In booming economic times, the detrimental effects of policies like minimum wage, immigration restrictions,
protectionism scarcityism, or socialism, can be hard to see. The good growth outweighs the bad from the policies, obscuring their effects. However, once times get tough, then the negative aspects of these policies stand in stark contrast. By way of metaphor, imagine going downhill in a car. Lightly applying the brakes won’t do much (depending on how steep the hill is, you may actually gain speed!). However, if you are going uphill, even a light tap will have a large effect on the car.
Unfortunately, the obscurity generated by the good times can cause less careful thinkers to determine that there are no negative effects of the policies they want. We see this quite often with protectionism.
We are now seeing the negative effects of protectionism and immigration restrictions here in the US following three major hurricanes that have hit in the past month: Harvey in Houston, Irma in Florida, and Maria in Puerto Rico. In normal times, the detrimental effects of artificially high prices and artificially scarce resources tend not to be noticed. Like the farmer who grows 100 acres of corn, and 1 acre is destroyed by parasites, it’s not too noticeable. But if a disaster hits, and how only 10 acres can grow with 1 acre being destroyed, it’s very problematic. When times are tough, and resources scarce, the market needs to work. These artificial restrictions only make the scarcity worse.
Looking at disasters like Irma, Harvey, Maria, etc give us an excellent chance to test the claims of the scarcityists, that protectionism, minimum wage, and immigration restrictions grow the economy, not shrink it. Given the tough time Texas, Florida, and Puerto Rico have is recovering basic supplies, it’s hard to believe the claims of the scarcityists. Abundance is wealth, not scarcity.