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Protectionism: Rearing Its Ugly Head Again

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One of the principal tenets of libertarianism is the right of people to freely trade their goods and services with others. The reasoning is based on moral principles underlying private property and individual freedom. Each of us has the right to sustain his life by utilizing the talents and abilities with which we have been endowed by the Creator. Moreover, we have the right to enter into mutually beneficial exchanges with others who are doing the same thing. Each person has the right to accumulate the fruits of these exchanges. Finally, we have the right to do what we want with the wealth we accumulate donate it to the poor, invest it, save it, hoard it, spend it, or even destroy it.

This is what freedom is all about. It is what rising standards of living are all about as well. People improve their lot in life by entering into mutually beneficial exchanges with others. These exchanges can involve the exchange of goods, services, money, or a host of other things. What is important to recognize is that each time two people voluntarily enter into an exchange, both of them, from their own perspective, improve their respective position. If I sell you an automobile for $5,000, both of us have raised our standard of living through the exchange. You exchanged because you valued the automobile more than you valued the $5,000. I exchanged because I valued the $5,000 more than I did the automobile. If each of us did not think that the exchange would improve his own situation, we would not have entered into the exchange.

The morality and benefits of freedom were the true significance of what happened in 1776. The Declaration of Independence expressed the revolutionary notion that there were certain fundamental rights with which no government, not even a democratically elected one, could legitimately interfere. These rights included, but were not limited to, life, liberty, and the pursuit of happiness.

In that same year, another revolutionary concept was enunciated in Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations. Smith suggested that the key to the creation of wealth and to rising standards of living for the general populace was the ability of people to engage freely in economic enterprise. In other words, the less governments were able to interfere with economic activity, even in an attempt to end poverty, the better off people would be economically.

These two ideas fundamental rights and free enterprise formed the basis for the creation of the largest free-trade zone in history: the United States of America. During the Articles of Confederation, the states were battling against each other with tariffs and other protectionist devices. When the Constitution called the federal government into existence, the states were prohibited from enacting such trade barriers between one another.

And it was a good thing that our Founding Fathers had the wisdom and foresight to constitutionally prohibit these types of things. Not only would they reduce the standard of living of the American people, they would also violate the fundamental moral principles of private ownership and individual freedom. And there is no doubt that in the absence of a constitutional prohibition, American protectionists today would have our domestic society riddled with tariffs, quotas, and other protectionist schemes.

Despite all the moral and utilitarian arguments clearly establishing the rightfulness and benefits of free trade, protectionism raises its ugly head in every generation. There are leading people in the Democratic Party, such as Rep. Richard Gephart (D-Mo.), a probable presidential candidate in 2000, who believe that the key to economic prosperity in America is the erection of more protectionist barriers on the international level.

There are people in the Republican Party who believe that the key to national greatness lies in protectionist measures. Patrick J. Buchanan, a key Republican and another prospective presidential candidate, recently published a new book entitled The Great Betrayal, in which he argues fervently for more international protectionist barriers.

And there is now a small group of people within the libertarian movement who are endorsing, embracing, and supporting tariffs in America as a way to fund government services.

It is important to note, first, that a tariff is a tax. What does that mean? It means that behind the collection of the tax is the armed might of the government. The government’s collection of a tariff may appear to be benign but that is only because people do not resist its collection. If they were to resist, everyone would clearly see that the tariff involves the initiation of force by one person (the government official) against another person (the private individual).

Of course, this means nothing to Democrats and Republicans. They have absolutely no reservations about using force in the realm of peaceful activity. Thus, they ardently support such things as Social Security, Medicare, Medicaid, public schooling, the drug war, taxation, and other assaults on people’s wealth, freedom, and property. But a tariff has enormous implications to libertarians because the core tenet of libertarianism is the nonaggression principle the principle that holds that libertarians will never advocate the initiation of force against another person.

Let’s assume that an American automobile dealer is a libertarian and, therefore, opposed in principle to tariffs. Suppose he makes a deal to buy 100 Toyota Camrys from Japan for $25,000 each. When the cars arrive at the port in Houston, the American car dealer is there to pick them up. A government official says, “You can’t take these cars until you pay me $100,000.” The car dealer says, “I’m not paying you or any other bureaucrat a dime. These cars belong to me, not you.” The customs official immediately summons a throng of U.S. marshals. The auto dealer summons a group of his employees. Neither side is willing to give in. How can the situation not end in violence? What does the libertarian protectionist do at that point? Does he assist the marshals, since it was he who endorsed the tariff in the first place? Does he assist the automobile dealer, since he is a libertarian? Does he simply stand aside and pray that one side gives in before the violence starts?

