One of the most important aspects of governance is trade policy, for it is part of both domestic and foreign policy. Without a proper understanding of the tools available to a sovereign, it is impossible to use trade policy effectively in either an offensive, defensive, or administrative capacity. This is essential for libertarians as well as reactionaries, since the logical conclusion of libertarianism is a world of sovereign private property owners who function as kings of their own particular hills, determining the norms to be followed thereupon. Since most of these tools may be understood as tariffs (taxes levied on imported or exported goods) of one type or another, let us explore the various tariff options available to a sovereign, their domestic and international effects, and other considerations of economic theory in order to determine the best course for achieving particular goals.

0. The King-Pill

Before delving into the subject matter proper, let us preempt the objection that there is something inherently anti-libertarian about restricting trade. It is true that in the ideal libertarian utopia described previously, tariffs as we know them would be impossible, as one cannot impose taxes upon or pay taxes to oneself. But even if every person in the world were somehow put in absolute power over equal plots of land, this precise condition would not persist for long. Economic inequality occurs naturally over time as a result of differing preferences and abilities, and the profitability of managing primary property would only accelerate this process.

Liberty allows people to assert individual preferences, and some people would prefer to cast aside the burdens of any crown, no matter how small, for they would rather apply their talents to other endeavors besides governance. Some people simply lack the entrepreneurial ability to run a business, and a libertarian government is simply a private business with primary property. Other businesses fail not due to incompetent management, but due to circumstances outside of the control of the business owners. Like any other failed business, such primary property owners would be bought out by more competent managers, likely putting the former owners into a rental relationship of some kind. Another possibility is military conquest. Just as some people in democratic societies do not believe in democracy, one should anticipate that some people in a libertarian society would not believe in libertarianism and would attempt acts of conquest. It may be that some such attempts would not be stopped by the attacked property owners or anyone else. In such cases, the conqueror will get away with gaining property by seizing control of it. On a sufficiently long timescale, natural disasters, climate change, and geological activity would destroy some land and create new land elsewhere, leaving some former property owners landless while opening up opportunities for homesteading. All of these factors would cause primary ownership to move away from the aforementioned types of property owners and toward those who are more able and willing to carry out sovereign functions. Note that new lands, whether on Earth or elsewhere, would allow for some dynamism in the long-term, but those with means would be most capable of reaching, utilizing, and defending those lands.

Therefore, we may expect the Matthew effect to play out, after the Biblical parable of the talents and Jesus’ declaration that “For to everyone who has will more be given, and he will have an abundance. But from the one who has not, even what he has will be taken away.”[1] Eventually, a society consisting of many landless people renting from a few landed people, much as citizens effectively rent from nation-states today, will result. Even among those who maintain allodial titles in land, some may find it beneficial to negotiate protection agreements with larger sovereigns. The result would resemble a feudal hierarchy with a monarch of sorts at the top, lords and vassals who nominally own land but rely upon a monarch for security, and peasants who rent land.

To understand these processes and results is to swallow the king-pill; even if all means were distributed equally, a new order of hierarchy and authority would eventually emerge. Whereas any real development of a libertarian social order will occur from less egalitarian conditions, the process of consolidation of sovereignty and stratification of society would occur more quickly than in perfectly egalitarian initial conditions.

As primary property owner, a libertarian monarch may decide who is allowed on his property and under what conditions. Traders who would enter his lands against his will are trespassers just like any other unwanted people. Those who would engage in trade activities on his property against his will are breaking the terms under which they may be within his kingdom, making them trespassers as well. Therefore, a libertarian monarch may set trade policy within his territory as a corollary of his private property rights. But just because he can set one trade policy or another does not mean he should. Let us proceed to our consideration of the range of policies that he may enact.

