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Harvard + Economists = Theoretical Nonsense

By Chuck Muth, President, Citizen Outreach

Knowing that Harvard University initially had its hand out and accepted an $8.7 million taxpayer-funded government subsidy tied to the federal coronavirus relief program – only to be shamed into turning it down following a furious public backlash – it should come as no surprise that Jay Garg, writing recently in the Harvard Political Review, came to the defense of foreign governments that subsidize their home-grown sugar markets.

Garg takes issue with President Trump’s calls to bring back various manufacturing and other businesses from overseas to better protect the republic when threats, such as COVID-19, come knocking on our door.  But such “economic protectionism,” argues Garg, “threatens both our lives and our way of life.”

Garg goes on to declare that “all available evidence and an overwhelming majority of economists support the notion that economic protectionism is a mistake.”

For some reason, every time I hear someone referring to economists while simultaneously arguing, as Garg does, that we need to “listen to the experts,” I can’t help but recall this classic Reaganism:

“Economists are people who wonder if what works in reality can also work in theory.”

“Economic protectionism,” Garg continues, “prevents cheaper foreign goods – perhaps made in countries with lower wages or cheaper materials, or simply made more efficiently – from undercutting domestic prices.”

Garg then specifically singled out imported sugar – which is limited by the U.S. sugar program of quotas and tariffs – as an example of cheaper foreign goods that would save consumers money if only we allowed free trade.

But as is the wont of U.S. sugar policy opponents, he left out one important little detail…

Foreign sugar isn’t cheaper because of “lower wages or cheaper materials, or simply made more efficiently.”  It’s cheaper because of foreign government subsidies.  And that is decidedly NOT “free trade.”

Protecting domestic sugar producers from sugar imports that are unfairly subsidized by foreign governments works in reality.  Yet folks such as Mr. Garg wonder if such common-sense policies protecting U.S. sugar manufacturers from cheaters works in theory.

In economist theory, no.  In consumer reality, absolutely yes.