The Immorality of Protecting Domestic Industry
This article is not meant to show the economic benefits that result from having free markets and competition. Reality has given us all the necessary evidence for this already, and the coinciding indexes between free trade and progress confirm it.
However, I do intend to demonstrate the immorality of protecting a country’s domestic industry.
Logic and facts have disproved all economic arguments used to demonstrate why it is necessary to protect domestic industry — from theories of protecting infant industries to the deterioration of terms of trade. All we need to do now is bury the emotional argument.
This emotional argument has its own theory: the theory of unemployment, which populists love to use in order to appeal to guilt, and ignore reason.
The argument goes something like this: “If Argentina opens its doors to imports of foreign products, domestic industry will not be able to compete; it will lose markets and lay off many Argentineans, leaving them in the street, unable to feed their families.”
In order to (allegedly) take care of people, protectionist politicians and “sensitive entrepreneurs” demand and promote tariffs, exchange controls or even the prohibition of certain products that are manufactured abroad. They argue that if there is no competition from foreign products with a better quality and lower price, our domestic industries will grow and create jobs for more Argentinean citizens.
We can see, for example, that the local shoe business of Mr. Gómez is growing and keeps hiring more employees. This, thanks to the huge tax burden that elevates the price of imported shoes, and which makes people acquire only those that are produced in the country.
What is it that protectionist politicians and sensitive businessmen avoid saying?
People buy goods they consider valuable for their lives at the lowest cost possible.
Let us say we have two pairs of shoes of the same brand and quality, at the same point of sale. The first pair costs $5, while the other one costs $10. No one in their right mind would choose to buy the most expensive one, except for sentimental reasons. The buyer evaluates and chooses the product that generates less effort.
The reason behind why we opt for the cheapest option when in front of two products with a similar benefit is very simple. If I buy shoes for $5 instead of $10, I will have $5 left that I can allocate to another product or service that I need or want.
The tendency to satisfy the greatest possible number of needs with the least effort is found in all spheres of life. Time is a scarce resource. Therefore, if I have to choose between getting to my house in one hour through a highway, or take the longer three-hour route, I will definitely opt for the first option. That will allow me to enjoy two extra hours in another activity that I like, such as playing tennis with my children.
Now, if somebody comes along and forces me to buy the $10 pair of shoes, or makes me take the longest route to my house aiming to promote local radio shows, what is it that we are not seeing nor will we ever see?
We will not see the history book I wanted to read, or the tennis match I did not get to play with my kids. We will not see the author of the history book receive those $5, or my children’s happiness after defeating me by 6-0 in the game.
Did anyone benefit from this? Of course. The seller of the expensive shoes and the hosts of the radio shows surely did.
To whose expense? Me, my children and an eternal chain of potential beneficiaries that will never be, given that someone self-arrogated the right to force me to give more money and more time to whom I would not have chosen.
Protectionists and crony entrepreneurs — it is time for us to call them by their real names — will always show one side of the coin, but there are some things they will never do. For example, talking about the unseen effects of their iniciatives.
They never talk about the industries that could have grown and the employees who might have been hired, if they would have given people the liberty to choose where to invest their own money. In the same vein, they will never mention our freedom, our right to choose with whom to trade, nor our property and our right to use it wherever and however we want.
They will never talk about the hidden xenophobia on their arguments, in which a person of another nation should be punished just for having being born in the other side of the borderline. It does not matter if the product a foreigner has to offer has a higher quality and lower price than that of Mr. Gómez. The mere fact of being called Smith condemns him.
They will never mention how they violate the basic principle of every civilized society: equality before the law. While the cronys receive privileges, consumers are treated as a lower caste, forced to pay for those privileges.
Finally, they will not admit they are stealing from you. Under nationalist, sentimental and legal pretexts (because they always twist the law in their favor), they take away from your pocket what would have been spent for another purpose. And beware of trying to buy shoes from Mr. Smith and save your $5, because for that action you may be called a criminal, smuggler or evader.