1. Types of Tariffs

It may be tempting to divide tariffs into categories of revenue-generating and industry-protecting, but this is a sliding scale rather than a strict dichotomy, for all tariffs have both effects to differing extents. Setting a tariff rates is therefore a balance between revenue maximization and industry protection. We begin at zero, for a negative tariff would both harm domestic industry and cost the sovereign while providing no domestic benefit. (The reasons why a sovereign might enact a negative tariff will be explored in Part II, but let us concern ourselves only with non-negative tariffs for now.) To examine the range of effects, let us consider a simple example in which avocados grown in the United States cost US consumers $1.50 each, while avocados grown in Mexico cost US consumers $1.00 each. At a tariff rate of zero, there is no revenue and no protection. Adding a small tariff, say 5 percent, will result in most people still buying the Mexican avocados and paying $1.05 instead of $1.00. (Merchants will treat tariffs as a cost of doing business and usually include them in the final price that consumers pay, so a tariff usually functions as a consumption tax targeted at particular goods from particular origins. Otherwise, the business must eat the cost, reducing its ability to spend money elsewhere.) A few people may decide to switch, but if all else is equal, most people would rather pay the revenue tariff and continue buying the cheaper foreign product, and there is no way to be sure that the reduced price difference is what caused a few people to reconsider their choices. Even so, there is no such thing as a pure revenue tariff that has no protective effect whatsoever.

If tariffs are raised to bring the items near parity, then at least in theory, consumer behavior will change sharply around the point of parity. In this example, a tariff of 45 percent should still have a mostly revenue-generating effect, while a tariff of 55 percent should cause most consumers to switch to buying American-grown avocados whenever they are available. At exactly 50 percent, there should be roughly equal protection and revenue effects, with the tie broken by nationalist sentiment, brand recognition, customer loyalty, etc. But tariffs rarely stay at parity, as special interests and consumer advocates compete to destabilize the equilibrium. It is important to remember that as tariff rates pass parity, consumers who switch to domestic goods will not pay above parity. If a domestic good is 50 percent more expensive than a foreign good in a free market and a 80 percent tariff is applied, the consumers who switch pay 50 percent more, not 80 percent more. This incentive is how protective tariffs function. One must also remember that this extra cost goes into the pockets of domestic producers rather than into the sovereign’s coffers.

Once past the point at which protection effects dominate, there is not much point in raising tariffs further unless one wishes to either enrich a domestic industry in addition to protecting it or ban imported goods outright rather than merely make them undesirable to consumers. One may interpret trade sanctions, embargoes, and import/export quotas as tariff rates of infinity, for the effects are identical. However, the revenue effect would not disappear completely at infinity. If there are customers for a good or service and people who can provide, then there will be efforts to make trade occur regardless of legality. As long as there are smugglers who attempt to evade trade prohibitions and the sovereign is able to seize some of their illicit goods, there will be revenue to collect even at an infinite tariff rate.

2. Revenue Tariffs

Now that we know what happens when tariffs are levied, let us consider why a sovereign would levy tariffs. The most obvious reason is that the owner of a port or trading post will tariff goods passing through in order to fund the upkeep of the facilities. Indeed, the etymology of the word tariff comes from the Spanish port of Tarifa, the first port in history to charge merchants for using its docks.[2] This type of rental agreement is beneficial for all parties involved; the port owner makes a living and employs other people to maintain the physical marketplace, while the traders and customers gain a stable, well-equipped location for trading. Higher-order effects abound, as a well-functioning market attracts more providers of goods and services in a virtuous cycle of growth and prosperity.

A sovereign may also tariff imports to raise revenue for other purposes. These include funding social programs, building other infrastructure, promoting tourism, providing military defense, or simply enriching himself. As previously explained, collecting tariffs is his right as a corollary of his ownership of territory and the terms of use for merchants and residents. When considering a libertarian monarch, the exercise of his property rights nullifies the standard moral arguments against taxation. One must then contemplate whether the monarch’s interests would be better served by centrally planning the provision of a particular service, funding it through tariffs and other rent collections but allowing competition, or leaving the market to its own devices. The answers will vary for each service and circumstance, but the incentive structure favors the monarch doing what is necessary to protect himself against foreign invasion and domestic insurrection, ensuring that he eats well, and letting free markets function otherwise so long as they do not impair these objectives.

