Bootlegger in a Baptist’s Mask

There is no point in taking any of the economic assertions in Robert Lighthizer’s new book “No Trade is Free” seriously. That would be the equivalent of a geographer taking seriously the work of a Flat Earth advocate. For many years most economists have clearly understood that free trade is hugely beneficial to both individual consumers and the economies of communities of all sizes. If Paul Krugman and Milton Friedman agree on something, it’s safe to say that it’s likely true. 

Now Lighthizer, former United States Trade Representative for President Trump, has written a political book, and it must be analyzed as such.  Fortunately, economics has provided useful tools to help us understand both the author’s motivations for writing it and the consequences of pursuing the policies for which he advocates. The field of economics that can do this is public choice.  Public choice economics is an area of study that assumes politicians are essentially self-interested in their actions. It also assumes that such self-interested individuals make “trades” in public goods to gain their goals.  In the case of office-holders the main goal is re-election.  Once we assume politicians are self-interested in their attempts to win elections, and are not trying to achieve some idealistic vision of the public good, we can see this book for what it is. 

Lighthizer himself is not running for public office, but one can notice straight away that the author is not only penning this book for a mass audience, he’s also writing for one person in particular — former President Trump, who is mentioned in glowing terms early and frequently by the author. It reads very much like a job interview for a similar position in a second Trump term, and a recent profile of the author in the Wall Street Journal only confirms my suspicion. 

So how does public choice help us cut through the sucking up to Mr. Trump and see plainly what Mr. Lighthizer is proposing? Two particular innovations are critical. The first is widely known by students in political science — the work of Mancur Olson in understanding why and how groups organize. 

Olson’s first great book is The Logic of Collective Action and in it, he addresses a puzzle that had stumped scholars for decades. When one looks at the long history of intellectual discussions about the dangers of democracy, many very smart people have been worried about mass democracy and rule by majoritarian mobs, and rightly so. But Olson’s work tackles a different vexing question about democracy — how do relatively small groups seem to exercise outsized influence over policy making.  Why do farmers, groups of manufacturers, the elderly, maintain large amounts of political power even when it hurts the interests of most of the rest of the citizens in a democratic system? 

The answer for Olson was the costs of organizing as compared to the benefits.  So, in the case of tariffs on foreign goods for example, the costs are paid by consumers in the form of a relatively small “tax” incurred by the tariff and spread widely across the population of a country.  This makes it economically inefficient for large groups of consumers to organize and oppose the tariffs. 

Just as critically the benefits of tariffs are concentrated among relatively small groups, the owners of steel manufacturers for example and their workers who keep their jobs despite not being cost competitive. Because the benefits to them are high and the costs of self-organizing are relatively lower compared to their benefits, the incentives exist for them to organize and lobby.  And responsiveness of politicians to such political pressure is amplified when those groups serve as swing voters in highly competitive states during hotly contested and tight presidential elections as we have had recently. Olson explains why the return of economically zombie-like tariffs have risen from the political graveyard of ideas since the 2016 election and now accepted by Democrats and Republicans alike. Tariffs are merely taxes on consumers that benefit domestic producers enforced by government. The only serious way to understand them is as political phenomena. 

The second innovation from public choice that can help us understand Lighthizer’s love letter to his former boss comes from the great political economist Bruce Yandle. Yandle hails from the South, Georgia in particular, and spent most of his career at Clemson in South Carolina. His experiences helped him develop an expression to understand how economic incentives can be camouflaged under the guise of moral claims. 

The South of Yandle’s childhood was populated by bootleggers who made and distributed illegal liquor in communities that prohibited booze.  Organized religion also played a prominent role in community life, and Yandle noticed that both groups shared an interest in keeping alcohol illegal, albeit for different reasons.  The bootleggers wanted to keep legal booze out to keep their profits high, while religious leaders had moral reasons for opposing the sale of legal liquor.  Despite those differences their political interests were aligned. 

He coined the phrase “Baptists and Bootleggers,” and developed a veritable cottage industry in economic studies of the phenomenon.  It both explained various alliances of very strange bedfellows in the political world but also helped to expand our understanding of how politics is very much about self-interest and small groups can wield inordinate power even when the consequences for the public are costly and inefficient. 

Now if there is one good thing I can say about this book it’s that Lighthizer doesn’t, or perhaps can’t, obscure the fact that the majority of his professional career was as a lobbyist for the steel industry, which has a long history of tariff protection. He leaves out the part about raking in giant fees from the steel companies to his DC law firm and benefiting handsomely himself.  Instead, he choose to tell the reader that while he grew up in Ohio as a lad caddying for “our” local country club (thus making it unclear whether he was a member or it was merely the community’s local club, one can infer the reality) watching his beloved town slowly decline as the nature of manufacturing changed throughout the Midwest in the 1960’s and 70’s. This provides the morally righteous spark to what becomes his Baptist fervor to tariffs. 

As taxes go, tariffs are hidden and unavoidable, which makes them dangerous to liberty and property. History is littered with trade wars that don’t end well. And even if a government could, in lieu of a tariff, offer consumers a choice to “tip” the business that produced domestically manufactured goods at a higher cost, that might be one way to handle the obvious imposition of an unfair and economically inefficient policy onto all Americans.  And if some of my fellow Americans wanted to voluntarily help their fellow citizens in the Youngstown, Ohios and Gary, Indianas of the nation, so be it. But forcing all of us, including many of us who don’t benefit from such laws, to pay the costs of maintaining these economically uncompetitive and losing industries is nothing more than a politically motivated transfer to swing voters living in competitive states. It’s pure politics motivated by the unique political institution of the Electoral College. The fact that the Biden administration has also chosen to impose high tariffs on imported goods during this election year lays bare the naked political calculation here. 

Bob Lighthizer wants you to join him in what he claims is a moral crusade to save a few American jobs. He fails to mention that ultimately, we will all pay much higher costs to do this and that he, his friends and former clients, and a very narrow sliver of the nation will benefit. He is that rarest of individuals, a lawyer for a bootlegger standing at the Baptist pulpit, hoping you don’t notice who’s putting money in the collection basket on Sundays.