This is part of a series on Milton Friedman’s “Free to Choose.”
In my previous post I explained the role of government in the marketplace. This is part four of a book series on Free to Choose by Milton Friedman.
In the second chapter, Friedman writes on the role of government as it relates to trade. He makes a strong case for free trade, and specifically focuses on international trade. However, the same principles ought to be applied to domestic trade.
Friedman believes that the restrictions on economic freedom have “also affected our freedom of speech, of press, and of religion.” This is evident through the examples he uses throughout the chapter and even in instances we can think of right now. Consider the hated Stamp Act that the British imposed upon the American colonies. This was a tax placed upon legal documents, contracts, newspapers and even play cards. Also consider the more recent example of how economic regulations have affected our freedom of religion (in four words): Sandra Fluke, birth control.
Bureaucrats like to think that economic regulations are helpful to the American people. But in reality, protectionism exploits consumers. Friedman even sites consumers as “major victims of such measures.” In the attempt to secure American jobs, bureaucrats hold off consumers from saving money because the nation is, as Adam Smith pointed out, unable to get the largest volume of imports as possible for as little as it can pay.
Friedman recognizes that without tariffs, workers may be harmed through a cut in wages or even laid off, if a foreign nation can produce products more cheaply. But this happens anyway in the domestic marketplace. Yet this would allow workers to look for work in industries where there might be a need for innovation. Put another way: why do we want to support inefficient businesses when we can save consumers money? Without the tariffs, we “might very well produce a stronger and more efficient” industry.
There are four arguments in favor of tariffs that Friedman rejects (two of which are explained here). First, the government should protect against foreign trade because of national security. Consider the steel industry. Friedman thinks this is foolish because we could just stockpile steel. And even still, the U.S. steel industry would not be completely destroyed because of the low transportation costs. Second, the “infant industry” argument is used to defend baby companies who would fail unless otherwise protected. But this happens anyway; “most firms experience losses in their early years.” In reality, this is just a smokescreen for more government regulation and serving the special interests. This argument is hardly ever used to support companies that have yet to come into existence. After all, such hypothetical companies have no spokesmen or lobbyists.
We need to follow the suggestions of Friedman and take certain measures to promote freedom. Instead of giving foreign aid and then imposing restrictions on trade,
“We could say to the rest of the world: we believe in freedom and intend to practice it. We cannot force you to be free. But we can offer full cooperation on equal terms to all. Our market is open to you without tariffs or other restrictions. Sell here what you can and wish to. Buy whatever you can and wish to. In that way cooperation among individuals can be worldwide and free.”