Whereas sovereigns are in competition to provide the most attractive location for merchants to operate, there is an inverse correlation between tariff rates and the number of sovereigns in a geographic area. The extent of this correlation is a function of the existence of other locations and the difficulty of reaching and utilizing them. Sovereigns are thus incentivized to attempt annexation of each other, while non-sovereigns are incentivized to support secession and decentralization. Regardless of the outcome of such class struggles, they place an upper bound on tariff rates.

3. Protective Tariffs

3.1. Infant Industries

Though tariffs in pre-modern times had more of a revenue-generating motivation, there were exceptions beginning with Edward III of England (r. 1327–77), who used protectionist methods to boost domestic manufacturing of wool cloth.[3] By the time of Henry VII (r. 1485–1509), England was the world’s largest manufacturer of wool rather than just the source of the raw material.[3] This leads us to the first argument for protectionism, which says that protective tariffs are necessary to allow new industries to gain a foothold and get their bearings before facing competition from more advanced and experienced foreign manufacturers, who might be able to defeat such upstarts before they can fully realize their potential. The certainty offered by a government that a particular industry will not be put out of business by foreign competition will attract investors to those businesses, which alters the economy in favor of that industry.

There are several problems with this argument. The sovereign may be inaccurate in his choices of winners and losers, thus wasting the kingdom’s resources on inefficient industries. It is even more difficult for a sovereign to figure out exactly how long protective tariffs should stay in place[4], which can either remove the training wheels too soon or turn an infant industry into a Peter Pan industry. But abusus non tollit usum, and it is possible for tariffs to help domestic industries develop if used properly.[5] That being said, private loans are a market means of helping infant industries succeed long-term when they will operate at a loss in the beginning without involving trade barriers.

3.2. Essential Goods

There are some goods and services the provision of which cannot rely upon foreign manufacture if the realm is to remain free. As George Washington wrote about the Tariff Act of 1789,

“A free people ought not only to be armed, but disciplined; to which end a uniform and well-digested plan is requisite; and their safety and interest require that they should promote such manufactories as tend to render them independent of others for essential, particularly military, supplies.”[6]

While it is not necessary for an independent polity to produce all of its essential supplies, its inhabitants must not forget how to do so, lest they be at the mercy of those who export those supplies to them. Furthermore, one of the most common acts of war is to disrupt an enemy’s trade routes, and this can leave one without essential supplies if one depends on allies for manufacture instead of retaining some domestic capacity. Free traders often assert, as Otto T. Mallery did, that “If soldiers are not to cross international boundaries, goods must do so,”[7] but this is not always true. Leaders sometimes believe that they have more to gain by war than by trade and act accordingly.

It must be noted that there are market mechanisms for handling disruptions in supply, and that a libertarian social order would involve less suppression of such mechanisms by politicians peddling economic fallacies about price gouging and profiteering, but these mechanisms require time to function. That time is not always available, especially with the rapid mobilization of troops and materiel that is possible with current (and presumably future) technology. Thus, it is prudent to provide enough protection to domestic industry to allow it to survive in some capacity in the event that it must be relied upon in an emergency. After all, it is better that certain industries be less efficient than that the kingdom be conquered.

3.3. Anti-Dumping

Advocates of protective tariffs claim that they are necessary to combat various forms of dumping, which is the selling of items in foreign markets for less than they are sold domestically. Anti-dumping measures are primarily concerned with four types of dumping: environmental, monetary, social, and tax dumping. In a libertarian social order, sovereigns are incentivized to undercut each other’s rent collection in order to attract people and businesses. As such, tax dumping is not only not a concern, but would be enabled by any attempt to prevent it. Enacting trade barriers in response to lower rent costs elsewhere would only further isolate the kingdom and harm the sovereign. While cartelization between sovereigns is possible, the incentive of every member of a cartel is to defect, and experience has shown that only force of arms is able to sustain a cartel from this tendency.

Social dumping is possible, but again, the sovereigns are in competition to offer potential residents the best deal. The greater wealth generation and lesser distortions by special interests in a libertarian social order mean that there would be less need for social programs, as more people would be able to earn a living rather than depending on charity or the sovereign for their upkeep. The worst that is likely to happen is that a few kingdoms or wilderness areas would become known as dumping grounds for those who cannot survive on their own merits in civilization, and that the other monarchs would subsidize those places as a means of cleaning up their kingdoms by exiling the greatest burdens.

