September 9, 2011
I HIGHLY RECOMMEND the ongoing discussion of free trade, and especially Kristor’s excellent comments on protectionism.
Let me try to translate what he is saying into my own very simplistic terms. Let’s say the government had intervened to save our textile industry years ago and had imposed tariffs on clothing imports from Asia. Instead of buying pants, coats and shirts made in Indonesia and Vietnam, we would be buying clothes made in America.
This factory-produced clothing would be much more expensive than what we buy today. Indeed, it would have to be more expensive, just like sausage became much more expensive in Soviet Russia. The price of the jeans would be determined not by competition but by the need to support a workforce, which would be the entire underlying rationale for the clothing industry.
An ordinary pair of jeans, for instance, might cost $100. (I use jeans only as a ready example not because I think jeans are necessary or desirable.) It’s true that many more Americans would have factory jobs producing jeans. However, many Americans, even those working in clothing factories, would probably start to make clothes themselves simply to avoid paying so much. After all, the government can impose tariffs but it can’t force people to buy certain products (or, as in the case of Obamacare, it encounters steep resistance if it does).
We would be spending more time to acquire basic clothing. Some people would look a lot more shabby, given that not everyone has the capability to make clothes well. But that’s not the worst of it.
The worst of it is that the jeans factory would essentially be a state enterprise, upheld as it is by government subsidy. Not only would we have to pay $100 for a pair of jeans, but that money would go to a factory that worked by the rules of liberal government. Men and women would have to be hired in equal numbers. Racial quotas would exist. Sensitivity training would be ongoing. Factory workers would have Martin Luther King Day parades, but might not have off on Christmas.
The clothing factory would be guided by egalitarianism and thus would not reward effort so much as political privilege. In exchange for jobs, we would gradually trade initiative, enterprise and the work ethic.
— Comments —
Laura, you’ve nailed it. You write:
Not only would we have to pay $100 for a pair of jeans, but that money would go to a factory that worked by the rules of liberal government. Men and women would have to be hired in equal numbers. Racial quotas would exist. Sensitivity training would be ongoing.
Thing is, this is already happening. Federal and state laws already force businesses to work by the rules of liberal government, i.e., they force business to operate almost as inefficiently and unprofitably as liberal government. That’s why it makes more sense to locate overseas.
For example, businesses must prove that they don’t discriminate against women; a disproportion of their representation in a firm’s work force, as compared with that of the general population, is presumptive evidence that they are guilty of conscious discrimination, and so all firms must prove they are innocent by documenting their adherence to policies and procedures designed to correct such disproportions, or face legal penalties. Likewise for race, creed, national origin, and sexual orientation. Sensitivity training is a routine element of business life. Everyone hates it, and everyone does it.
Federal policies interfere with business pervasively: workplace safety, accounting, compensation and benefits, hiring and promotion, pricing, compliance with tax laws and securities regulations, compliance with industry-specific regulations, IT – almost every business activity is touched. It costs a lot. For every low-level Federal bureaucrat reviewing compliance filings, there are several employees in the private sector involved in preparing those documents (preparation is far costlier than mere review). Banks now devote more man-hours to compliance activities than to banking. Banks have more than twice as many employees as they need to have, in order to operate a banking business. That should tell you something. In concrete terms, it should tell you that interest rates on deposits would be far greater than at present, and interest rates on loans far less, if it were not for the cost of those compliance activities. Now, it is sickening enough to consider the adverse impact of banking compliance costs on the finances of every family in the country; but if you want to get really scared, think about the fact that those compliance costs are felt throughout the financial system of the country. Every business and government that borrows money to finance operations – including the Feds – is paying far, far more in interest cost than it otherwise would. The cost of capital is artificially increased throughout the whole economy, reducing economic growth, profits, productivity, employment, wages, everything – including tax revenues. Not to mention the fact that all those compliance professionals are among the brightest, most capable workers in the economy – and their life’s blood is being wasted on activities that produce no sales – that, i.e., produce no value for the customer, for us.
And this is replicated, to some degree, for every business in the country.
Posted by Laura Wood in Uncategorized