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Free Trade is Pro-Middle Class and Pro-Family

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Tags Protectionism and Free TradeTaxes and Spending

03/14/2019

The most sophisticated proponents of protectionism acknowledge the economic arguments in favor of free trade, but portray their position as transcending economics and the free traders’ superficial hunger for “cheap stuff.” These protectionists instead champion loftier goals such as the political and societal benefits of a robust middle class. But, leaving aside the economic superiority of free trade, protectionism still falls short of free trade in achieving the protectionists’ own stated goals; it is free trade which preserves peace and community.

Advocates for tariffs often support them in the name of supporting a strong middle class, the existence of which, they claim, provides political and societal benefits that outweigh the overall efficiency losses tariffs bring about. It is true that, in the short term, taxing foreign steel benefits the specific industries whose output is steel, and may increase the number of jobs and/or salaries in steel production. However, this is at the expense of every industry whose inputs include steel. Steel factory employment comes at the cost of car factory employment. Now, what if foreign steel were not taxed, but rather a lower-order good, closer to immediate consumption, like foreign cars were instead taxed?

It is more difficult to see why taxing cars would hurt American workers other than reducing the workers’ — and everyone else’s — purchasing power qua consumers. But it would still be harmful. It would hurt taxi drivers, Uber, Lyft, truck and limo drivers, and all of the industries tied to the people and cargo transported in these vehicles.1 Descending the ladder of production, what if tariffs were placed on finished consumer goods? Would this benefit the middle class producers of this consumer good without hurting other middle class workers? Not necessarily, because, as mentioned above, higher prices for consumer goods may reduce domestic spending in other domestic industries, and in that way hurt middle-class workers. Moreover, these tariffs hurt foreign consumers, who in turn will have less money with which to purchase U.S. products.

If one’s goal is to use tariffs to bring net benefit to the domestic middle-class, even if it means sacrificing overall economic efficiency, then such a person faces a metaphysically possible but hopelessly complex puzzle, like running through a rainstorm and dodging all of the raindrops. The odds that political actors will identify the ideal tariff, dispassionately enforce it without being swayed by special interests or the temptation of increasing revenue, prevent illegal circumvention of the tariff, and then constantly adjust the tariff in real time as changing conditions render a new tariff rate necessary, are somewhat below fifty percent.

Social Benefits

Free trade, in addition to allowing consumers to amass larger amounts of essentials like baby food, fuel, and medical equipment, offers social and political benefits.2 Free trade creates special interests for peace. With or without tariffs, there are special interest groups that pine for war. Those who sell the weapons and the inputs for the weapons to belligerent states seek war. Free trade counteracts these entrenched bellicose interests with countervailing self-interest. Companies that do business between countries, companies that produce part of their product here, and part there, that buy from here and sell there, desire peace. When war comes, sanctions, blockades, and bombs will ruin those companies, and so they have a motivation to be lobbyists for peace. A free trade regime does not categorically rule out war, but it is a force that will, other things equal, tend to make war less common, and that’s of monumental importance.

Free Trade Brings Communities Together

Protectionism, rather than holding communities together, can sever them across political lines. When empires collapse, or parts of nations are conquered by their neighbors, tariffs along new political boundaries can sever traditional bonds. If Armenians within the Ottoman empire are separated from Armenians within the Russian empire by trade restrictions, then that community is deprived of the full benefits of commerce, by which individuals’ fates are tangibly and symbiotically intertwined. If Austrians suddenly find themselves within the new borders of Italy, and can trade more freely with southern Italians hundreds of miles away than they can with their former compatriots whom they can see across the border, previously existing local bonds are weakened. In other situations, bonds that would have formed in the counterfactual world with free trade, do not.

There is more to life than accumulating material possessions. I have met few or no people who think otherwise. Those who value strong families, tight communities, hard work, and spiritual health should favor free trade so that the inputs upon which workers’ livelihoods depend are not artificially scarce; so that tariffs do not drain the purchasing power of consumers whose demand supports industries; so that nations are more reluctant to war with one another; and so that commerce, one of the great engines of social harmony, is not hindered between neighbors kept apart by political boundaries.

  • 1. Tariffs on finished consumer goods will have one fewer mechanism through which they reduce domestic employment: they do not directly increase the cost of the factors of production of other industries, as tariffs on second and higher-order goods do.
  • 2. Exemptions from tariffs on nobler goods such as medical equipment would still result in higher prices for these goods so long as the (nonspecific) factors of production for these items were not also exempted.
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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