Monday, 11 January 2010

Don Boudreaux on protectionism

At Cafe Hayek Don Boudreaux writes,
Trying to justify raising taxes on Americans who buy foreign-made steel, United Steelworkers’ President Leo Gerard says – in a letter today to the Wall Street Journal – that “China flat-out cheats in its trade practices.”

By “cheats,” of course, Gerard means that the Chinese find ways around artifices designed to restrict Americans’ access to Chinese-made products.

In fact, the real cheats are Gerard, U.S. steelmakers, and Uncle Sam. They conspire together to deny to hundreds of millions of Americans opportunities to take advantage of the best deals possible. They scheme to restrict Americans’ choices so that steel producers in the U.S. don’t have to work so hard to earn consumers’ dollars. They connive to raise their own spending power by reducing the spending power of millions of others.
This is a good point to make about the reasons for protectionism, rent seeking. Being few in number steelmakers, in this case, know that they have much to gain from restricting the choices available to steel buyers. The steel buyers on the other hand are many and so each one individually loses only a little from the protectionism. But those little losses add up to much more than the gains the steelmakers make. Overall the economy is made worse off.

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