Economics in One Lesson

C
HAPTER
11
Who’s “Protected” by Tariffs?
1
A
mere recital of the economic policies of governments all over
the world is calculated to cause any serious student of eco-
nomics to throw up his hands in despair. What possible point can
there be, he is likely to ask, in discussing refinements and advances
in economic theory, when popular thought and the actual policies
of governments, certainly in everything connected with interna-
tional relations, have not yet caught up with Adam Smith? For pres-
ent-day tariff and trade policies are not only as bad as those in the
seventeenth and eighteenth centuries, but incomparably worse. The
real reasons for those tariffs and other trade barriers are the same,
and the pretended reasons are also the same.
In the century and three-quarters since 
The Wealth of Nations
appeared, the case for free trade has been stated thousands of times,
but perhaps never with more direct simplicity and force than it was
stated in that volume. In general Smith rested his case on one funda-
mental proposition: “In every country it always is and must be the
interest of the great body of the people to buy whatever they want of
those who sell it cheapest.” “The proposition is so very manifest,”
Smith continued, “that it seems ridiculous to take any pains to prove it;
nor could it ever have been called in question, had not the interested
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sophistry of merchants and manufacturers confounded the common-
sense of mankind.”
From another point of view, free trade was considered as one
aspect of the specialization of labor:
It is the maxim of every prudent master of a family, never
to attempt to make at home what it will cost him more to
make than to buy. The tailor does not attempt to make his
own shoes, but buys them of the shoemaker. The shoe-
maker does not attempt to make his own clothes, but
employs a tailor. The farmer attempts to make neither the
one nor the other, but employs those different artificers.
All of them find it for their interest to employ their whole
industry in a way in which they have some advantage over
their neighbors, and to purchase with a part of its pro-
duce, or what is the same thing, with the price of a part
of it, whatever else they have occasion for. What is pru-
dence in the conduct of every private family can scarce be
folly in that of a great kingdom.
But whatever led people to suppose that what was prudence in the
conduct of every private family 
could
be folly in that of a great king-
dom? It was a whole network of fallacies, out of which mankind has
still been unable to cut its way. And the chief of them was the cen-
tral fallacy with which this book is concerned. It was that of consid-
ering merely the immediate effects of a tariff on special groups, and
neglecting to consider its long-run effects on the whole community.
2
An American manufacturer of woolen sweaters goes to Congress
or to the State Department and tells the committee or officials con-
cerned that it would be a national disaster for them to remove or
reduce the tariff on British sweaters. He now sells his sweaters for
$15 each, but English manufacturers could sell here sweaters of the
same quality for $10. A duty of $5, therefore, is needed to keep him
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in business. He is not thinking of himself, of course, but of the thou-
sand men and women he employs, and of the people to whom their
spending in turn gives employment. Throw them out of work, and
you create unemployment and a fall in purchasing power, which would
spread in ever-widening circles. And if he can prove that he really
would be forced out of business if the tariff were removed or
reduced, his argument against that action is regarded by Congress as
conclusive.
But the fallacy comes from looking merely at this manufacturer
and his employees, or merely at the American sweater industry. It
comes from noticing only the results that are immediately seen, and
neglecting the results that are not seen because they are prevented
from coming into existence.
The lobbyists for tariff protection are continually putting forward
arguments that are not factually correct. But let us assume that the
facts in this case are precisely as the sweater manufacturer has stated
them. Let us assume that a tariff of $5 a sweater is necessary for him
to stay in business and provide employment at sweater making for his
workers.
We have deliberately chosen the most unfavorable example of any
for the removal of a tariff. We have not taken an argument for the
imposition of a new tariff in order to bring a new industry into exis-
tence, but an argument for the retention of a tariff