Protectionism isn’t all Beer and Skittles

US President Donald Trump’s political response to the rust belt could do more harm than good to middle America with a virtual tax that will help a diminishing number in the manufacturing sector.

A recent Breitbart article about Trump’s tariff scheme titled ‘Our Factories Were Left to Rot:’ American Workers Thank Trump for Ending ‘Betrayal’ of Unfair Trade was brought to my attention on Facebook. I responded off the cuff:

Protectionism isn’t all beer and skittles.

It can hurt consumers more than what it benefits workers. And the unskilled workplaces of yore in the industry are exactly where they were 30 years ago: 30 year ago.

Technology has moved on. Continuing removal of obstructive regulations and taxes would have far greater benefit in terms of job opportunities than governments picking winners. If government were good at picking winners, Hillary would be President.

Tariffs should not be used to directly protect domestic, moribund industries. Welfare to industry has a high social and economic cost; inevitably reducing the drive to innovate in protected industries.

While there are valid arguments for tariffs to protect against dumping or to offset e.g. subsidies to industries abroad, they take more money out of the pockets of consumers, resulting in less stuff being bought.

The Mises Institute has 3 recent article addressing the issue of tariffs, false premises and who ends up paying what price. I yield the podium to those more specifically read on the matter.

  • American Laws — Not Chinese Ones — Make American Industry Less Competitive
    Much has been said about the proposed steel and aluminum tariffs proposed by President Trump. It will likely usher in a trade war the US is ill-equipped to fight. Tariffs are just another tax. In general, tariffs are an all-around bad idea.
  • The Best Way to Compete with China Is to Free the Economy
    We know from sound economics that socialism – or in other words, public ownership of the means of production – cannot function: economic calculation to the attempted degree is impossible, and chaos and poverty are the inevitable results. Under state capitalism that has access to international markets, however, things are somewhat different. This scheme may well go on for quite a while and even reach some high-flying planned goals. China’s stunning growth performance in the last decades bears witness to this theoretical assessment.
  • Manufacturing Jobs Are Overrated
    Trump is capitalizing on an enduring myth of American economic history in which it is believed that declines in manufacturing jobs are accompanied by drops in standards of living as well.

In closing, one must recognize that society has to resolve the uncomfortable problem of what to do with a section of the population that does not have the intellectual capacity for even process work. Dr Jordan Peterson indicates that about 10% of the population has an IQ below 83; with a cognitive ability too low to cope with the demands of technology in the modern workplace.  Another video on the subject with Dr Richard Haier where the cognitive limit is described as being unable to translate written instructions into physical actions.

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