Monetary dumping is unlikely, as a return to sound money is likely to precede or accompany a transition to a libertarian social order. When precious metals and/or cryptocurrencies are in use as currency, the ability of sovereigns to debase currencies is inhibited. Modern methods of testing for precious metal content make pre-modern debasement schemes impracticable, and blockchain technology makes interference with cryptographic ledgers nearly impossible. Future sovereigns will not have the ability to manipulate the trade balance by devaluing currency, as any who try paper money or other inflationary schemes will lose market share to those who maintain sound money, or at least respect it.

This leaves environmental dumping, which occurs when a sovereign has lax standards for environmental pollution, habitat destruction, and preserving endangered species. In libertarian philosophy, pollution is an act of aggression against people and their property. Unless consent is obtained from a sovereign, environmental dumping would be cause for defensive force to stop the pollution. However, this is historically uncommon; the more likely scenario is that the interests of industry and property would come to some agreement that is least damaging and obstructive to all. As Ronald Coase explains, if an externality can be subject to trade and transaction costs are sufficiently low, then bargaining can lead to an efficient outcome.[8] While this bargaining can be prevented by poorly defined property rights, high transaction costs, holdouts, or free riders, and Coase argued that they almost always do[8], the design of a libertarian social order ensures that these problems which plague modern society are minimized. As such, agreements will be reached in many places with varying terms, and the sundry kingdoms with their differing institutional arrangements will function as experimental laboratories for finding the optimal environmental policies, much as Coase would recommend.[9] Tariffs may be used by libertarian monarchs as a non-aggressive anti-pollution measure by adding expense to goods that are manufactured in a dirty manner, much as carbon taxes do today. Alternatively, much like the social dumping case, a few places may serve as industrial wastelands that are environmentally sacrificed so that everywhere else may be relatively clean.

3.4. Industrial Synergy

Antonio Serra notes that the wealthiest cities are those with the greatest diversity of professions.[10] Erik Reinert finds an inverse correlation between economic specialization in a country and the degree of development.[11] Interdisciplinary collaboration between various professions leads to new discoveries which would not occur if people of differing professions did not have regular contact, and transaction costs are lessened by removing the need to travel to other cities and countries for such collaboration. Furthermore, a polity that only has a few signature industries is more vulnerable to economic instability. For instance, a local economy based almost solely on resource extraction will suffer if that resource is depleted or falls into disuse, as many ghost towns worldwide that were once thriving hubs of mining and ore processing can attest. Similar problems can occur in an agricultural sector due to droughts, floods, and soil mismanagement. Once again, protective tariffs are a trade-off in which the first-order effects of consumers being able to purchase less goods must be weighed against the higher-order effects of keeping a diversity of professions active within a polity.

3.5. Anti-Subversion

Like any other sovereign, a libertarian monarch must attend to his own security first and foremost. The need to fund a military deterrent has already been discussed, but internal threats which take on more of an economic than a military character may also emerge. It is possible for business interests to become extremely wealthy and powerful without holding sovereign power anywhere, as the current state of affairs clearly demonstrates. It is also possible, and currently the case, for such elites to become subversive when their self-interest conflicts with that of the sovereign. Tariffs have a complex relationship with this problem, in that they may cause it, exacerbate it, mitigate it, or solve it, depending on the situation.

As aforementioned, non-sovereigns are incentivized to support secession and decentralization in order to increase the number of sovereigns within a given geographic area, which will lower the amount of tariffs and other rents which may be charged. And as previously discussed, some people in a libertarian social order will attempt acts of conquest, not least because a well-managed sovereign property is very profitable. High tariffs may lead people to make attempts against the sovereign to take power and use it to alleviate their burdens, and the best remedy may be for the sovereign to charge more reasonable rents. In other cases, people become subversive for other reasons, and the sovereign may use tariffs to remind them who is in charge in the hope of peacefully quelling an uprising.

