Trade And Tariffs

For most of the first 100 years of the US, the only two major financing methods the federal government used were tariffs and, to a lesser extent, taxes on liquor. Tariff rates were generally from 5 to 10%. Imports and exports stayed fairly equal since there wasn't much in the way of foreign investment in the US (which doesn't get accounted for in the way we figure trade "deficits" today). Far harder to invest and run a business on the other side of a huge ocean that still took quite a while and involved a significant level of actual danger to cross than it is today.

Tariffs were also explicitly used as a weapon against the South, to force them to buy goods from the North instead of imports. In fact, that was one of the major arguments that led to the succession of the South and the resultant Civil War. Sorry, but no, it wasn't *all* about slavery.

No single policy acts in a vacuum. We grew despite the tariffs that were in place, not because of them. We grew because of the low level of government interference in free markets. We grew because we didn't see business as some evil or dangerous mount that needed to be ridden with jack boots and spurs.

Free trade benefits the population as a whole. Yes, some individuals get hurt, but that happens all the time for many reasons other than trade as well, whether it's new technology or processes, businesses moving from one place in the country to another, or just the changing tastes of the general public.

Yet even though all of these non-international trade changes create far more total losses for the individual businesses and employees in the nation affected by whatever changes happen, we still recognize that the nation as a whole benefits and so don't demand government stop the changes from happening (although many states have become quite predatory or cronyist in offering government goodies to attract new or keep old companies in their state).

International trade is exactly the same thing. There is no economic difference to the nation as a whole what caused the change that creates the temporary business dislocation. When a less expensive way of making a good is found, more people benefit than are harmed, albeit that the losses are more localized and easy to see, while the benefits are more diffuse and harder to pinpoint.

The ideal situation is that our government not get involved at all. It doesn't matter to the workers or final consumers what another country's policies are. They are really unimportant to a truly free trade. If another country doesn't mind harming their own citizens for the benefit of their politically well connected, that's their problem, not ours. It is not our business, as a country, to decide how other countries are run.

Any artificial change in the price or supply of any good or service, such as tariffs, forced on the economy harms it as a whole. The current free market price of any given good or service is the always moving target of finding the most efficient way to produce the most supply of what is of the most value to the most consumers at the lowest possible price. That's really the bottom line of what drives everything that happens in a free market.

Prices people are willing to pay are used to inform producers of what consumers want at any given point in time. Desire for profits drives producers to find the most efficient way to meet those desires at the lowest cost. That process is what has created the incredible world we live in today, the explosion of possibilities never even dreamed of before, raising masses of people the Earth could never even have sustained before yet to an increasing standard of living, in an amount of time that's the merest fraction of the history of the human race.

This is what freedom creates and this is what is blocked when the force of government inserts itself between what free and peaceful people want to do and what they are allowed to do. It can do nothing *but* net harm to its citizens.

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Posted in Economics.