The Modern Candlemakers’ Petition
The importance of free trade and economic globalization.
It is an exceeding rarity for a group of economists to agree on anything, with the sole exception of the importance of free trade and increasing economic globalization, which is why it is disheartening to hear both candidates rail against free trade and agreements that would liberalize trade across the world. I will however, readily admit that Trump has much more of a protectionist streak in his policy than Clinton does; it can be convincingly argued that Clinton’s anti-Trans Pacific Partnership (TPP) stance can be chalked up to her reaching out to Sander’s supporters and not the result of her own stance, she previously argued that the trade deal was beneficial to the American economy.
This is the American political landscape that we now live in, where both major party candidates stand ready to take a firm position against trade liberalization in general and the TPP in general. Of course, one cannot argue that the TPP is perfect or even great as a trade deal, considering that the Cato Institute gave it a 6.03 out of 10 score, where 5 meant it would not have made trade any freer than it already was. It is not my intention here to support or oppose the TPP, since I have not read 5,500 page agreement, but my intention is to offer an opposition of protectionism in general.
One of the most useful tools in logical discourse is the reductio ad absurdum, or the reduction to absurdity, and one of the most impressive reductio ad absurdum arguments against protectionism comes from the French economist Frédéric Bastiat’s Candlemaker’s Petition, wherein fictional “Manufacturers of Candles, Waxlights, Lamps, Candlelights, Street Lamps, Snuffers, Extinguishers, and the Producers of Oil, Tallow, Resin, Alcohol, and, Generally, of Everything Connected with Lighting” pen a letter to the government of France demanding that they force people to shutter their windows so that they must buy candles or lamps instead of using the free and natural light of the sun. Certainly any such request would be taken as completely ridiculous and rightly derided. Here is where the reductio ad absurdum comes in. If it would be risible to request that all windows be shuttered so that candlemakers might benefit from an increase in the sale of candles, then so too must it be absurd for domestic manufacturers to demand that tariffs or import quotas be placed on foreign goods for the benefit of the aforementioned domestic manufacturers.
Certainly people are worse off if, instead of using sunlight for free and not needing to spend their money candles, they instead must divert money that would have gone elsewhere in the economy, say to buying a pair of shoes, into the purchase of artificial light, since instead of having light and a new pair of shoes they know only have light, which is not even as bright as natural sunlight would have been. Once again we turn to Bastiat’s wisdom in his That Which Is Seen, and That Which Is Unseen, specifically to his Parable of the Broken Window. In this parable, a man’s window is broken and so he must go to a glazier to get it repaired, which costs him six francs. Some people may see this and remark, “that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it”, but this argument focuses only upon that which is seen and ignores that which is unseen, for if the man spent six francs on a new window, he now does not have that money for a new pair of shoes, or any other good that may strike his fancy. Simply put, if the window had not been broken, then he would have had a whole window and a new pair of shoes instead of just the window. It is then easy to argue that he and the rest of society are worse off as a result, since a productive trade did not occur and resources were instead spent on repairing a broken window; only the glazier benefits, whereas both the man whose window was broken and the cordwainer are worse off.
Protectionism operates in much the same way. With restrictive import quotas or high tariffs, we can readily see the domestic industries that benefit, since those employed in those industries are able to keep their jobs and continue their inefficient output of goods or services, but it is very difficult to see many of the deleterious effects of protectionist economic policy, which is why Bastiat called them unseen. Let us take sugar in the United States as an example. It currently costs $826,000 to save one job in the sugar industry in the United States (this link also contains the costs of saving jobs in many other industries), but it is very difficult to see this cost for two reasons. One is that the costs are distributed among all consumers in the economy and the other is that it is distributed amongst many goods in the society. Each consumer only ends up paying a few extra cents on each sugar containing good, but that cost is real and it does add up to the staggering sum of $826,000 per job per year. It is difficult to see this cost and so those in favor of protectionism can argue that they are saving American jobs and benefiting the American consumer, but in reality it has a very large cost on the economy as a whole by preventing people from buying cheaper goods and having more resources available to satisfy their other wants and desires.
The $826,000 per job per year that was going to support the comparatively inefficient sugar industry would instead be going elsewhere in the economy, allowing economic production to increase since consumers can now meet more of their wants. Protectionism exists not because it is actually beneficial in any way to the economy, but because those who benefit can more readily show their benefits than others can show the costs. There is nothing in protectionism but a series of broken windows, and so we should always oppose protectionist measures since it will provide us with cheaper goods being produced by more efficient producers as well as enable us to satisfy more of our demands since we will have more of our incomes available to us. I will of course temper this by saying that the free trade agreements negotiated by governments are not necessarily free trade, since true free trade would be the elimination of all tariffs, import quotas, subsidies, and other strictures on those wishing to import and export, but these agreements are usually at least “net liberalizing” to borrow the terminology from the Cato Institute.
Returning now to the Candlemakers’ Petition, imagine how much poorer we would all be if we could not rely on the sun to provide us with light, but instead had to board up our windows and instead furnish our homes with enough lamps and lights to replace the day at all times. It is no different in principle than banning foreign imports or slapping tariffs and quotas on them; it is only a difference in magnitude. The next time someone suggests that what our economy needs is protectionism and movement away from free trade, take it as seriously as you would the Candlemakers’ Petition.