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Tuesday, November 13, 2018 Leer en Español

Tariffs Are Just Another Form of Welfare

Jobs and businesses that exist only because of protectionism are parasitical on wealth produced by those who follow the rules of competitive markets.

Here’s a letter to Cafe Hayek reader Roland de Groote:

Mr. de Groote :

In your first e-mail to me you argued that “protection is necessary to make sure innocent workers’ incomes don’t fall with higher imports.” I replied by offering two reasons why I disagree.

The first is that every day witnesses incomes earned at some particular jobs being reduced by a variety of economic forces, only some of which are imports. I see no cause for government to give special protection to workers who lose jobs to imports and not to workers who lose jobs to the likes of changing demographics, changing consumer tastes, and the introduction of labor-saving machinery. (In response you might argue that government should ensure that no job is ever destroyed for any reason. I would reply that any attempt to carry out such a policy, by utterly destroying the market economy, would return us quickly to dark ages.)

My second reason is that, if you insist that society owes a duty to workers whose incomes fall because of imports, then a far better means than protective tariffs of fulfilling this alleged duty is for government to give cash handouts to those workers. At least this way, this ‘duty’s’ cost would be shared by all taxpayers rather than concentrated on consumers who purchase the protected outputs.

You object to my cash-handout point by arguing that such handouts “aren’t dignified…. People need meaningful work not welfare.”

I object to your objection. Where is the dignity in keeping workers in jobs artificially? There is nothing at all dignified about working at jobs that exist only because government agents coercively prevent consumers from buying imports that compete with goods and services produced by protected workers. Jobs and businesses that exist only because of protectionism are parasitical on wealth produced by those who follow the rules of competitive markets.

Protective tariffs protect, not meaningful work, but wasteful—meaningless—work. Protective tariffs enrich a handful of people at the greater expense of their fellow citizens. Protective tariffs are welfare—and welfare that, because the coerced income transfers are less obvious than government cash grants, is far more insidious and worse than are cash handouts.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030


Note that I do not support such a policy of cash handouts. I note only that such a policy would be superior to a policy of protectionism.

This article was reprinted with permission from Cafe 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.