3.6. Trade Deficits

Some advocates of protectionism believe that it is bad for there to be an imbalance between imports from a given country and exports to that country, and that tariffs should be used to correct such trade imbalances. The argument goes that if a country imports more than it exports, then domestic production and the value of currency will drop. Of all of the arguments for protectionism, this one makes the least sense, especially in a system of sound money and full reserves, which a libertarian social order is almost certain to be.

Most arguments for maintaining trade balance focus on bilateral relationships, but international economics is never that simple. As Robert Murphy explains,

“A country ultimately pays for its imports with exports, but that doesn’t mean a country must pay for its imports from Japan with exports to Japan. To see this, imagine a simplified scenario where Japan sells automobiles to the U.S., the U.S. sells software to Kuwait, and Kuwait sells oil to Japan. In this fictitious example, the U.S. would have a trade deficit with Japan but a surplus with Kuwait, Kuwait would have a trade deficit with the U.S. but a surplus with Japan, and Japan would have a trade deficit with Kuwait but a surplus with the U.S. In terms of currency flows, Japanese automakers would probably accept U.S. dollars in exchange for their products, and then sell these dollars on world currency markets against Kuwaiti dinars. Then the Japanese could use the dinars to buy Kuwaiti oil, while the Kuwaitis would use the dollars to import American software.”[12]

It is important to remember that currency is simply a means of facilitating this process above and beyond what a barter system would allow. In Murphy’s example, it is not only the case that Japan sells automobiles to the U.S., the U.S. sells software to Kuwait, and Kuwait sells oil to Japan. It is also true that Japan buys U.S. dollars, the U.S. buys dinars, and Kuwait buys yen. If not for these fiat currencies, there would be some other object traded in their stead, making the whole idea of a trade imbalance appear quite ridiculous as agreed-upon exchanges between buyers and sellers take place.

A related concern is the balance of payments, which includes revenue and capital in addition to the balance of trade. Murray Rothbard explains what happens with payment imbalances:

“During the day of the gold standard, a deficit in the national balance of payments was a problem, but only because of the nature of the fractional-reserve banking system. If U.S. banks, spurred on by the Fed or previous forms of central banks, inflated money and credit, the American inflation would lead to higher prices in the United States, and this would discourage exports and encourage imports. The resulting deficit had to be paid for in some way, and during the gold-standard era this meant being paid for in gold, the international money. So as bank credit expanded, gold began to flow out of the country, which put the fractional-reserve banks in even shakier shape. To meet the threat to their solvency posed by the gold outflow, the banks eventually were forced to contract credit, precipitating a recession and reversing the balance-of-payment deficits, thus bringing gold back into the country.

But now, in the fiat-money era, balance-of-payments deficits are truly meaningless. For gold is no longer a ‘balancing item.’ In effect, there is no deficit in the balance of payments. It is true that in the last few years, imports have been greater than exports by $150 billion or so per year. But no gold flowed out of the country. Neither did dollars ‘leak’ out. The alleged ‘deficit’ was paid for by foreigners investing the equivalent amount of money in American dollars: in real estate, capital goods, U.S. securities, and bank accounts.”[13]

A return to sound money, likely a form of cryptocurrency, will have revolutionary effects on these concerns, potentially eliminating them outright. If one cryptocurrency comes to dominate global markets, then the issue of trade and payment imbalances is solved because there would be no other currency zone with which to have imbalances. If there are multiple cryptocurrencies, then inflation is still rendered either impossible or outside the whims of rulers, thus eliminating the problems discussed by Rothbard above because cryptocurrencies have no central bank full of meddlers.

3.7. The Dire Problem

By the time that a libertarian social order can be established, there may be a novel use for tariffs in combating the Dire Problem. Mencius Moldbug explains the nature of this problem:

“[T]he Dire Problem is that there is a line of productive competence beneath which a human being is a liability, not an asset, to the society including him. This calculation is made in terms of the marginal human—does [a society] gain or lose by adding one person just like this person? For millions, the answer is surely the latter.

