Blockading Ourselves: C. Bohanon aznd T. N. Van Cott

69 Blockading Ourselves by Cecil E. Bohanon and T. Norman Van Cott B lockading enemies is a standard wartime ••. tactic. The objective, of course, is to prevent an adversary from trading with other countries. At the same time, warring na tions try to keep their own seaports open. In light of this centuries-old wartime tactic, it is curious that nations at peace regularly blockade themselves by pursuing policies which restrict imports. The irony of nations turning a wartime weapon on their own citizens during peacetime has escaped attention in the flood of recent com mentary on international trade. One might object to this wartime/peacetime eontradiction on the grounds that it is an imper fect analogy. Note, however, that the goals of wartime blockades and peacetime import re strictions are similar in that both seek to prevent foreign goods from entering a particular mar ket. Logical consistency implies that if wartime blockades hurt enemies, peacetime restrictions hurt our own economies. Alternatively, if peacetime restrictions improve a nation's eco nomic strength, wartime blockades are treason ous.

A Lesson from U.8. History During the U.S. Civil War, the North block aded the major seaports of the South. Historians generally agree that the South's economic strength was sapped by the blockade. Entering and leaving Confederate seaports became more costly, usually requiring the skills of blockade runners. Professors Bohanon and Van Cott teach in the Department of Economics at Ball State University, Muncie, Indiana. The adverse economic effects of the blockade on the South were twofold. First, the blockade made imported goods less available, so that the Confederacy had to eliminate certain uses to which imports heretofore had been put. The re sources the Confederacy previously had been using to pay for these imports had to be redi rected to less-preferred goods. Second, the im ports that did slip through the blockade came at a greater cost. More costly imports meant the Confederacy had to send more of its production to foreigners as exports to obtain these imports.

Today's media pundits sing the praises of ex ports and consistently denigrate imports. Fortu nately for the North, Abraham Lincoln and his Secretary of the Navy, Gideon Welles, knew better. The purpose of the blockade from the North's point of view was to reduce the Con federacy's access to imports. Admittedly, the North also tried to prevent Confederate exports when, for example, it intercepted cotton-laden ships bound for England. But these export in terruptions served the North's interest only be cause they reduced the Confederacy's ability to pay for imports. The North surely would have been willing to permit Confederate exports, provided it could have completely eliminated Confederate imports. Popular wisdom aside, exporting without importing is counter to a na tion's well-being; it reduces the availability of goods and services to the inhabitants. From the time of Adam Smith and David Ricardo, economists have carried the torch for free trade. It is common to hear people say that economists have won all the formal debates on the subject, but have been steady losers in the 70 THE FREEMAN. FEBRUARY 1989 political arena. Curiously, economists have not trumpeted the fact that governments' wartime actions are consistent with the free-trade doc trines of Smith and Ricardo. Perhaps the econ omists' reticence reflects what Milton Fried man, in The Optimum Quantity of Money and Other Essays, describes as a tendency among economists "to discard war years as abnormal. ' , We submit, however, that government offi cials' wartime actions should not be over looked. Indeed, the contradiction between their wartime and peacetime actions can be explained in terms of the first principles of economics.

These same principles suggest, moreover, an important consideration if the dream of free trade is to become a reality. Why do government officials behave as they do? The personal benefits and costs to politi cians obviously playa key role. Peacetime im port restrictions benefit politicians because they can confer privileges on domestic industries that are facing foreign competition. Politicians bear little personal cost because consumers harmed by the restrictions are spread through out the economy and are too unorganized to be politically important. Politicians cover their tracks with rhetoric to the effect that imports "weaken the economy," "deter economic growth, " and "destroy jobs." However, if one believed this political rhet oric, one would never suggest a wartime block ade. Quite the opposite-a better wartime strategy would be to encourage neutral nations to trade with your enemies. Indeed, why not sub sidize your own citizens' trade with enemy na tions, since it supposedly saps your enemies' economic strength?

Any schoolchild, of course, can see the folly of this logic. Such policies risk national disas ter, which in this case translates into personal disaster for the policy-makers. For this reason, the lessons of Smith and Ricardo necessarily loom large in the calculations of wartime poli ticians. When viewed in this perspective, the contradiction becomes more understandable. At the risk of belaboring the wartime/ peacetime imagery, the contradiction is similar to the foxhole religious conversions that occur during every war. Soldiers under heavy fire promise God they will "walk the straight and narrow" if God will get them out of their pre dicament. Once safe, however, they return to their "backsliding" ways. So it is with govern ment officials and international economic pol icy. Peace reduces their personal costs of acting contrary to national economic efficiency. Raising the Costs Aside from pointing out the logical inconsis tency of protectionist rhetoric, what does the foregoing tell us? Perhaps the salient point of the contradiction relates to how personal costs influence government policy-makers. This in tum suggests that the path to reform of interna tional economic policy must go beyond merely explaining the economics of trade, ·as desirable as this may be. That is, essential to international economic reform is the idea that peacetime pro tectionism must be personally more costly to government policy-makers. It is quite likely that reform along v these lines encompasses changes that are of a quasi-constitutional or constitutional nature. 0 71 Popper, Hayek, and Classical Liberalism by Jeremy Shearmur K arl Popper, who turned 86 years old this past July, is justly famous for his work in the philosophy of science. As a young man, Popper was inspired by the way in which Einstein called into question the ideas of Isaac Newton. Einstein put forward a theory that, if true, explained why Newton's work had been so successful. From Einstein's theory, however, there could also be deduced conse quences that differed from those of Newton's theory; predictions that could be put to the test.