Creating a long list of the familiar flaws in protectionists’ thinking is easy. Protectionists don’t realize that, although trade ‘destroys’ some particular jobs in the domestic economy, trade simultaneously creates other – and better – particular jobs in the domestic economy. (Foreigners sell us stuff only because they want to buy other stuff from us.)
Protectionists seriously misconstrue so-called “trade deficits.” Protectionists don’t understand the principle of comparative advantage. Protectionists see the act of importing stuff as the burden a people must unfortunately bear in order to obtain the privilege of exporting stuff. (It would be as if you were to see your act of accepting paychecks from your employer as the burden you must unfortunately bear in order to obtain the privilege of toiling for your employer.)
The rest of this column could be filled with literally nothing but further additions to this list of well-known protectionist misunderstandings and fallacies. And because of space constraints, there would be many misunderstandings and fallacies left unmentioned.
But I instead want to focus on one infrequently mentioned protectionist fallacy – namely, the protectionist presumption that their fellow citizens regularly spend and invest their own money stupidly.
That protectionists have such a low opinion of their fellow citizens becomes obvious upon inspection of protectionists’ many assertions about the current state of the economy. In the United States, we Americans are constantly told by protectionists that as international trade grew freer and more frequent from the mid-1970s until around 2018, America’s industrial economy was “hollowed out,” especially by imports of cheap T-shirts and trinkets. We’re also told that the now half-century-long run of annual trade deficits has transferred much of our wealth to foreigners. Protectionists further insist that American producers have been out-competed by wily foreigners — and simply can’t compete unless our government handicaps US imports and subsidizes US exports. And protectionists never tire of complaining that American workers, although desperate for jobs in manufacturing plants, have lost such jobs to low-wage workers abroad.
The fact that none of these empirical claims made by protectionists is even remotely true is not my central point. Instead, I wish to emphasize that each of these protectionist claims implies that we Americans are dismayingly dull-witted — that we are childishly irresponsible with our own money, and that, at least in comparison with non-Americans, we are buffoons in matters of commerce, industry, and entrepreneurship.
Do note, however, that when protectionists tell their tales they speak and write as if the only actors who take initiative in international commerce are foreigners. In these tales, we Americans are inert; we’re passive players and, as such, become victims. Foreigners cheat us… foreigners take our jobs… foreigners outcompete us… foreigners destroy our industries… foreigners buy up our assets and load us down with debt… foreigners enrich themselves at our expense. But of course each and every one of the international commercial transactions in which foreigners allegedly inflict these nefarious consequences on Americans is a transaction to which an American (or group of Americans) is a voluntary party.
Protectionists’ opinion of their fellow citizens could hardly be lower. As protectionists see matters, most of us wind up poorer after each commercial transaction with non-Americans, despite the fact that we continue voluntarily to engage in such transactions. Perhaps we are too senseless to realize the deepening impoverishment that each of us suffers after each economic engagement with a foreigner. Or maybe we are so delusional that we continue to hope that, although we have consistently been harmed by foreigners when trade is free, we’ll soon turn the tables on those cunning merchants who ship us their goods from abroad.
It’s easy to understand why, in protectionist tales, foreigners act with initiative and astuteness while Americans react passively and dully. Ironically, were protectionists to portray their fellow citizens as being the intellectual equals of foreigners – to portray their fellow citizens as being as active and as intelligent as foreigners – protectionists would forsake the ability to blame foreigners for the mythical damage that trade does to America.
In most protectionist fables, the good guys and gals – domestic citizens – must also serve as the fables’ dolts, who fall victim to devious and smarter foreigners.
In complete contrast to protectionists, we free traders have a high opinion both of foreign merchants and of our fellow citizens. We trust that our fellow citizens spend and invest their own money prudently and productively. Although mistakes sometimes are made – both by our fellow citizens and by foreigners – people learn from their errors and adjust their decision-making accordingly. The result is that nearly all of the commercial transactions that our fellow citizens make with foreigners are ones in which both the foreign traders and our fellow citizens gain.
How, then, can it be that if almost all of the countless individual commercial transactions that Americans have with non-Americans are transactions in which Americans gain, the overall result of these transactions is that Americans as a group lose? This question should be put straight-on to protectionists much more frequently.
How might they answer? One possible response of the protectionists would be to deny that we individual Americans gain in most of the transactions that we have with foreigners. But protectionists can’t explicitly respond in this way because to do so would clearly reveal their low opinion of their fellow citizens’ intelligence.
An alternative answer would be to insist that when all the positive gains from these international trades are summed together, the result is a negative number, as in 114+76+9+101+958+5+10 = -1,970. Protectionists, of course, would also avoid this answer, as not even they will confess to rejecting basic arithmetic.
The answer that protectionists give, often only implicitly, is that the gains that each American reaps when trading with foreigners are more than offset by losses that those trades allegedly inflict on other Americans. When, for example, Joe in Jacksonville buys a car from Sven in Sweden, Molly loses her job at the automobile factory in Michigan. But this answer doesn’t acquit protectionists of the charge that they hold a very low opinion of their fellow citizens’ intelligence.
If so many of us Americans are losing business and jobs — and, thus, are thrown indefinitely into unwelcome idleness — because our fellow citizens are dealing commercially with foreigners, why don’t Americans step up to the economic plate and compete better against foreigners? Are Molly’s abilities so limited that she is capable of working only in an automobile plant? Are American businesses so inept that they can find no way to employ Molly in some other capacity to produce outputs that can be sold at profitable prices? Is the United States so destitute of entrepreneurship that no one here can invent new products or new methods of production that put American workers and resources to productive uses? Are we Americans so myopic and frivolous that whenever we sell assets to non-Americans we blow all the sales proceeds on satisfying our immediate sensual desires rather than reinvest these proceeds in assets and entrepreneurial ventures that have more economic promise than did the assets that we sold?
Is it really true that when it comes to entrepreneurship, business administration, investing, and managing both our commercial and household finances, Americans as a group are outclassed by the Chinese, the Europeans, the Mexicans, and other foreigners?
Free traders know that the answer to each of the above questions is an unambiguous “no!” And in support of our answer, we have reams of evidence on the performance of the American economy.
Protectionists, in contrast, in addition to having to torture the data to elicit from them a false anti-free-trade confession, cannot escape the charge of believing that their fellow citizens, when participating in market exchanges, are dumb as dirt. Americans should pay no attention to those who hold them in such low regard.