Against Tariffs

One of the main victories for liberty during the Nineteenth century was the repeal of the Corn Laws in England, no doubt thanks to the efforts of men such as Richard Cobden and John Bright. Until Robert Peel was able to lead Parliament into abolishing the food and grain tariffs, England’s agricultural imports were a great deal more expensive than the international average. Domestically, the landed aristocracy leaned heavily in favor towards the Corn Laws, as it was effectively a state-sponsored subsidy for their agricultural production.

Many arguments in favor of the Corn Laws centered around the preservation of the agricultural industry in England. It was argued that by allowing cheaper foreign grown grains to flood the British markets, British farmers would be left unemployed, their working conditions diminish, and the economic costs outweigh the perceived benefits of cheaper food. However, rather than leave the country in destitution, the repeal of these tariffs led to periods of increasing prosperity for all the citizens of England. Understanding the fact that real wealth is derived from diminishing costs, and not necessarily increases in wages, plays a huge role in determining where one stands on the issue of tariffs.

Upon further analysis of the economics of tariffs, the negative nature of such policies becomes clear. For starters, it is important to understand what tariffs accomplish. Tariff proponents will point to the jobs that are saved thanks to the policies implemented by the government. These, however, are only the seen benefits. What remains hidden from the average layman (and sadly too many academics and politicians), are the unseen costs of tariffs.

These policies are effectively a mechanism for disbursing costs across a society while concentrating benefits for a select few. The higher prices for the imported goods affected by such policies are paid for by the consumers (including those comparatively few consumers whose jobs have been saved by the tariffs), which, when aggregated, leads to a socially costly drain on society. Resources which would have otherwise gone into more productive endeavors, creating new wealth by producing and consuming more goods while maintaining the same levels of consumption on previous goods now have to be diverted in order to pay for the higher cost of the protected goods.

Hence, we arrive at one of the greatest fallacies of modern economics, which is that wealth creation is driven by increases in wages. Defenders of tariffs will argue that the jobs that are saved by protectionist policies are good for the economy, as those workers are able to be employed at higher wages than they would otherwise be compared to other nations. This view sees the economy as one driven by consumption, where consumers buy goods and services, which drives the economy forward, which allows for the production of new goods and services, with this cycle continuing ad infinitum.

The reality is quite different, however. Wages, when understood properly, are an important factor of production. In other words, an increase in wages leads to an increase in the cost of production. Therefore, a mere increase in wages is not enough to gauge the material betterment of society. It is often the case that wage increases driven by government intervention lead to a fall in production. This, in turn, means businesses are forced to produce less than what they would have otherwise produced. A decrease in supply leads to a rise in prices, which often offsets the gains made by the wage increases, as well as leaving all the other consumers of the society worse off.

Today’s political climate is one that is growing increasingly hostile to the virtues of free trade. Decades of soft protectionism hidden in the bureaucratic mess of agreements such as NAFTA and TPP have played an important part in wearing down the public’s faith in the ideals of free trade, and too few men of influence are taking a stand to defend liberty, and demonstrate the follies of protectionism. Therefore, it is up to us to ensure that the light of liberty does not fade away into the night, by sharing the knowledge that so many great men have bestowed upon us, and never giving in to the temptations of intervention.

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