a given effort? The political question about protection is: Does the statute enacted by the legislature alter the distribution of property so that one man enjoys another man's earnings? Has the state a law in operation which enables one citizen to collect taxes of another?"
"The philosophical protectionists at once reply that this is not the question … They are not willing to consider the question of wealth aside from other things. They want to embrace in the view what they call moral, political, social, esthetic, and sentimental considerations. Their instinct is perfectly correct when they oppose those operations of analysis and classification which would introduce clearness and precision into the discussion … [they] keep clear mixed with unclear … [and] dogmas which are conveniently vague, loose and broad … "
" … regard the introduction of extraneous elements, no matter under what high-sounding names … as sure signs of impending confusion and fallacy … "
"Any favor or encouragement which the protective tariff system exerts on one group of its population must be won by an equivalent oppression exerted on some other group … If the legislation did not simply transfer capital it would have to make capital out of nothing. Now the transfer is not simply an equal redistribution; there is loss and waste in the case of any tax whatsoever … We cannot collect taxes and redistribute them without loss; much less can we produce forced monopolies and distorted industrial relations without loss."
"It is very singular that the people who believe in these notions are so slow to understand the fact that whatever lessens the wealth of a community, in the widest generalization or deduction only lessens its wealth!"
"…[protectionism] can appeal to no motive save that of desire for profit. It does so by providing that a certain industry shall, under protection, pay higher profits than it could under freedom … The rest is all phrases intended to occupy attention while the thimblerig is going on."
"A restricted trade lowers the physical well-being of the population, and, with that, all chance at intellectual and moral well-being, below what it would be under free trade…"
" … [protectionism] can win nothing for some without an equivalent or greater deduction from others … whatever strength and help it brings to them as a group it must take from other groups … this operation cannot increase the national welfare…"
" … this humbug … was all rhetoric … we were right to debate it as a question of dollars and cents only. There is nothing else in it. A wants protection; that is, he wants B's money. B does not want to let him have it. A talks sentiment and metaphysics finely, and, after all, all there is in it is that he wants B's money. A does not otherwise show much interest in sentiment and patriotism and metaphysical goods generally. He never goes to Washington to lobby … unless there is a chance in it for him to get B's money. He is then moved to scorn at B's love of money… because B will not give up his money. The matter is all stated from A's standpoint. We see him all the time. For him to want B's money is patriotic. It is "developing our resources." It is noble. For B to want to keep the same money is mean. I insist upon the matter being stated in the most crass and vulgar way, just because that is all there is of it when the humbug is all eliminated."
"Competition is the force which under freedom indicates to us what we can do for ourselves and them, and what we can let them do for us to our final maximum advantage. To shut of competition and go into the industries which…Congress or the caprice of individuals may select, is like unhinging the compass and steering the ship by chance."
"If the industry does not pay … it is wasting and destroying…The protected manufacturer is forced to allege, when it asks for protection, that his business would not pay without it. He proposes to waste capital. If he should waste his own wealth he would not go on long. He therefore asks the legislature to give him power to lay taxes on his fellow-citizens, to collect from them the capital which he intends to waste, and good wages for himself while he is carrying on that business besides … Either an industry can pay under freedom, in which case it does not need protection, or else it would not pay under freedom, in which case it is wasting the wealth of the nation as long as it goes on."
William Graham Sumner noted that when it came to protectionism, "Common-sense makes its way very slowly into the minds of men when it has to rely on its own merits." After all, the self-interest of those who wish to employ the government to take from others often blinds them to rational argument, and those who want to land the job of facilitating such transactions for what he called "parasite industries" are more than eager to do so. But it still does not change the truth that "any scheme which aims to gain, not by the legitimate fruits of industry and enterprise, but by extorting from somebody a part of his product" deserves moral condemnation.
Gary M. Galles is a professor of economics at Pepperdine University. See his archive.