25 Reasons Why Protectionism Is Taken Seriously When In Fact It Is A Form of Economic Suicide American Enterprise Institute
It is a scientifically and mathematically provable fact that all tariffs, at any time and in any country, will hurt economic growth, eliminate net jobs, destroy prosperity and lower the standard of living of the protectionist country because that tariffs are guaranteed by ironclad economic laws to generate costs for consumers which outweigh the benefits for producers, i.e. tariffs will always impose deadweight losses on the protectionist country ( see diagram above, and “An economic analysis of protectionism makes it clear that Trump’s tariffs would make us poorer, not taller”). That is, the reality that tariffs always inflict great economic damage and worsen society is not a questionable result, rather it is a provable fact, like the law of gravity.
Update: There is a lot of empirical evidence showing that protectionism and tariffs always generate costs for consumers far greater than benefits for producers (i.e. windfall costs) see CD articles here, here and here.
So why is protectionism taken so seriously and so credible, when in fact it is a form of job destruction and prosperity economic suicide And one economic death wish?
here are my 25 main reasons which explain why protectionism is taken so seriously, despite the fact that it is guaranteed to impoverish America and destroy jobs, not make us “great again”:
- The false belief that trading is a zero sum (win-lose) game when in fact it is a win-win game.
- The costs of protectionism to consumers are mostly hidden.
- The benefits of protectionism for producers are easily identified and visible.
- The jobs saved by protectionism are observable and visible.
- The jobs lost to protectionism are not easily observable or visible.
- The benefits of protectionism for individual producers are very high (eg, $ 300,000 annual increase in income per sugar farm due to trade barriers for foreign sugar).
- The costs of protectionism for individual consumers is very low (eg $ 5-10 per year higher sugar prices per person due to tariffs on sugar), although the overall costs of protectionism are very high.
- The costs of protectionism to consumers are delayed for many years.
- The benefits of protectionism for producers are immediate.
- Producers who seek the benefits of protectionism are focused and well organized.
- Consumers who pay the costs of protectionism are scattered and disorganized.
- There is huge political gain for protectionist politicians in the form of votes, political support, and financial contributions from protected national companies and industries.
- There is a huge political cost to politicians trying to remove or reduce trade barriers in the form of lost votes, support, and financial contributions from previously protected domestic producers.
- The pathological obsession, but false that exports is good.
- The pathological but false obsession that we import is bad.
- The fact that most Americans work for a company that manufactures a single product or a group of similar products (e.g. cars, steel, textiles, household appliances) and therefore are favorably disposed to support protectionist trade policies that benefit them employer and their industry.
- The fact that American consumers buy hundreds if not thousands of individual products, goods and services, and therefore are unlikely to be fully aware of the negative effects of protectionism or to be motivated to fight against it. protectionism.
- Many Americans think that exporting American goods is patriotic.
- Many Americans believe that importing foreign products is unpatriotic.
- The false belief that trade deficits are a sign of economic weakness.
- The false belief that trade surpluses are a sign of economic strength.
- The fact that protectionism is guaranteed to create deadly economic losses is not easy to understand, nor are these losses easily observable or measurable.
- The general lack of economic knowledge of the general public.
- The general lack of economic literacy among politicians, or their intentional disregard for economics of protectionism in favor of adopting public policies that help them win re-election.
- Failure to recognize that most imports are inputs purchased by US companies, which allows them to be as competitive as possible when selling their products in world markets.
Conclusion: Taken together, the above 25 reasons help us understand the popularity of protectionism, despite the fact that it is guaranteed to inflict great economic damage. Protectionism is mainly popular for political reasons, not for economic reasons. To paraphrase Thomas Sowell, the first lesson of international economics is that free trade makes us better and protectionism makes us worse. The first lesson in international trade policy is to ignore the first lesson in international economics and impose protectionist trade policies when they serve the political interests of short-sighted elected officials. When politicians can rely on mainstream economic illiteracy and blind patriotism to ‘buy American’, the political fallout of protectionism is too tempting to ignore despite the reality that it is a form of economic suicide. . And because the benefits of tariffs for producers (and the jobs created or saved) are concentrated, immediate and visible, while the costs for consumers (and jobs lost) are diffuse, delayed and invisible, it’s easy enough to see why protectionism is popular, even though the economic costs far outweigh the economic benefits (i.e. deadweight loss) and so it ultimately comes down to account of a form of self-inflicted economic poison.