Monday, 6 March 2017

Buchholz on Abraham Lincoln on tariffs

Daniel Pearson writes in The Hill,
In his address to a joint session of Congress this week, President Trump quoted President Lincoln’s views on international trade: “The first Republican President, Abraham Lincoln, warned that the ‘abandonment of the protective policy by the American government [will] produce want and ruin among our people.’ Lincoln was right.”
Ten years before, Todd Buchholz had written the answer to Trump,
Abraham Lincoln put one protectionist argument pithily: "I don't know much about the tariff, but I do know if I buy a coat in America, I have the coat and America has the money--if I buy a coat in England, I have the coat and England has the money." He was right--he did not know much about the tariff (Buchholz 2007: 76).
And, it is clear, Trumps doesn't know much about the tariff either. Pearson continues,
Lincoln likely saw Adam Smith’s “invisible hand” of the marketplace to be doing a fine job of allocating resources within the United States, so may not have perceived much additional benefit from allowing it to work across national borders. He likely never contemplated David Ricardo’s concept of “comparative advantage,” which explains that neither individuals nor nations should seek self-sufficiency, because not everyone or every country can do everything well. The better approach is for people to specialize in activities at which they are most productive, then trade to obtain other needed goods and services.
Lincoln was a thoughtful man. If he was alive today, his views on trade likely would have evolved to reflect the economic experience of the intervening years. Perhaps he would even support the position articulated by another great Republican president, Ronald Reagan, in his 1983 State of the Union address: “As the leader of the West and as a country that has become great and rich because of economic freedom, America must be an unrelenting advocate of free trade.”
In short, self-sufficiency leads to poverty, trade to wealth. Trump's anti-trade agenda will make Americans poor, not great.

  • Buchholz, Todd G. (2007). New Ideas from Dead Economists: An Introduction to Modern Economic Thought, Completely Revised and Updated, New York: Plume.

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