Worse, with the steady advance of technology, this line rises. That is: the demand for low-skilled human labor shrinks. Abstract economics provides no guarantee whatsoever that the marginal able-bodied man with an IQ of 80 can feed himself by his own labors. If you doubt this line, simply lower it until you doubt it no more. At least logically, there is a biological continuum between humans and chimpanzees, and the latter are surely liabilities.

Why does this matter? It matters because either (a) a man can feed himself, or (b) he dies horribly of starvation, or (c) someone else feeds him. If (a), he is an asset. If (c), he is a liability—to someone. If (b), he makes a horrible mess and fuss while dying, and is thus in that sense a liability. Moreover, the presence of the poor becomes extremely unpleasant well before the starvation point.”[14]

It must be noted that the “horrible mess and fuss” includes a large amount of rioting, looting, burning, and terrorizing. Libertarian monarchs, like neoreactionary kings, must contend with this problem. To dismiss it by claiming that artificial intelligence and the automation brought by it will create new and different occupations so that no one is left without a potential means of support is a hactenus ergo semper fallacy. In the upcoming industrial revolution, machines will build other machines while acquiring the ability to learn and think for themselves, thus making many economic actors across many disciplines completely obsolete without the potential to re-train for another occupation. In order to curtail the potential destructive aspects of this change, one option will be to tariff goods that are produced without human labor and/or intellect. Mainstream libertarians may balk at such an economic intervention, but as Moldbug writes,

“As both a good Carlylean and a good Misesian, the King condemns economism—the theory that any economic indicator can measure human happiness. His goal is a fulfilled and dignified society, not maximum production of widgets. Is it better that teenagers get work experience during the summer, or that gas costs five cents a gallon less? The question is not a function of any mathematical formula. It is a question of judgment and taste. All that free-market economics will tell you is that, if you prohibit self service, there will be more jobs for gas-station attendants, and gas will cost more. It cannot tell you whether this is a good thing or a bad thing [emphasis mine].”[14]

Accordingly, a libertarian monarch may decide that he would rather have more economic opportunities for people within his territory than cheaper goods and more production absent such opportunities. Those who put the well-being of their people ahead of raw economic progress can improve their reputations, which will attract more and better residents to their properties. Tariffs on automation-produced imports in order to protect human labor from robotic competition may serve this purpose.

4. Other Reasons For Tariffs

So far, we have considered the raising of revenue and defenses against various problems as reasons for a libertarian monarch to levy tariffs, but there are several other motivations which are of a more dubious value. Let us explore these and show how a libertarian social order reduces tariffs that are levied for these reasons.

First, an unscrupulous state that cares more about its image than its actual competence may create problems in order to “solve” them, thus providing propaganda to justify its own power and expansion. For example, a state that wishes to increase spending but has no clear need to do so may decide to create such a reason. Enacting a burdensome tariff (or outright ban; remember that bans are infinite tariffs) on popular foreign goods is likely to produce a black market in which said goods are smuggled into the country and sold untaxed. Smugglers and bootleggers will agree with the trade barrier for the wrong reasons, as it helps them corner the market by hindering and/or removing law-abiding competitors. This can lead to powerful organized crime groups that come to challenge the state for power, as in the United States during Prohibition and much of Latin America during the ongoing War on Drugs. Meanwhile, the state will then claim that it needs more revenuers, customs agents, and perhaps a larger coast guard force to stem the flow of illicit goods. Had the state simply allowed freer trade, the entire problem could have been avoided. But few people tend to see the entire picture, and a complicit establishment of academia, media, and corporations can see to it that such voices are ridiculed and suppressed, even absent official state action.

Second, a state may use taxes in general and tariffs in particular to curtail behaviors that it finds undesirable. The face-value idea is to increase the price of substances that harm the health of their consumers in the hope that people will purchase less of such products. Such “sin taxes” can be more effective than outright bans if used properly, in that black markets are less likely to form if white markets still exist, and a modest increase in the cost of harmful substances may discourage new users and convince some marginal users to reduce or even eliminate their consumption. The decrease in short-term purchasing power must be weighed against reduced long-term healthcare costs. However, a sin tax can be less effective than a ban if it leads to the problems outlined in the previous paragraph, and it is usually such goods that garner such attention.

