Freeman

ARTICLE

The High Price of Protectionism

JUNE 01, 1971 by PAUL L. POIROT

Unless you use tires on your car, the headline might have meant nothing to you: Michelin Unit Pays Union $250,000 for Not Working.1

The French tire manufacturing company estimated the man hours it would take for union workers to assemble tire-making machinery in its plants being built at Granton and Bridgewater in Canada, and agreed to pay the union $250,000 if the men stop insisting that they do the job.

Michelin wanted its own experi­enced workers to install the spe­cialized machinery and equipment, rather than have it done by the millwrights of Local 1178 of the United Brotherhood of Carpenters and Joiners. The payment was offered to the union, on behalf of some 60 millwrights, to avert the possible loss of several million dollars due to the direct and indirect repercussions of threatened strike action.

Just what does it mean to a tire user if one of the manufacturers — in this case, a Canadian branch of a French firm — spends $250,000 to avoid the possible loss of several million dollars? Does it mean higher-priced tires, or lower-priced tires, or what? We probably can’t know for sure. Is this Canadian branch of Michelin Tire the mar­ginal producer who would be driven out of business by costly strike action? If so, his going out of business might well have re­sulted in higher-priced tires. And paying 60 union members not to work, if it kept a marginal pro­ducer in business, might mean tires at lower prices than other­wise would have prevailed. It’s not that easy to judge the impact on the market of the action taken by Michelin in this instance. All we can judge, with reasonable assur­ance, is that Michelin management used available resources as best it knew how, at its own risk, to sup­ply quality tires to consumers at the least possible cost.

The Waste of Resources

If paying union members not to work seems like a funny way to run a tire business, save some of the chuckles for the untold num­bers of other firms in countless lines of business in all parts of the world who face similar problems each day they operate. And try to understand that in the final analy­sis it’s invariably the customer who pays — either in higher prices, or in purchases never consum­mated — whenever labor unions or other quasi-governmental agencies of coercion indulge in the sort of monkey business that tends to cor­ner or close off some segment of the market, thus disrupting peace­ful production and trade.

If the $250,000 payment by Michelin to keep the union from striking its business seems like a flagrant waste of scarce resources, consider the $150,000,000,000 — six hundred thousand times as much — currently turned over by government to various welfare programs in the United States in a year. Every dollar’s worth of goods and services coercively di­verted from the market for each and every one of the governmental welfare programs — just like the $250,000 payment by Michelin — is, in effect, paying somebody not to work. Such intervention with­draws scarce resources from the market and diverts those resources to purposes for which consumers presumably are unable or unwill­ing to pay. And so far as the pay­ing customers are concerned, such a diversion of resources amounts to waste. They just aren’t getting any tires, or anything else they want, for those expenditures. Such diverted resources go instead to "buy off" the union, or some other politically powerful pressure group, in order that the Michelins and other market operators may continue to function peacefully to serve willing customers.

Closing the Market

This is not to condone feather­bedding and various other make-work practices by labor unions under their grants of special priv­ilege by government. But the total amount of extortion and waste and disruption due to union practices under government sanction is a mere trifle in comparison to the amount of direct government in­tervention now undertaken in the name of the "general welfare." The government not only winks at and condones the $250,000 dab of extortion exacted from Michelin by the United Brotherhood of Car­penters and Joiners; it not only fails in its proper function of pro­tecting the lives and property of peaceful citizens; but, worse yet, the government itself has usurped the role of chief extortioner, in Canada, in the United States, in­deed in every nation where gov­ernmental activities are currently withdrawing from the market somewhere between a third and a half of all economic resources. In other words, instead of allowing peaceful and productive individ­uals maximum opportunity to spe­cialize and trade in their own best interest, the government takes a third to a half of what each pro­duces and diverts it to purposes the producer had not intended, re­distributes some of it to those who have produced little, if anything, of value to consumers. From a third to a half of the market is closed — a third to a half of scarce resources literally are wasted.

This is not to deny that there is a proper role for government — the role of policing the market and protecting lives and property. It is to assert that governments every­where today have largely forsaken their proper role — they are not protecting lives and property — instead, they are plundering peace­ful and productive persons and subsidizing wastrels and trouble­makers.

Paying tribute to coercionists is indeed a sorry way to operate a business. But citizens who will let their own government close the market, sell protectionism to powerful lobby groups, and other­wise abandon its principled role, scarcely deserve a better fate, for they have given no thought and no support to freedom.

 

***

The Apprenticeship of Liberty

Nothing is more fertile in prodigies than the art of being free; but there is nothing more arduous than the apprenticeship of lib­erty…. Liberty is generally established with difficulty in the midst of storms; it is perfected by civil discords; and its benefits cannot be appreciated until it is already old….

The advantages that freedom brings are shown only by the lapse of time, and it is always easy to mistake the cause in which they originate.

ALEXIS DE TOCQUEVILLE, Democracy in America (1835)

FOOT NOTES

Wall Street Journal, April 9, 1971.

ASSOCIATED ISSUE

June 1971

ABOUT

PAUL L. POIROT

Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.

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