America is divided over heavy metal cronyism

America is divided over heavy metal cronyism
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Critics counter with concerns about inflation and trade wars, which would pit the United States against other countries. Already China and the European Union have issued warnings.
Sometimes lost in the debate is another, more fundamental threat. No matter how other countries respond, protectionist policies will divide Americans at home. The tension is inevitable because tariffs, like all forms of cronyism, create privilege for some at the expense of others.
U.S. workers might not care, as long as the designated losers are isolated overseas. Many exporting nations cheat anyway, they’re told. So tariffs merely balance an already tilted playing field. But set aside for a moment the us-against-the-world mindset, and consider the way tariffs pit Americans against Americans.
The division starts with unequal application. U.S. policymakers can’t favor all industries — at least not equally. So they single out some for special protection while leaving others exposed.
Recent winners include manufacturers of washing machines and solar panels. Older tariffs cover everything from live foxes to paperclips. All of this is great if you live in the United States and work in these specific areas. But what about everyone else?
This is the problem with cronyism. Powerbrokers love tariffs, taxes, subsidies and regulations because these instruments of government force always work in their favor. Average folks don’t have the same access to backroom deals, so they invariably lose even when they think they are winning.
Even if we give the White House the benefit of the doubt, and view the new tariffs as an honest attempt to preserve jobs rather than a way of helping friends in high places, tariffs still rig the economy.
Government has an interest in job creation, especially in key sectors like manufacturing, agriculture, high technology and energy. Aluminum and steel span all of these sectors, so the desire to protect domestic mills is understandable. But policymakers can’t generate jobs artificially in one part of the economy without penalizing other parts.
U.S. companies that use aluminum and steel to manufacture goods will pay more as a direct consequence of the tariffs, which will affect jobs along their supply chains. Later, as countermeasures emerge, the pain will spread. Farmers who export soybeans, for example, would suffer if U.S. trade partners retaliate with increased tariffs on U.S. agricultural exports.
The economy is interconnected like the environment. Nothing happens in isolation, and the net effect of trying to pick winners and losers is usually fewer jobs overall, not more.
Too much government interference also delays the process of creative destruction — the sometimes painful but necessary evolution that occurs as market conditions shift.
Billy Joel captures the desperation of unemployed factory workers in Allentown, where useless diplomas hang on the walls. “Every child had a pretty good shot / To get at least as far as their old man got,” he sings. “But something happened on the way to that place / They threw an American flag in our face.”
The pain is real. But the forces of globalization and automation cannot be ignored.
If China or any other country can outperform the United States in any industry — or even if they cheat by manipulating currency, enforcing their own tariffs or dumping oversupply into U.S. markets at reduced prices — the answer is to fight back with less cronyism, not more.
Fewer tariffs, taxes, subsidies and regulations would set the U.S. economy free and unleash a wave of innovation. Layoffs might occur in some parts of the economy, but the tradeoff would be upward mobility for the masses as consumers gain access to cheaper, higher-quality products and services.
The alternative is to prop up factory jobs artificially, masking the problem and postponing the necessary hard choices. That is not a winning model, except for the cronies.
Rajshree Agarwal is the director of the Ed Snider Center for Enterprise and Markets at the University of Maryland’s Robert H. Smith School of Business and a Cato adjunct scholar.