Phil Gramm and Donald Boudreaux discuss the high price of protectionist economic policies.
Since Adam Smith debunked mercantilism in “The Wealth of Nations” (1776), the political appeal of trade protectionism has centered on its ability to benefit a privileged few special interests while spreading costs across society. Yet as the global economy has become more integrated, the cost of granting special favors through such policies has exploded. Each job created by recent tariffs on washing machines and steel has cost the U.S. economy an estimated $820,000 and $900,000, respectively. Tariffs imposed in the name of revitalizing American manufacturing have, over six years, been followed by slightly decreased manufacturing output, reductions in the percentage of the nonfarm labor force employed in manufacturing, and significantly higher trade deficits.
Sidestepping the economic logic and evidence that trade and private markets fuel growth and higher living standards, protectionists and industrial planners are trying to change the terms of the debate. Disciples on the right and left argue for policies that promote not efficiency, consumer benefit and economic growth, but rather jobs as ends in themselves. …
… On the surface, their argument is appealing. Jobs are at least as important as consumption. But this raises an age-old question: Who decides which jobs to promote? In attempting to answer, it becomes clear that the new mantra is the same old siren song.In a free society, consumers determine what is produced by choosing where to spend the incomes they’ve earned through hard work and thrift. Consumer sovereignty directs labor and capital to create the mix of goods and services that consumers want. Businesses either produce them efficiently or fail.
Politicians who advocate focusing on jobs propose that we allow government to direct how labor is employed, how capital is invested, and which goods and services are made available to consumers. That concept isn’t exactly novel: Allowing the “best and brightest” to choose such arrangements has been tried and rejected for eons.
