What is the National Interest?

Posted by Deepish Thinker on June 08, 2007
Economics, US Politics

Recently the political climate in the United States has tilted towards protectionism. Politicians on both sides of the aisle (and more than a few economists) have been loudly proclaiming that the national interest of the United States would be best served by restricting trade. Or at least, in true mercantilist fashion, by restricting imports.

This raises the interesting question of what exactly constitutes the national interest. If the national interest would be best served by maximizing the wealth of the United States then the best policy would be the elimination of trade barriers (a point about which there has no doubt whatsoever since the ‘logic’ of mercantilism was blown out of the water 200 years ago).

But what if wealth maximization is not the primary determinant of the national interest. There are at least three feasible alternative explanations of what our political leaders mean when they refer to the national interest.

(1) The Cynical View:

Our political leaders may simply equate the national interest with the narrow sectional interests of politically important special interest groups. From a politician’s perspective this is entirely logical.

For example, in 2002 it was clearly in the best interests of the nation that President Bush be re-elected (at least in the mind of President Bush), which is why the supposedly free trade supporting President suddenly found it necessary to impose economically asinine tariffs on imported steel (At the time steel producing Ohio, Pennsylvania and West Virginia were expected to be key swing states in the 2004 election).

(2) The Greater Wisdom View:

Wealth is in many ways a rather crude measure of wellbeing. In attempting to maximize the overall wellbeing of the nation, our political leaders may be taking into consideration factors not included in financial calculations. For example, it is plausible to argue that the nation would be better off with fewer goods and a cleaner environment, which is why it might make sense to attach environmental conditions to trade deals.

It may well be that this is how politicians actually think about trade. However, a cynic might point out that there seems to be a surprisingly high correlation between the trade policies that politicians believe will maximize national wellbeing and those that happen to be politically expedient.

(3) The Relative Power View:

It could be that what really matters is relative wealth. Our political leaders may be less interested in the absolute wealth of the United States, than they are in its wealth relative to potential strategic competitors.

While free trade would certainly enhance the wealth of the United States, it would likely benefit other trading nations even more, reducing the economic differential between the United States and the rest of the world. Since military power is highly dependant on economic strength it might be considered better for the United States if its trading partners, in particular China, remained relatively poor, even if this meant failing to maximize the economic potential of the United States.

From a relative power perspective the United States has every incentive to discourage free trade. If you are in the lead there is little incentive to do anything that might help the other guys catch up. Of course it is unlikely that this view would ever be publicly expressed since suggesting that the United States should restrict trade so as to maintain its relative military and economic advantages might be viewed as more than a little mean spirited.