Make no mistake about it: an international tariff is as much a violation of private property and individual freedom as a domestic tariff would be. It is my money and it is my property. Under what moral authority does a government official tell me that I can’t enter into a mutually beneficial transaction with someone living in California? New York? Mexico? Cuba? When asked why they favor tariffs, Democrats, Republicans, and the small group of libertarians often respond: because the Founding Fathers permitted them in the Constitution. In his new book, Buchanan states:

“Dick Armey calls free trade a ‘basic human right,’ as does the libertarian scholar Jacob Hornberger. Every person on earth, writes Hornberger, has a ‘God-given right to enter into mutually beneficial exchanges with others anywhere in the world. They have the right to travel and move without political restriction. It is the duty of government to protect, not regulate or destroy, these inherent fundamental rights.’ But if this right is ‘God-given,’ the Founding Fathers trampled all over it. The Constitution declares that Congress ‘shall have Power’ to lay ‘Duties’ and ‘Imposts’ and ‘regulate Commerce with foreign nations.'”

This is often the problem with both conservatives and some libertarians: they overlook basic moral principles and instead simply look to the Constitution for guidance as to the propriety of governmental conduct. The Constitution permitted slavery. Does that make it right? The Constitution permitted governmental postal delivery. Does that make it right? The Constitution permitted the government regulation of commerce among the states. Does that make it right?

Buchanan suggests that protectionism would help the American people economically. Why should Americans be permitted to close down a business in the United States and reopen in Mexico, he asks, where it can pay workers a lower wage? Because it’s their business, Mr. Buchanan! It belongs to them, not the employees, not the government, and not society. That’s what private ownership of property means the right to do what you want with it. If people are not free to spend and invest their money the way they want, then how can they possibly be considered free? Isn’t public ownership of the means and results of production what conservatives used to oppose, Mr. Buchanan?

Moreover, what is amusing about protectionists is how they never respond to the crucial question: If tariffs are so beneficial to people, then why not let each state enact them against the other states? Why not let American cities enact them against other American cities? Why stop there? Let’s have neighborhood tariffs too. Just think, all those walls all over America, creating massive amounts of prosperity! After all, Mr. Buchanan, you wouldn’t want a California business shutting down and moving to Texas, where the wages might be lower, would you? And what could be worse than a business relocating from New York City to White Plains, New York, in an attempt to reduce costs?

Libertarian protectionists argue that they endorse tariffs because they believe that this is a legitimate and constitutional way to fund the federal government. Well, under the Sixteenth Amendment, income taxes are constitutional too. Should we endorse that form of taxation as well?

Why shouldn’t people fund government services voluntarily? To suggest that people do not consider government sufficiently important to fund voluntarily is ridiculous. Today, Americans permit government to plunder them to the tune of at least 25 percent of their income to fund the massive welfare state and regulated society. This would seem to imply that many Americans believe that government is important. Why wouldn’t they be willing to voluntarily contribute 1 or 2 percent of their income to fund only the essential activities of government in a libertarian society? Or are we libertarians relegated to saying, “Oh, no. We can’t do that. Freedom doesn’t work.”

And how do libertarian protectionists suggest that state and local governments be funded? Usually, this question makes them very uncomfortable and they refuse to answer it, because it puts them in a quandary. Should they endorse tariffs by state and local governments and thereby resort to the situation that existed under the Articles of Confederation? Or should they endorse traditional means of collecting governmental revenue: sales taxes, income taxes, property taxes, and the like? The probability is that, when pressed, they will support a hotel retail tax. Why? Because it is so similar to the international tariff: it steals from “foreigners” rather than the local folk.

A decade ago, one of the ugliest walls in history was torn down. It is time for Americans to now tear down their walls those that interfere with both the free movement of goods and the free movement of people. We must not be willing to settle for the compromises of libertarian philosophy to which America’s Founding Fathers succumbed. We must build on what they began and raise liberty to the highest standard ever.

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    Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.