Third, tariffs can function as a soft variant of economic sanctions, and effectively are sanctions as tariff rates become high. In the course of international affairs, sanctions are a common tool of politicians who seek to achieve foreign policy objectives without resorting to open warfare. Just as economic ostracism can remedy undesirable behavior on an interpersonal level by imposing a cost for bad behavior, tariffs can be used in the same manner between sovereigns. The case of environmental dumping discussed earlier is one example of this, but trade restrictions may be imposed against a polity for a multitude of reasons. Though the use of sanctions can be better than inaction or war, it tends to be ineffective. It is an admission that diplomacy has failed to resolve a dispute, can escalate a conflict, drags innocent bystanders into a dispute, harms commoners more than the offending elites, and is no substitute for defensive force in cases where the use of force is appropriate. Politicians like to use sanctions not because they work, but because they are effective for political posturing, for giving the appearance of acting tough while doing nothing of substance. Sanctions are also used simply because there are no other options between diplomacy and military action to compel change in a geographical area outside of a government’s direct control.

Fourth, tariffs may be used to encourage negotiations that will reduce tariffs. The threat of tariffs as a means to deter other states from imposing tariffs is an important tool for deterring trade wars, and a nation that refuses to consider such a deterrent is at a disadvantage against other nations that have no such scruples. In this sense, the threat of tariffs works much like nuclear deterrence, in that peace is achieved through mutually assured destruction. An example of this occurred with trade in avocados and corn between Mexico and the United States immediately after NAFTA in 1994. When Mexico tried exporting avocados to the US, the US government resisted at first, but gave in when Mexico started erecting barriers to US corn exports.[15] The end result of this use of counter-barriers against barriers to free trade was freer trade.

These dubious reasons for levying tariffs are common in modern nation-states, especially those governed by liberal democratic values. In a libertarian social order, a private property owner has little need for propaganda, as his authority is not subject to popular will, especially if he has taken proper precautions to curtail the sort of degenerate conduct protected by the First Amendment to the United States Constitution today. Creating problems just to solve them (or let them fester) is thus multiply wasteful with no benefit to justify the expense. Controlling private behaviors, such as drug use, is also of little concern. The traditional solution of quarantining vices in opium dens, saloons, brothels, casinos, etc. would likely be applied in most places, with a few kingdoms allowing public libertinism and a few catering to teetotalers of various stripes. The remarketizing of healthcare goods and services that would follow the breakup of large nation-states would remove the motivation for state involvement in taxing and regulating vices unless a particular king chose to run a healthcare system in his kingdom rather than leaving it up to private enterprise.

Economic sanctions are more likely to be used, but the larger number of polities reduces their effectiveness. Again, the nature of a libertarian social order removes the need for political posturing, and monarchs are more swiftly decisive than democratic governments in matters of diplomacy or military action, which removes several motivations that currently cause sanctions. Organizing a coalition to have effective sanctions is made more difficult by the greater number of sovereigns who must agree to implement them, and like any other cartel, each member is incentivized to defect. It is also more likely compared to the current system that the sanctioned kingdom will have its own coalition of polities, leading to retaliatory sanctions and a broader shutdown of trade. Violently enforcing sanctions defeats the purpose and risks making enemies out of allies. For sanctions to work in a libertarian social order, the undesirable behavior motivating the sanctions would have to be sufficiently detrimental to a large number of sovereigns so that the offending sovereign would be a pariah.

This leaves tariffs as a negotiating tactic, which in truth they always are. This is the most likely use of tariffs by libertarian sovereigns as a foreign policy measure, and it is the least offensive of these four because it helps to keep rents low and sovereigns peaceful toward each other. There is always a danger of brinkmanship, but the sovereigns who threaten to push tariffs too high only harm the well-being of their own kingdoms while encouraging their residents and industries to emigrate.

Intermission

So far, we have considered the development of a libertarian social order, the justification for tariffs from private property rights, the various types of tariffs, the reasons for imposing tariffs, and the wisdom of each of these motivations. In Part II, we will consider the possibility of negative tariffs, contemplate the broken window fallacy, and treat the theories of comparative advantage and mercantilism at length.

References

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