The Corner

The Poison of Protectionism

Ramesh points to a good Washington Post article about the persistence of sugar subsidies. This fight is far more important than most conservatives realize, and goes to the very essence of a free society. 

First of all, protectionism is always bad policy — for industry and consumer alike. Proponents of the sugar subsidies argue that it’s in the national interest to protect “efficient American farmers” from subsidized foreign competitors. The superficial appeal of that argument is understandable, but it’s wrong. Just because other governments are willing to waste taxpayer money and impose artificially high food prices on their citizens doesn’t mean we have to do the same. Protection from competition shields the producer from the competitive pressures that speed the reallocation of human and material resources to positions of greater value. If you want to see what happens when industry and labor are protected from competition, visit Detroit, or pretty much anywhere else in the rust belt. This is why unilateral tariff reduction is always good public policy. The proper way to address the problem of subsidized foreign competition is through multilateral trade agreements such as WTO, where the U.S. would be pushing for much more stringent reductions of agricultural protections, if it weren’t so busy protecting its own cartels. 

The costs of farm protections to society as a whole is always higher than the benefit, for the same reason that ”deadweight loss” always results from the restricted output and artificially high prices in the monopoly setting. The basic problem, from a political point of view, goes to something that Milton Friedman said once: ”Each of us is fundamentally more concerned with our role as a producer of one product than with our role as a consumer of 1,001 products.” These terrible policies survive because their benefits are visible and highly concentrated, while the costs are diffuse and quite hidden from the public. Of course, when a progressive manages to hide the true costs of a policy, he congratulates himself for eliminating the cost altogether. But conservatives should know better. 

Protectionism is always a reverse–Robin Hood proposition. Farm protections force the poor to pay artificially higher food prices in order to pad profits for millionaire farmers. And the poor never even realize that they’re basically being defrauded by a conspiracy of government officials and their favorite special interests. When properly understood in their true economic light, these farm supports (like the abominable Wright Amendment for American Airlines) are tantamount to government collusion in a criminal price-fixing cartel. Contrary to what is an almost biblical tenet of progressivism, government cannot sanitize a price-fixing cartel. Government power can only make the cartel’s injury to the public far worse, both by protecting the cartel from the competition that would bring it down in a truly free market, and by making the cartel permanent. It is no surprise that the New Deal’s agriculture supports were foisted on the American public as emergency measures, but are still with us today.

But the stakes are even higher, for these policies call into question the sustainability of our very Constitution. Conservatives are only starting to grasp the crucial connection between government-created monopolies and cartels – of which the sugar subsidies are a classic example — and the constitutional destruction brought about by the progressive and New Deal movements. The whole point of those movements was to get the government out of the business of protecting the public from special interests (or “factions” as James Madison called them) and into the business of protecting special interests from the public — that is, from public competition. In order to do that, it was necessary to expand both federal and state power over the economy simultaneously, in order for states to be able to strengthen their own cartels, and get federal protection for the ones they couldn’t sustain on their own. It is no accident that all of the New Deal–era cases that expanded the federal commerce power well beyond the intended constitutional limits, up to and including Wickard v. Filburn, involved the protection of a cartel either in agriculture or labor. If you need further convincing, please read Michael Greve’s The Upside Constitution, and Richard Epstein’s forthcoming The Classical Liberal Constitution, both of which should be required reading in Congress. 

In the meantime, just keep in mind that any member of Congress who supports these agricultural protections necessarily accepts the progressive view of unlimited federal power to regulate economic activity, and is therefore in no position to dispute the constitutionality of Obamacare. Part of the reason that progressivism’s constitutional destruction has been so hard to reverse is that its most essential policies — government protection from competition — has such broad bipartisan support in the legislation that lobbyists actually influence and Congress actually passes. But people need to see this stuff for what it is, the product of a government captured by special interests, a throwback to the pre-Enlightenment era of crown monopolies for favored courtiers, and poison for a free society.

In Congress, every special interest is represented by lobbyists. But who represents the public interest? That’s supposed to be your elected representatives. But if you want to find out whom they really represent, look no further than the vote on the upcoming farm bill. 

Mario Loyola is a senior fellow at the Competitive Enterprise Institute, the director of the Environmental Finance and Risk Management Program of Florida International University, and a visiting fellow at the National Security Institute of George Mason University. The opinions expressed in this column are his alone.


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