Unfortunately, the companies that tend to get these protectionist aid tend to be less efficient than other industries, which is part of the reason why they lobby for it in the first place. It stands to reason, then, that the money is not used as efficiently as it would have been by the original taxpayers or businesses if they had expanded their own payrolls, or had more money to spend on goods for themselves. If individuals allocate the money themselves, it goes towards sectors that the public values more. Why should we all pay more for Ford to make cars, especially if more people want to drive a Honda? The government is ill-equipped to choose the “right” industries to which to distribute money.

Your argument is that protectionism is good because it keeps people employed. Even if we grant all your premises, we can see that this protectionism hasn’t worked in the U.S. The steel industry and auto industries get tariffs, subsidies, etc. and they are still hemorrhaging jobs. What is the result? Cars and steel are more expensive, and the taxpayers have fewer dollars to spend to create jobs in other sectors of the economy (places where, if they had a lower tax rate, more jobs could be created). And some of the jobs that we spend so much money trying to protect are still disappearing. Protectionist policy leads to more unemployment, and if we follow your logic, more suicides.

So, will we have fewer auto workers in Missouri if Ford decides to leave? Maybe. But will other businesses be able to expand their payrolls if their tax rates were lower after the state stopped handing out tax incentives to favored industries? Yes, but these jobs are more diffuse and spread across the state, and therefore harder to point to.

(I’ll point you to our case study about Tennessee’s higher economic growth than Missouri’s. It’s an interesting point to ponder.)

Trade makes everyone better off. When goods are cheaper (like, when they come from a foreign country) people have more purchasing power. This raises the standard of living across the board. When taken over generations, these protectionist policies severely hamper the quality of life for future generations.

We can see empirically that these protectionist policies are not as effective as they pretend to be: American cars are more expensive, and people are still losing jobs in that sector. It takes a lot of money to prop up industries that cannot compete on their own, money that, if left in other sectors, would translate to even more jobs than those in the protected sectors. (Really, if you haven’t read it yet, Henry Hazlitt’s Economics in One Lesson is worth reading. He explains this phenomenon very clearly.)

Also, though this is not a topic that Show-Me Daily deals with, Naomi Klein’s portrayal of Milton Friedman is ahistorical and inaccurate, and thus not a convincing example.

How does keeping an auto plant open harm unseen businessmen? Like the service sector business owners which support those workers? Do you know what Natural Bridge was like before GM relocated to Wentzville?

I’m not sure I understand your argument. Right now, the government has the power to take tax dollars and give them to specific corporations. The government gets to choose which businesses receive the taxpayers’ dollars and which businesses do not. I’m not sure how one could argue that there could be an even greater capture than the government simply handing businesses billions of the taxpayers’ dollars. Perhaps your argument might make more sense on a topic other than tax credits (though I’d be happy to discuss at another point why that still wouldn’t hold true). But on the topic of tax credits, your argument does not make sense.

Tax credits help the targeted “seen” businesses and individuals who keep their jobs, but hurt the “unseen” individuals and businesses who have less money to create jobs or spend in other sectors of the economy. (Henry Hazlitt’s Economics in One Lesson explains this in further detail.)

Perhaps no one has clearly articulated the libertarian/free-market/classical liberal philosophy to you before; you probably agree with it more than you believe. Governmental involvement necessarily gives corporations and big business more power… this is a bad thing. Governments create barriers to entry, which prevent others from competing with those favored businesses. They give favored industries the public’s money. Big businesses like these tax credits, barriers, tax increment financing, etc., because they are able to capture far more market share than they could if they had to compete in a free and open market (or what you might call “corporate anarchy”).

Libertarianism/classical liberalism is a very nuanced philosophy, which I would be more than happy to talk with you about in detail at a later point or point you to some good essays and books explaining the mechanisms behind it. I think you would benefit from our book club discussions, where we discuss these sorts of issues and can address your disagreements in further detail. Our next meeting is on Wednesday, July 14, and we are reading the The Ultimate Resource 2. (Email our editor, Eric, for more information.)

Hope to see you there!

What precisely are you saying?

I think that government did pick a winner with that new grocery store downtown…

no?

Moreover, the idea that government picks winners and losers happens to be a joke. Libertarianism would only be corporate anarchy and even greater capture among a reduced government body. If anything TIF would increase as a weaker government would have reduced power to say no as fewer access points exist for citizens to object and be involved. Finally, the people, through government, have an obligation to pick certain winners and choosers if their job or entire town happens to be at stake. Or perhaps we should remove all trade barriers and subsidy flooding our borders with cheap foreign goods increase unemployment and maximizing suicides? Wait, that would be what Milton et al did to South America, Asia, and Eastern Europe through structural adjustment!