Saturday, July 16, 2016

Protectionist Prologue

I am going to write a comprehensive look at protectionism very soon (as I also hope to write a comprehensive look at immigration, and others on money and banking, taxation, free trade and national defense), but before doing so, I want to offer an argument that just came to me, which may, in certain circumstances be useful in disputing claims of protectionists. In a way, it is akin to Bastiat's proposal to make a railway made entirely of gaps to maximize income, in that it is a reductio ad absurdam (though to a lesser degree than Bastiat's), but, though that type of argument can sometimes produce misleading arguments, in this case I think it is quite obvious once the argument has been made, that there is something wrong with the protectionist position.

My usual argument against protectionism is a more blatant reductio ad absurdam). Taking the basic premise of protectionism that jobs are all that matters, and we are better off when foreigners buy from us, rather than when we buy from them, and that we are best served by high prices for foreign goods, I made my previous argument as follows:
Let us look at the most extreme forms of the two positions. My position, that free trade is good, even when foreign lands subsidize their sales, and that cheap foreign goods are beneficial, and the protectionist argument, that it is best when we sell to foreigners and do not buy, when high foreign prices keep us from making purchases*.
Now, let us take those two to their logical conclusions. In the ultimate expression of my world view, foreign lands would send all of their produce to us at no cost, and ask for nothing in return, buying nothing from us. We would be effectively swimming in a sea of free foreign goods.
On the other hand, let us look at the protectionist ideal. We would produce as much as humanly possible, and send it to foreign lands, taking nothing in exchange. In short, we would be toiling day and night, working as much as possible, and have nothing to show for it.
Which of those two sound like prosperity to you?

Of course, the point of this is to highlight the main problem of protectionism, which I described as seeing the world backwards, or, as I also put it protectionists imagine we buy goods to give us a reason to work, while free traders see us working in order to provide us the means to consume. And that is the primary problem of protectionism, and many other faulty economic theories, seeing jobs as an end, rather than a means, and forgetting that we are both producers and consumers, and consumption has primacy.

Which is why I came up with my more recent argument, to make this point much more clear.
Again, we start with the basic dichotomy. Protectionists see jobs as the ends of economics, while I see consumption. So, to see if we can figure out which is true, let deprive ourselves of one, but not the other.

If the protectionists are right, the ultimate horror would be to be deprived of the ability to labor, while being given all the consumables you could want. If jobs are the ultimate end, this would represent deprivation.

On the other hand, if I am right, and consumption is the end, then it would be the ultimate misfortune to be forced to labor nonstop while being deprived of all consumables.
Since, in reality, the latter is called slavery, and is considered an inhumane treatment,  not to mention that being deprived of food and water would result in death, I think I have made my case. While, in practical terms we may need to work to earn our keep, the fact remains that work is not an end in itself, and is not our ultimate goal. We work to consume, we do not consume to justify our work.

And thus, I would argue, are defeated all the premises underlying the arguments for protectionism. But, if this fails to satisfy you, please come back, as I will be offering a more comprehensive view of the subject in the very near future.

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* In reality, it is impossible to have unbalanced trade, as goods trade against goods. Thus, even if China buys more from us than we do from them, that means they must trade those US dollars to another nation which uses them to buy more from us than we do from them. Only if a nation chooses to hoard currency, can there be a true trade imbalance. On the other hand, on the books they can exist, as some purchases are not counted as trade, such as hiring services, investing in foreign firms, land purchases in other nations and so on. There is one other exception. If Nation A devalues their currency while nation B is holding a substantial amount, the reduced value of Nation A's currency can result in a real trade imbalance, but that means, effectively, nation A is robbing nation B via inflation.



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