More government means more expensive everything. Every second and penny spent paying government taxes and complying with government regulations – raises the prices of the goods and services people proffer.
And more government makes it more difficult to innovate – to create and improve goods and services. Innovation is delayed or outright prevented – because the time and money wasted on government could be much better spent developing the next great things.
More government also inflates the prices of everything trade. It ain’t free trade – if governments are involved.
“Trade Wars” actually aren’t about trade – they are about government trade policy.
If peoples are trading freely, there isn’t a “War” – there’s commerce. The “Wars” only happen when governments get involved – placing tariffs, regulations and subsidies in the way of the flow.
It becomes a regulatory arms race. A government imposes another subsidy or tax. So several others in response impose new subsidies and taxes of their own. Lather, rinse, repeat.
A horrendous example of government policy Trade Wars – is all things farm.
(O)ur Farm Bill – which warps our market – has warped the world’s as well. (Franklin Delano Roosevelt) helped beget an eight-decade-long international regulatory arms race.
Other produce-producing nations saw our lattice-work panoply of tariffs and subsidies – and felt compelled to match them. And then exceed them….
So what we now have is a global lattice-work panoply of tariffs and subsidies. A thicket that grows ever thicker – as each next government tries to outdo the last.
How bad has it become? Just on the government money side?
Check out Texas Tech’s Foreign Subsidies Database. The Executive Summary lists the omni-directional government infusion interference:
- All countries, both industrialized and developing, support their agriculture sectors, but use vastly divergent policy tools and combinations of tools. Most use guaranteed minimum prices and import tariffs to protect domestic producers.
- Industrialized country governments are moving from price supports toward decoupled direct income payments.
- Developing countries supplement their price support programs with input subsidies, which are excluded from calculations of the Aggregate Measure of Support (AMS) by the World Trade Organization (WTO), but are nonetheless trade distorting.
- Developing countries’ tariff protection is higher than that of industrialized countries.
- The use of sanitary and phytosanitary (SPS) measures to restrict imports are more frequent among developing countries than in developed countries.
That’s a mess.
