Liberty vs. Leviathan

Chronicling Liberty's battle against Leviathan

Pat, meet Fred

I like Pat Buchanan. I really do. I enjoy reading his columns and from what I see of him on TV he seems to be a friendly, fun loving guy. And agree or disagree with his positions, his political analysis is always interesting and insightful. When it comes to economics though, he’s much better at politics.

His most recent column is a good example. Just in the last few sentences he lists off half a dozen or so economic fallacies to which he subscribes.

In today’s world, America faces nationalistic trade rivals who manipulate currencies, employ non-tariff barriers, subsidize their manufacturers, rebate value-added taxes on exports to us and impose value-added taxes on imports from us, all to capture our markets and kill our great companies. And we have a Republican Party blissfully ignorant that we live in a world of us or them. It doesn’t even know who “us” is.

We need a new team on the field and a new coach who believes with Vince Lombardi that “winning isn’t everything. It’s the only thing.”

While it’s easy to want to agree with Buchanan’s sentiments – (Who wants to see people lose their jobs?) – he makes a mistake common to all fallacies that deal with trade.  As Frédéric Bastiat points out time and again in Economic Sophisms, fallacies that revolve around trade “… all have a common root: the disregard of men’s interests in their capacity as consumers.”

In Sophisms Bastiat points out that no matter how it’s done, restricting trade ultimately is an attack against the consumer – that’s you and me. On the other hand, measures other governments take to make their products more easily available are beneficial to the consumer.

Take for instance his example of other governments subsidizing the manufacturers within their borders. Ultimately, this is a tax on the citizens of the other country. We as consumers benefit at their expense. If you and I are able to purchase their product at a subsidized price it just means we have more disposable income to purchase other products we need; products which may or may not be manufactured here. More disposable income for consumers is a good thing.

Take some time over the holidays to read Bastiat’s Economic Sophisms (or here in pdf) . Start with “Conclusion” to get an idea of where he’s coming from. See how justice and peace are violated when trade is restricted in “Conflict of Principles”. Read “Robbery by Subsidy” to see how subsidies and tariffs benefit the producers or the government at the expense of the consumer.

In Sophisms, Bastiat always focused on the economic arguments of protectionism, never questioning his opponents motives. I’m sure Buchanan wants what’s best for workers and for the country. Unfortunately, what he thinks is best, isn’t.

Also, see Sergei Boukhonine’s article “The VAT Subsidy That Does Not Exist” at for his analysis of the VAT to understand why imposing a VAT or giving a VAT rebate is not protectionist.


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December 2008
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