The steel industry isn’t in favor of free enterprise. It wants tariffs and import quotas. Again, I don’t blame them. They’re trying to protect their own interests. But the rest of us are fools if we let them get away it.
There’s a big hue and cry about the steel industry and about imposing higher tariffs or import quotas on steel. Now every ecologist in this country ought to be on the right side of that issue, which is a free trade issue.
If Japan chooses to subsidize the export of clean air to the United States, why should we object? Isn’t that what it’s doing when it sends steel here? But here we have this great hue and cry that we should somehow or other subsidize steel–either by tariffs, or quotas, or in other ways–to enable steel to produce both its product and its pollution at home.
Adam Smith in the “Wealth of Nations” answered this in 1776. From that time to this, hardly any professional economist has believed in tariffs, or protection, or anything but free trade. Let us suppose for a moment that the Japanese flood us with steel. That will reduce employment in the American steel industry, no doubt. However, it will increase employment elsewhere in America.
We will pay for that steel with dollars. What will the Japanese do with the dollars they get for the steel? They aren’t going to burn them. They aren’t going to tear them up. If they would that would be best of all, because there’s nothing we can produce more cheaply than green pieces of paper. And if they were willing to send us steel and just take back green pieces of paper I can’t imagine a better deal. But they’re not going to do that. They’re not stupid, they’re smart people. They’re going to use those dollars to buy goods and services. They’re going to spend them. In the process of spending them, they may spend them directly in the United States. Then that directly provides employment in the United States. They may spend them in Brazil or in Germany or in China or anywhere else, but whoever gets him in turn is going to spend them. So, the dollars that we spend for the steel will find their way back to the US as demand for US goods and services. You will have less employment in the steel industry but you will have more employment in the industries producing the goods we export. Overall, total employment will not be affected. But overall the American consumer would be benefited. Because he will get the steel more cheaply and the goods made from the steel more cheaply than he otherwise would. That’s the benefit to the American consumer.
Now why is the steel industry and similar industries so effective in their campaigns for protection?
Because of a very common problem that affects not only this, but lots of a lot else. And that is the difference between the visible and the invisible. The people who are going to lose their jobs and steel are very visible. They’re a collective group, you can name their names. Suppose we restrict imports from Japan. Then people are going to lose their jobs in these export industries. They will be widely spread over the country. You and I couldn’t name one person. But that doesn’t mean they’re any less real. But the greater propaganda effect of the steel industry is because you can set the visible–it is a more potent political force than the invisible people who will lose their jobs.
I urge on those people who think there’s some sense to the steel industry argument to consider it in a more absurd setting. You very often bring out the logic of an argument by carrying it to an extreme. You know you could have a great employment in in the city of Logan, Utah of people growing bananas and hot houses. If we had a high enough tariff on the import of bananas it could become profitable to build hot houses and grow a grow of bananas in those hot houses. That would give employment. Would that be a sensible thing to do? If that isn’t sensible then neither is it sensible to artificially restrict the import of steel.
Now with respect to the charge that the Japanese government is subsidizing the export of steel. Number one, it is very dubious that it’s true; but let’s suppose it were true. Then that would be a foolish thing for the Japanese to do from their own point of view. But why should we object to them giving us foreign aid? We’ve given them quite a bit.
