The Basic Trade Issue

I am quite sure that John Nye, Tyler Cowen, and Dani Rodrik would all disagree with my assessment, but Nye makes my Case that Tariffs can be very beneficial. It remains hard to convince Anyone that economic development in Britain or the World in the later half of the Nineteenth century could have been more rapid, as the existent infrastructure was being pushed to its limits, though infrastructure construction was in itself massive during the Period. The Tariffs in place realistically paid for that construction. Examination of the Period without resort to hard Numbers suggests that all the basic economies, Developed and Undeveloped, were basically overheated; a good Case can be made for vast Resource wastage from extreme Resource-extraction and Production methods utilized to meet high and immediate Demand. The Tariffs served as a Governor on overheated economies, and drained excess Profits which could not achieve sustainable Investment.

Study of the tax impact of Tariffs might present some Insight into the theory of Tariffs. Let Us first answer the question of Who. Tariffs taxed exactly those industries who were trying to rapidly expand the market for their Products. These Producers wanted this expanded market to quickly pay off their mortgage debt for Production facilities, so they could expand their capitalization. Their choice of foreign markets not only included far greater Consumers, but a lack of taxation; imposts upon themselves, their Workers, and their Consumers. A basic drive behind their desire for foreign markets was attempts to escape the heavy taxation. Importing nations, however, found a vital loss of Tax revenues coming from their Citizens’ purchase of foreign Goods, and took immediate Steps to reintroduce this Tax revenue by venue of Tariffs. Study of the Graph provided by Dani Rodrik highlights the first attempts at this Tax revenue replacement were too high, but both Britain and France reduced their Tariffs until domestic and foreign tax revenues relatively equalized.

I think We have established the basic Who, How, and Why in the previous paragraph, as well as the basic How Much. The only Question remaining consists of asking whether Developed nations pass a boundary, past which Tariffs become counterproductive. Modern Economists might universally agree that Tariffs are an obsolete form of Taxation, and need be discarded on the trash heap of outdated technological forms; I do not! Developed economies still have the same problems of overheated production, excess Profits without adequate Investment potential, and Tax base erosion from increased Importation. The Problems increase in Number, Kind, and Cost as nations develop, and Tariffs have an established history of effectively dealing with the basic structure of these Problems. lgl