Tariffs: An Allegory

Suppose you run a company with lots of employees. For a long time, among your employees have been a couple of your nephews. If you’re being honest, they are not your favorite workers. There’s always pressure to raise their wages and they are now up to $25 per hour each, which is more than they are worth. They even side with the union against you and are not generally grateful to you for employing them. Plus they are crude: they tell jokes you don’t like, drink beer, and are often just a pain in the rear.

One day you decide you are going to replace them. For just $10 an hour each you can hire three others to do their jobs, dropping your wage to $30 an hour.

At first, you are relieved. You are pocketing more money for yourself and it’s time your nephews make their own way in the world, anyway. Tough love.

But then your sister calls crying and tells you the boys aren’t doing well. Next thing you know your nephews are living in your basement and eating out of your fridge. Already, your plan to save money and avoid aggravation is a bust.

On top of this, you now start to notice problems with your new employees.

You trained Guy A and all of a sudden you realize that his cousin is starting a new company and is launching what looks like a copy of your latest design. Just a coincidence, your employee says. But now it develops that even though you hired one of theirs, his family won’t even let you sell to them anymore. They are going to buy from the cousin, even if his product isn’t the best or costs more. It’s a cultural thing, you have to understand.

Guy B has brought his whole family to your town and even though you are only paying him $10 an hour, the rest of his family is getting free services and your taxes are going up. Plus the whole family is voting against you and changing your town.

Guy C takes the money you pay him and hands part of it over to his religious leaders who regularly complain about you. One of his cousins is threatening a terrorist attack.

Wait . . . It Gets Worse
So now your town wants to hire increased security. You don’t want to to have to get involved in that effort and you don’t want your sons, who are actually contributing to your business, to have to interrupt their lives for this, either. But what about your nephews? They are still unemployed, why don’t they take on that job?

When one of them finally does you are happy to see him out of the house. But, again, the government is still sending you the bill for him. A year later he gets injured and comes back to live with you. Maybe your tough love thing was a little too much. He’s injured and now he’s hooked on pain meds. In fact, your other nephew, who didn’t go off to fight, has discovered that the only work he can find is making and dealing some of these same meds. Yep, this is working out great.

Way back when, you thought your nephews were crude, drank too much beer, and were a pain in your rear. But now you look back and that time looks positively idyllic by comparison. You have new employees who are petitioning to silence the church bells in your neighborhood because their own religious sensibilities are offended by the sound. Some are linked to terrorism and there are whole districts in your town that you know are too dangerous even to visit. Your town just doesn’t seem the same anymore.

Price Isn’t Everything
See how much money you are saving? See how your bottom line is, and should be, your one and only concern?

Sure, if the free market price were your only concern, buying from the lowest bidder would be good. But this is ridiculous. We routinely think that single issue voters are myopic, but then somehow the narrowest definition of free trade is supposed to be our single issue and if we don’t fall over on the wisdom of the elite’s purist definition we are ignorant of economics and have sold out our principles. I’m sorry, price is not the only economic concern and economics is not the only social concern. Would you go and live for decades in Pakistan just because they’d pay you 25 percent more?

I used to fall for the free trade line. I even sold it myself. I was wrong. Most of the free traders in the Beltway aren’t free traders at all. They have their hands in the cookie jar somewhere else. If we are going to live in a quasi-socialist state where we are just going to pay the rust belt in welfare what we took from them in wages, we are not saving a dime.

And then when you factor in the intellectual-property theft from China, the markets they close off to us, the fact that we have to turn to the rust belt to get our soldiers to fight the Islamists we made rich by buying their oil, the anti-American unassimilated voters we are importing. None of this is working out in the way it was sold to us.

The free traders say that whatever you tax you get less of. Well, then let’s stop taxing income. We didn’t have an income tax from 1787 until 1913. We had tariffs. Why are tariffs worse than income taxes? And please don’t bring up Smoot-Hawley, where the government double-dipped and had income taxes and tariffs, which was a huge change from the policies of the 1800s.

Libertarians and NeverTrumpers will say we have sold out our principles. In truth, we have wised up to a bigger game and we are maturely adjusting our actions where our theory didn’t work as planned.

They are stuck with failed policies, still buying into the con.

Photo credit: iStock/Getty Images

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4 responses to “Tariffs: An Allegory”

  1. “Suppose you ran a business with lots of employees?”

    There’s your mistake Max. Farming in the countryside makes much more sense.

  2. Yep-we were sold a bill of goods and just because its moniker includes “free”, the conservative/Republican/traditionalists towed the line thinking free trade is an extension of freedom and liberty. We’ve had to learn from the School of Hard Knocks to see that much of “free trade” benefits a few at the expense of many.

  3. Interesting analogy exposing the shortcomings of many of the arguments being made from both sides against Trump’s recent tariff announcement.
    As a free-market conservative, I’ve struggled to reconcile the dilemma of opening one’s own markets to goods produced in countries that flagrantly defy the civil standards we live by.
    Sub-standard environmental and safety concerns of other nations are focused on by the Left, while I find captive labor policies and national security concerns even more compelling challenges we must address.
    Trump understands that many nations are overtly and covertly hostile to us, and that trade policy needs to be integrated with national security concerns. Some of our largest trading partners, whether in Asia, the Middle East or right across the border unfairly exploit our openness and generosity while harboring enmity and threats to our national security. With friends like some of them, who needs enemies?

    • Many of those exploiting us are Americans themselves. Businesses, bankers and politicians have taken self interest to a whole new level.