Alexander Hamilton and the American Way: Protectionism in the United States  

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February 4, 2015

Guest Post by Randal A. Burd, Jr.

Those who enjoy even a cursory understanding of the economic policies of the last two decades should be quite familiar with the term “free trade.”  Free trade is simply a government’s policy to intentionally refrain from restricting imports or exports via the use of subsidies and tariffs.  While policy wonks on both sides of the political aisle may view or at least portray the Unites States as a county founded on principles of free-range capitalism, Ian Fletcher, author of “Free Trade Doesn’t Work: What Should Replace it and Why,” argues that the success and prosperity of this country has been guided at many times during its history by protectionist policies.

Protectionism is the use of export subsidies, import quotas and tariffs on imported goods, and other regulations to ensure the best interests of one nation over the other nations it does business with.  These interests can come in the form of protecting employment opportunities at home and conserving native natural resources.  Fletcher contends that all four presidents whose likenesses are enshrined upon Mount Rushmore as well as the first Treasury Secretary of the United States, Alexander Hamilton, were proponents of protecting the interests of the United States with a variety of tariffs, subsidies, and bans on certain imports and exports.

While critics of protectionism, from famed economist Adam Smith in his 1776 work entitled “Wealth of Nations,” to Greg Mankiw, chairman of the Economics Department at Harvard University, argue that one should never produce at home that which can be acquired for less money abroad, current economic rivals such as China are even now engaging in protectionist practices via customs and quality regulations in order to curb imports of raw materials such as corn, cotton, and grain, thereby protecting their local markets.

This November 2014 account of Chinese imposed protectionism is not an isolated case.  Countries from Russia to Argentina and Brazil have been implicated in recent traditional and non-traditional protectionist practices.  Few could argue on examination of individual cases at the prudence of safeguarding domestic industries while limiting imports and boosting exports for the good of a nation.  If free trade were universally the most beneficial policy to adopt, such subversive reliance on protectionist practices would be nonexistent.  It appears that Hamilton’s defense of protectionism for infant industries continues to be put into practice by foreign nations now nurturing developing industries of their own.

One of the strongest advocates of revisiting the protectionist policies of America’s history is Pat Buchanan, assistant to President Nixon and White House Director of Communications for Ronald Reagan.  In 2002, Buchanan identified current economic issues which he asserts have resulted from embracing free trade: crises in farming and manufacturing, and the dependence upon foreign producers which has resulted massive trade deficits and foreign purchase of U.S. assets.

In addition to outlining the perceived failures of free trade, Buchanan recounts a modern day example of a U.S. president implementing a protective tariff: President George W. Bush’s implementation of tariffs on foreign steel to positive effect.  Even in the 21st century, protectionism appears to be a viable tool in national economic policy.  But regardless of the role protectionism plays in the economic policies of the United States now or in the future, it is undeniable that protectionist policies played an integral role in this nation’s historical narrative.

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