Ever hope for a trend to die? Whether its socks with sandals, pineapple on pizza, or government in the economy, some bad ideas never seem to go away. Mark Twain perhaps said it best, “History doesn’t repeat itself, but it often rhymes.”
The cargo ships of today aren’t filling their sails with wind. Like their forebears, however, some ships still sail under the flag of mercantilism, a form of economic regulation designed to increase national prosperity through restrictive trade practices. Back before Adam Smith, the goal was to maximize exports while minimizing imports to maximize gold reserves. The more money you had, the thought went, the wealthier you were.
Eighteenth-century Scottish political economist Adam Smith rejected mercantilism for the same reasons we should today. Wealth, he explained, consists of the wide variety of goods exchanged in various markets. Sitting on a mountain of gold or paper and selling more than you buy does not make you better off. Only products, goods, and services improve our lives. Gold and other forms of money are merely mechanisms for facilitating trade. Countries, like the people who compose them, should focus on improving their lot with goods and services, not on maximizing money in their accounts for its own sake.
People, in other words, do not, and should not care about where the products and services are coming from, home or abroad. Yet today, governments still promote exports over imports as if production and wealth were a zero-sum game, and the one who fills his coffers more wins. The United States, among others, is not immune from this mercantilist mental illness. In 2010, for example, President Obama stated, “Over the next five years, we are going to double our exports of goods and services, an increase that will grow our economy and support millions of American jobs.” Donald Trump, in his 2017 Trade Policy Agenda sought to break down “unfair trade barriers” in other markets that block US exports. With reins in hand, Joe Biden is dabbling with exports now too: “Exports are up which means we’re making things here in America and shipping the products overseas rather than shipping jobs overseas to make things overseas and bring them back home.”
Such policies allow exporters to reap massive rewards at the expense of taxpayers, with little to no effect on economic growth. The US Department of Commerce’s Bureau of Industry and Security is tasked with governing exports. The Department of Commerce’s approved budget for 2023 is also over 100 billion dollars. The special interests at play within government organizations is nothing new. AIER’s founder, Colonel EC Harwood, quipped about them in 1944, writing that, “It is common knowledge that various special interests obtain favored treatment by means of monopoly privileges or subsidies of one kind or another at the expense of the general public. It is to the interests of such favored corporations and individuals to justify the favor they receive by whatever arguments they can induce the public to accept.”
Global free trade, by contrast, helps both consumers, via lower quality-adjusted prices, and taxpayers. Walking into a Walmart to buy goods I want for dollars I earn at work does not leave me, or the nation, worse off, even if those goods originated in another country. Buying domestic goods alone harms US exports, creating a reciprocal action, a movement for nationalists in their countries to buy only domestic products. Gary Clyde Hufbauer and Euijin Jung of The Peterson Institute for International Economics argue that “US exports could expand by $189 billion annually if OECD countries all repealed their existing local content laws.”
Old policies lead to old results. Mercantilism, alongside export promotion policies, belong in the trash.