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Bastiat understood and illustrated the destructive fallacy of protective tariffs over one hundred fifty years ago. Why do so many politicians STILL believe tariffs to be a "good" thing, when, by all ACTUAL measures they are not? The answer lies in the "seen", versus the "unseen". Here, Economist Walter Williams explains.
Seen and Unseen - LewRockwell LewRockwell.com
Posted from lewrockwell.com
Economics
Politics
Foreign Policy
Posted 9 y ago
Responses: 2
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So if we didn't tax the cheap steel, and allowed it to flood the market here, we run the risk of running ourselves out of business. Now with those jobs, you're being paid a salary of 50-55K a year. Those individuals are earning a living, paying taxes, and while wishing they were paid more, they can take solace in the fact they are working. Giving them a 100k check seems very shortsighted. It would be gone in a matter of days if they are paying off a house. Then you have these suddenly unemployable individuals who might be "too old" to learn a new career, too "young" to fully grasp what has happened, but have a lot of "sudden" cash, and lets keep the ripple effect going. If there is nothing in the town to generate money, people will eventually leave. Detroit is a shining example of this. So in this town the mill was the primary employer, had provided for the town in taxes and other means. With the suddenly unemployed mill workers, and the shut down mill, businesses will close. If there is a hospital, eventually they will close also. So is the tariffs that bad? The ripple effects were something the author didn't mention or if he did, I did not see it. I also didn't see mentioned how other countries have tariffs on items they import from America.
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SSG Gerhard S.
Though I understand your concerns, the issue is not whether we kept those 1700 (noncompetitive) jobs in the steel industry. The issue was whether those jobs were worth the $800,000.00 price tag we ended up paying for them. The $100,000.00 point was just to illustrate that value wise, we would have been much better off giving each employee that money and saving the American people $700,000.00 per employee in higher costs in steel prices. The point is, that increase is not a net gain, but a net loss, with the end result being higher prices to consumers, AND the eventual loss of those Steel industry jobs anyway.
There was NO net gain, other than the "seen" political optics of "helping" those 1700 steel workers, while creating the unnoticed and "unseen" price increases that resulted for everybody else. I agree, the closing of such a mill is catastrophic to a particular town that is dependent on it.... the sad fact is, there are legions of such "one industry" towns. Would it be practical for the Federal government to create tariffs for each of those industries as well, to the cost of 16 times the pay of each of the workers?
Clearly, when looked at individually, it seems compassionate to take steps that would keep such jobs functioning, however it was actually the more shortsighted course of action, as those jobs went away in spite of those tariffs, only the loss was delayed which allowed the politicians who made the move to take the credit, while NOT getting any of the blame for the higher prices, OR the loss of the jobs that occurred AFTER they were out of office.
There are other ways to save jobs, to make our businesses more competitive, and to keep jobs here, or bring them here from other countries that do not involve increasing tariffs. We could, for instance eliminate the Corporate income tax, greatly diminishing the cost of production here in the US. We could untangle our vast, contradictory, and incomprehensible regulatory behemoth that drives up prices, and inhibits new businesses and processes from even being started. Both of these approaches would increase, and draw production in the US without raising prices to the consumer, or costing $800,000.00 for a $50,000.00 a year job.
In Conclusion, the concept of the seen and the unseen was illustrated 150 years ago, and is an Economic observation, not a political, or a social one. Economically the actions that took place with those steel jobs was harmful, ultimately to ALL parties, except the politicians. If our goal is to make politicians look good for a while while ending up with the same bad results, delayed, and at a HUGELY inflated price, then Tariffs are the way to go. If our goal is to keep jobs, and make us more competitive, LESS government is the more effective course of action.
As always my friend, great conversation. Regards. And my apologies for my lack of brevity... brevity is not one of my strong points.
There was NO net gain, other than the "seen" political optics of "helping" those 1700 steel workers, while creating the unnoticed and "unseen" price increases that resulted for everybody else. I agree, the closing of such a mill is catastrophic to a particular town that is dependent on it.... the sad fact is, there are legions of such "one industry" towns. Would it be practical for the Federal government to create tariffs for each of those industries as well, to the cost of 16 times the pay of each of the workers?
Clearly, when looked at individually, it seems compassionate to take steps that would keep such jobs functioning, however it was actually the more shortsighted course of action, as those jobs went away in spite of those tariffs, only the loss was delayed which allowed the politicians who made the move to take the credit, while NOT getting any of the blame for the higher prices, OR the loss of the jobs that occurred AFTER they were out of office.
There are other ways to save jobs, to make our businesses more competitive, and to keep jobs here, or bring them here from other countries that do not involve increasing tariffs. We could, for instance eliminate the Corporate income tax, greatly diminishing the cost of production here in the US. We could untangle our vast, contradictory, and incomprehensible regulatory behemoth that drives up prices, and inhibits new businesses and processes from even being started. Both of these approaches would increase, and draw production in the US without raising prices to the consumer, or costing $800,000.00 for a $50,000.00 a year job.
In Conclusion, the concept of the seen and the unseen was illustrated 150 years ago, and is an Economic observation, not a political, or a social one. Economically the actions that took place with those steel jobs was harmful, ultimately to ALL parties, except the politicians. If our goal is to make politicians look good for a while while ending up with the same bad results, delayed, and at a HUGELY inflated price, then Tariffs are the way to go. If our goal is to keep jobs, and make us more competitive, LESS government is the more effective course of action.
As always my friend, great conversation. Regards. And my apologies for my lack of brevity... brevity is not one of my strong points.
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Thanks SSG Gerhard S. for posting the Seen and Unseen. It is not surprising to me that the negative effects of tariffs have been understood by wise people for centuries. When I first read the Claude Frederic Bastiat (1801-50) was a member of the French National Assembly I was thinking of the revolutionary body in the late 1700s. I was relieved to learn that he was not alive during that period.
Protectionism raises it ugly head periodically in nations around the world. Unfortunately tariffs are generally imposed when the cost of goods and services is more than the market will bare.
Protectionism raises it ugly head periodically in nations around the world. Unfortunately tariffs are generally imposed when the cost of goods and services is more than the market will bare.
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