Home Economic Trends Joe Biden and Protectionism: Continuing to Make America “Grate” – Gary Galles

Joe Biden and Protectionism: Continuing to Make America “Grate” – Gary Galles

Nobel Prize–winning economist George Stigler once wrote of economists as preachers, which he described as involving offering “a clear and reasoned recommendation (or, more often, denunciation) of a policy or form of behavior by men or societies of men,” particularly with respect to the ethics of market competition. With regard to defending those ethics (i.e., defending mutually voluntary arrangements that individuals make with one another versus involuntary arrangements forced on some by others), I fit in his preacher category. I find the violation of people’s rights and of public policies that impose or necessitate such abuses immensely grating.

When Donald Trump announced his intent to “Make America Great Again” (soon advertised on MAGA hats), the preacher in me applauded the tax reductions (unfortunately not matched with spending reductions) and the rein on unnecessary and unnecessarily costly regulations. However, when it came to his assertion that his protectionist policies would achieve his intent, when they would actually impose harms on Americans to protect special interests, I had a severe allergic reaction. I even joked to one of my classes that his protectionist policies could only make America grate again—by making America less great and poorer.

Now President Joe Biden, proving his ability to seize on bad ideas, is following the same protectionist path, despite being elected in large part because he was not Trump. As James McCarten, of the Canadian Press (a useful person to get a viewpoint from, since Canadian producers as well as American consumers and taxpayers would be harmed), wrote of the State of the Union address: “He didn’t just defend Buy American. He doubled down on it, promising new rules for federal infrastructure projects that would require all construction materials—not just iron and steel, but copper, aluminum, lumber, glass, drywall and fibre-optic cable—be made in the U.S.”

This address followed Biden’s earlier bragging that his forthcoming plan would be even more tilted toward American producers than earlier plans.

Biden’s protectionism, closely following Trump’s and many before him, relies on a false patriotism argument. Imports are attacked as harming American industry, which is then used as the rationale for “we must defend America” protectionist policies. Since imports always harm American producers of competing products in the sense of reducing demand for their output, those wanting protection for themselves find that argument convincing, as do many who overlook the logical cheat. But in their roles as consumers (which is what Americans have most in common economically), Americans are cheated by that cheat.

The conflict is framed as a mano-a-mano fight between foreign producers and American producers, where patriotism should lead America to favor American producers. If that were accurate—if that was all that was involved—and Americans cared more about “our” producers, Americans would give them preference, other things being equal. That is not all it is. At its heart, protectionism is actually a conspiracy between American producers and the American government to rip off American consumers (and taxpayers in this case) and foreign suppliers.

Besides getting patriotism backward, the presumption that such policies will increase demand for American producers isn’t actually implied either. The higher costs such policies impose will decrease output in industries that use the affected inputs. That will be particularly true for producers who compete in export markets with countries that do not similarly penalize their producers. Then, reduced export earnings will put fewer dollars in the hands of people in other countries, reducing their demand for American exports as well. However, “patriotic” protectionists never seem to notice such realities.

Depicting protectionism as domestic producers versus foreign producers ignores the central issue—Why would American consumers prefer to buy from foreign producers rather than domestic ones? Because foreign producers offer a better price, quality, and service deal. Consequently, when trade restrictions take away those superior options, they make American consumers poorer. Patriotism does not imply our government should help American producers beggar American consumers.

Making protectionism even worse is that it is a negative-sum game. The resources represented by the difference between lower-cost imported goods and higher-cost domestic goods are simply wasted for each unit of domestic output inefficiently “protected.”

Our founders, undeniably patriotic, saw through the protectionist farce. For instance, Thomas Paine, the fiery rhetorician stoking America’s revolution, argued in The Rights of Man: “When . . . attack is made upon a common stock of commerce, and the consequence is the same as if each had attacked his own. . . . [E]ach nation . . . increases [its] riches by something which it procures from another in exchange.”

Even before America was founded, Charles Louis de Secondat, Baron de Montesquieu, who Robert Wokler called “perhaps the most central thinker . . . of the Enlightenment,” wrote in his 1748 The Spirit of Laws of free trade, derived from our ownership of ourselves, as a core application of liberty: “the riches it produces have no bad effect.” Quite the opposite. “In republics . . . merchants having an eye to all the nations of the earth, bring from one what is wanted by another,” so that “it is much better to leave [trade] open, than by exclusive privileges, to restrain the liberty of commerce.”

Free trade is simply the liberty of every one of us to choose who we will associate with in productive ways and how we will arrange those associations, without artificial limitations. It is an essential part of self-ownership, which is an essential element of freedom.

Behind the boilerplate protectionist bragging of Joe Biden, just like that of Donald Trump and fellow protectionists before him, protectionist policies actually represent the forced imposition of tyranny. Free trade provides benefits to each willing participant, whether or not it crosses borders. America’s founders recognized that, since the Commerce clause in the Constitution created the largest internal free trade zone then on earth by banning state restrictions on interstate commerce. If free trade is good across state borders, reflecting valid principles of freedom, those same principles make it good when it crosses federal borders as well.

We should remember that, as Henry George put it in his 1886 Protection or Free Trade: “Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. . . . What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.”

Doing to ourselves what enemies try to do to us in war is not patriotic. It instead reflects what Thomas Paine recognized as “the greedy hand of government thrusting itself into every corner and crevice” for favored interests against those the government are supposed to represent. If Americans really want America to be great rather than to grate more, they should not let rhetorical misrepresentation and misdirection prevent them from choosing what they want for themselves.