Ludwig von Mises showed how one government intervention inevitably leads to more interventions. That’s because the original intervention produces a crisis. At that point public officials have a choice: Repeal the intervention or enact a new intervention to address the crisis. The likelihood that they will adopt the former is nil because that would entail admitting they were wrong. So, they enact the new intervention, which then produces a new crisis. The process ends up as a never-ending series of crises and interventions.
We now have a classic example of that phenomenon with Trump’s new $12 billion welfare plan for farmers. Trump started a trade war by raising tariffs on a number of countries. Downplaying any negative consequences, he said that trade wars are easy to win.
Not surprisingly, the countries Trump targeted have retaliated with increased tariffs on people in the United States, which are now adversely impacting various sectors of the U.S. economy. One of them is farmers, who are now experiencing an extreme drop in sales.
Rather than admit he was wrong to start his trade war, Trump instead has decided to give the farmers a $12 billion welfare dole, not out of his own money but instead out of the money that American taxpayers send the IRS. With the mid-term elections coming up in November, Trump wants to do everything he can to mollify his base, even if it means embracing a new and expensive socialist welfare program.
That’s precisely what Mises said would happen with interventionism: Interventionism produces crises which then are used to justify new interventions.
We also have Friedrich’s Hayek’s insight about central planners, that is, those government officials who believe they have the wisdom and smarts to plan economic activity. Hayek called this mindset “the fatal conceit.” What better term to describe Donald Trump? He is absolutely certain that his central plan for international trade is better than anything that free trade and free markets could accomplish.
Except that it won’t. If we learned anything from the Soviet experience, it is that central planning will never work. It is an inherently defective system. It will never produce prosperity. It will never produce harmony. Trump’s central plan for trade will actually do the exact opposite. It will produce more crises, more disharmony, and more impoverishment, along with more interventionism and more welfare.
For more, see my conversation today on FFF’s Libertarian Angle with Richard Ebeling, the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at the Citadel. The title of today’s show is: Trump’s Tariff-Welfare Plan for Farmers.
