Andra Manta

Protectionism and the Destruction of Prosperity

Murray N. Rothbard

Protectionism is the economic policy of restraining trade between states, through

methods such as tariffs on imported goods, restrictive quotas, and a variety of other
government regulations designed to discourage imports, and prevent foreign take-over of
native markets and companies.

By raising taxes on imported goods or imposing limits the choice of the consumer
is restricted. Also, both the cost of the goods and the cost of doing business increase. Under
protectionism you might end up poorer because protectionist laws reduce consumer spending
power by destroying jobs.

Protectionist laws force us to pay more taxes on imported goods, but also raise
general taxes as well. Somebody has to pay the bureaucrats that work in tax departments too.

However, there are some that can be considered winners of the protectionism.
Those who gain from protectionist laws are special interest group such as big corporation,
unions and farmer’s group (the ones whom want to get away with charging higher prices and
getting higher wages than they could expect in a free marketplace).

There are, of course, losers of the protectionism – the ordinary consumers. Their
freedom is being trampled into dust by these laws, and they are literally being robbed, through
taxes and higher prices.

We all know that trade should be beneficial for both parties; otherwise they
would not engage in the exchange. Protectionists try to deprive some of us of products we
desire so that we will have to turn to inefficient firms.

Fair Trade is an organized social movement and market-based approach that aims
to help producers in developing countries and promote sustainability. A common protectionist
would say that is „unfair” for an American firm to compete with a Taiwanese one which
needs to pay only one half of the wages of the American competitor. If the American wage
rate is higher it means that the American labourer is more heavily capitalized and it is more
productive. If they impose protective tariffs to save less efficient US firms, the protectionists
are injuring the American consumer and also harming efficient US industries.

Inter-state tariffs are unconstitutional, but even so, protectionists have been able
to impose inter-state tariffs in another guise.

The industrial revolution brought prosperity to the starving masses. The

development of railroads has reduces dramatically the cost of transportation. A tariff is like a
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“negative railroad” and protectionists are just as economically destructive as if they were
physically “chopping up railroads”.

Dumping is an informal name for the practice of selling a product in a foreign

country for less than, either the price in the domestic country, or the cost of making the
product. Dumping is good for the regular consumer, but it harms domestic industries
(producers).

Infant industries are those that are not strong enough to survive open
competition (they depend on government subsidies and protectionism). These inefficient
industries lead to higher prices and lower quality goods than if the goods produced by the
industry were produced on international market.

Senile industries are declining and inefficient and may require large investment
to make them efficient again. Protection for these industries would act as an incentive to for
firms to invest and reinvent themselves. However protectionism could also be an excuse for
protecting inefficient firms.

Protectionists focus on the horrors of imports being greater than exports. It is

true that in the last few years, imports have been greater than exports by $150 billion or so per
year. The "deficit" was paid for by foreigners investing the equivalent amount of money in
American dollars: in real estate, capital goods, U.S. securities, and bank accounts.

Protectionism is not only nonsense, but dangerous nonsense, destructive of all

economic prosperity. Without the division of labour and the trade based upon that division,
the entire world would starve. Coerced restraints on trade – such as protectionism – cripple,
hobble, and destroy trade, the source of life and prosperity. Protectionism permanently
shackles trade under the cloak of patriotism.