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Friday, June 2, 2017

An Open Letter to Workers in Declining Industries

Tariffs keep resources locked into ‘the industries and jobs of yesterday.’

Dear Concerned Worker:

Those of us who support free trade are often accused of being callous and out-of-touch – even eggheaded – when we explain the benefits of free trade. These benefits include avoiding the damage unleashed by protectionism – damage that is real but unseen and overlooked by nearly everyone. In making our case for free trade, we economists are scolded for writing and speaking in ways that no worker who has just lost a job to imports would find reassuring or comforting.

I know that you love your kids and grandkids. You want them to prosper and to be secure. I do not speak for my fellow economists or for my fellow free-traders, but I here confess to too often defending free trade poorly and with a tin ear to daily realities of workers concerned with their and their families’ livelihoods.

So, dear Concerned Worker, I write to you now when you are employed and untroubled by unusual anxiety. I write to you as someone whose life situation allows you to reflect calmly, soberly, and maturely on not just today but, mostly, on the coming tomorrows – for as I know you know, nearly all of the rest of your life will be lived, not today, but in those tomorrows.

The Best Tomorrow Possible

I know you to be someone who sees beyond today and who cares about, not just what is in store for the rest of today, but also about what is in store for tomorrow and the many tomorrows after that. And I know that you love and care deeply about your kids and grandkids. You want them to prosper and to be secure. Indeed, your concern about tomorrows is mostly for the well-being of your children and grandchildren.

You should support free trade because, above all, it assures prosperity for your children and grandchildren.

I know you also to be someone who has a sense of justice. You aren’t someone who wishes to gain unfairly or to prosper at the expense of others who are made poorer by your prosperity.

Therefore, when I as an economist make the case for free trade, I make the case for better tomorrows. The case for free trade has many different elements. They are overwhelmingly, although not exclusively, about tomorrow.

In short, I write to you now as a fellow adult whose concerns and interests extend beyond the immediate here and now, and beyond our own narrow self-interests.

You – dear Concerned Citizen – should support free trade because, above all, it assures prosperity as great as possible for your children and grandchildren. But that is not all. The protectionism that you might be tempted to support today will indeed protect those jobs that you now see and are familiar with – jobs that you and your wife now hold, or that your neighbors and friends now hold. Losing these jobs would indeed be a trying experience.

But please know that if these jobs are protected today with tariffs or other trade restraints, there are fellow citizens somewhere today who will lose their jobs or who will be unable to find new employment that they would find in the absence of the tariffs.

My Fellow Americans

No one can say for certain just who these unfortunate fellow citizens are who lose their jobs. But we know they exist. Economics tell us that they exist. We know these fellow citizens, who are thrown out of jobs, exist because the tariffs that protect your job cause foreigners to have fewer dollars to spend or to invest in America. That reduced spending and investment – spending and investment reduced throughout our country – is what causes some fellow citizens to suffer the same trying fate (temporary job loss) from which the tariffs today protect you.

Even if those tariffs do not destroy your job, they will almost certainly reduce your real wages, today and into the future. Perhaps you’re untroubled by this injustice, but trusting that you are a decent and good person, I’m confident that, now that you know that the protection of your current job comes at the expense of some fellow Americans’ current jobs, your support for tariffs is less enthusiastic.

In a moment of actual job loss, your concern for your fellow citizens might well give way, understandably so, to a greater concern for yourself and your family – and so you’ll support tariffs to protect your job. But when your job is not at any immediate risk of being destroyed – when you can reflect (as mature people must do if democracy is to work well) on the wider and longer picture – you, I hope, will oppose tariffs as a matter of principle because you oppose privileges given to some at the expense of others.

Yet even if you’re less able than I believe you to be to consider government policies from a broader perspective than your own narrow material interest, knowing what I just told you about the effects of tariffs should still lead you to support free trade.

If your job isn’t today threatened by imports, some other Americans’ jobs – jobs held by Americans whom you do not know – are almost surely being destroyed by imports. And so if tariffs are used to protect those jobs, it’s very possible that among the American jobs that will soon be destroyed by those tariffs is your own.

And even if those tariffs do not destroy your job, they will almost certainly reduce your real wages, today and into the future. The tariffs will raise the prices of the goods and services that you buy for you and your family. The tariffs will work as a pay cut for you. Actually seeing this pay cut and understanding its source are nearly impossible without understanding the basic economics of trade. But once you understand this economics, you know the pay cut to be real.

Tariffs ensure that the economic opportunities open to your children will be fewer. In short, economics teaches that your enlightened self-interest should lead you to support free trade.

Yet the case for free trade is even stronger if you care about your children and grandchildren (as, again, I know you do, very much). Even if you couldn’t care less about fellow Americans who suffer temporary unemployment as a result of the tariff that protects your job, and even if you don’t care one bit about your and other Americans’ loss of purchasing power today that is caused by tariffs, these tariffs ensure that the economic opportunities open to your children and grandchildren will be fewer and worse than they would be without tariffs.

Tariffs Keep Wages Low

Tariffs keep resources locked into – to use language that is popular in the media and on the campaign trail – ‘the industries and jobs of yesterday.’ By keeping labor and other resources locked into existing, protected industries, tariffs prevent the creation and growth of newer, more innovative, and more productive industries. Similarly, because tariffs shrink the size of the market to which domestic producers have access, tariffs artificially prevent many firms that would otherwise expand to achieve larger and more-efficient sizes of operations from doing so.

The productivity of workers in these firms is thereby kept artificially low, which means that the wages of workers in these firms is kept artificially low. (You yourself might be among the workers whose wages are kept artificially low by tariffs. And unless you understand the basic economics of trade, you’ll never even suspect that this unfortunate possibility might be real.)

This is one of the important lessons of economics that is surely of no comfort when your job is in peril. Over time, the inefficiencies and stagnation caused by protectionism accumulate. By the time your children are in their prime working years, the opportunities open to them will be much worse than these opportunities would be, had tariffs not been in place in the past to protect the jobs and industries of your children’s past. The tariffs that are in place today, to put it bluntly, will ensure that tomorrow your children are working in the past.

This denial of opportunity and prosperity that your children suffer because of tariffs will be even worse for your grandchildren. The stagnation and rot of tariffs accumulate over time. (Don’t forget: the entire point of tariffs is to protect today’s jobs and firms from the forces of economic competition and from economic change.)

This reality is one of the important lessons of economics that is surely of no comfort today when your job is in peril because of foreign trade but that is, surely, of great significance for those of us who care not just about today and not just about ourselves, but who care also about tomorrow, about others, and, especially, about our children and grandchildren.

I’ve tried your patience with this letter, dear Concerned Worker. So I’ll end here. As I say above, the case for free trade – the case against protectionism – has many more elements in addition to those briefly summarized above. They all reinforce the points mentioned here.

I wish you well. And I know that you, too, wish well for others – those others who are already born and those many, many others who are still to arrive with hopes of long, healthy, peaceful, and flourishing lives.

Don Boudreaux
Professor of Economics
George Mason University

Reprinted from Café Hayek.

  • Donald J. Boudreaux is a senior fellow with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University, a Mercatus Center Board Member, and a professor of economics and former economics-department chair at George Mason University.