THE PUBLIC MIND: ECONOMIC FALLACIES SUPPORTING MERCANTILISM ARE STILL WITH US

Dear Editor:

In reference to your Be Our Guest (8/19/91), it is unfortunate that the economic fallacies that supported mercantilism, and which were completely demolished by the classical economists, are still with us. The ideological plague has again reared its ugly head in the form of protectionist myths. I will not endeavor to refute these ideas with economic arguments. I can certainly not state the case any better than Adam Smith, David Ricardo, or Jean Baptiste Say. Instead, I would like to focus on a neglected moral issue.

A general trend in western civilization from the Enlightenment to the late nineteenth century was increasing respect for the institution of private property. This helped give birth to the industrial revolution, and led to the death of slavery. It is not necessary here to give a justification of the private property ethic, as most Americans already claim to believe in it. Our nation's founders believed in it, as in the Virginia Convention's proposed Bill of Rights (June 27, 1788): "That there are certain natural rights ... among which are the enjoyment of life and liberty, with the means of acquiring, possessing, and protecting property, and pursuing and obtaining happiness and safety."

Inherent in the right of private property is the right to enter into noncoerced contracts and exchanges with other property owners. Owners do not freely enter into exchanges unless they expect, beforehand, to benefit. If these contracts are interfered with by a coercive party (e.g., the state), then people are harmed. Allowing people title to their property, without allowing them to freely enter into contracts with other owners, makes the rights of private property vacuous and useless.

Protectionists propose to limit the right of domestic consumers to exchange their property freely. While they certainly have the right to espouse this view, they should not wrap this decidedly un-American idea in the cloak of patriotism. They should admit that they are opposed to the free market economy and the American way of life. How absurd to complain about government regulation, and then solicit enhanced trade barriers. How naive to complain about deficits and overtaxation, and then call for yet another festering bureaucracy.

If I exchange money for a Japanese car, I have received wealth in the form of a consumer good. The car maker exchanges the (American) money for American (consumer or capital) goods. Everyone benefits. Keep in mind, the Japanese, through their investments here, are helping to bail our sorry butts out of the fiscal swamp created by our idiotic government policies.

The trade deficit is an illusory statistic, purely the creation of customs officials. In a money economy, temporary imbalances will exist in the trading accounts of economic partners. In a global economy, this measurement problem is geometrically increased. Incidentally, why just measure flows between countries? Why not measure the trade gap between Missouri and Illinois? Cape Girardeau and Perry counties? The framers of the Constitution knew from experience that interstate barriers to trade make everyone poorer, so they made the United States a free trade zone. The situation is the same with respect to international trade.

The international division of labor has created unprecedented wealth in the two centuries since the publication of The Wealth of Nations. The division of labor is about the only thing separating primitive man from modern man. The logic of the protectionists shows itself when people (seriously?) propose trade restrictions between states, counties, and even cities. This is the road down which their logic must lead us, and it is the road to stagnation, poverty, and ultimately, the very destruction of society.

In the words of M.N. Rothbard: "In the hosts of special interests using the political process to repress and loot the rest of us, the protectionists are among the most venerable. It is high time we get them, once and for all, off our backs, and treat them with the righteous indignation they so richly deserve."

Sincerely Yours,

Edward W. Rehak

Oak Ridge