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COLUMN: Politics not always the architect of human prosperity

Politics is supposed to be some grand, noble enterprise that reflects how society comes together to get things done. Things that we citizens, for some reason, are presumed to be unable to do ourselves.

But once you step out of the high school civics classroom, it’s almost never about that. It’s about responding to the politically strong at the expense of the politically weak. This is never clearer than in the case of trade.

The standard way we discuss foreign trade is to assume countries trade with one another. If “America” buys more stuff from “Japan” than “Japan” buys from “America”, then “America” has a trade deficit with “Japan” and that’s bad. Or unfair. Or harmful. Or something.

If “France” chooses to make “American” cars more expensive to import, “America” must retaliate buy placing tariffs on “France’s” wines. Fair’s fair, right? “France” hurt “America”, so “America” has to hurt “France”. And so it goes.

But what if that’s all wrong?

Countries don’t trade. Their citizens do. Nor do they only make things to earn money. They also use their money to buy things.

Unless and until this simple truth is understood, our economy will continue to be crippled by unfair transfers of wealth from group A to group B, simply because group A can work the system better.

Think of it this way. When America passes tariffs on imported steel to “help American jobs”, it might actually do that, at least for a time. I don’t believe shielding anyone from competition ultimately helps them, but let’s assume I’m wrong. That is still only half the story.

Protectionist tariffs focus on Americans as producers, but completely ignore our role as consumers. Tariffs on imported steel forces Americans to pay more for steel than they otherwise would. That makes them poorer. Protectionism is nothing more than a political decision to help American producers at the expense of American consumers.

Why does this happen? Because producers are organized and highly visible politically, while consumers are not. Labor unions, for example, focus exclusively on their members’ role as producers. We consumers, by contrast, are too busy living our lives to insist on the right to make economic decisions independent of what others may want.

“Well sure Barry,” you might say, “that’s all very nice in the ivory tower world of economic theory, but in the real world free trade is a myth. Governments subsidize their pet industries and “protect” their workers all the time, so we have to play hardball. If they lower trade barriers with us, we’ll do the same, but trade has to be “fair”. Tit for tat, and all that.”

I wonder, though, if we’ve really thought about what that means. China hurts its consumers to help its producers, so we have to do the same? Why exactly is that? If country A chooses to harm its poor to help its rich, must country B do so as well? Clearly not. Now substitute “politically weak” for “poor” and “politically strong” for rich. Why isn’t that just as wrong?

If protection is so wonderful, why don’t we let the states practice it? Can you imagine the absurdity and the economic chaos if Colorado could place a tariff on “imported” Oklahoma oil to “protect” Colorado’s oil and gas industry? Or if Minnesota banned imports of Wisconsin cheese because Minnesota’s purveyors of fermented curd complained of “unfair competition”?

And yet, such absurdities abound in the world of international trade. A reminder, perhaps, that politics is not always the architect of human prosperity. Sometimes, it is the exact opposite.

Barry Fagin is senior fellow in technology at the Independence Institute in Denver, and the author of the Radical Center. His views are his alone. Readers can write Fagin at barry@faginfamily.net.

Barry Fagin

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