The Essential Rothbard - Ludwig von Mises Institute

The Essential Rothbard 83
that there is something powerful and uniquely spurring to
development of an export industry per se. In short, instead of
realizing that an industry which is particularly efficient and
advanced will then become a leading export industry, he tends
to reverse the proper causation and attribute almost mystic
powers of initiating development, etc., to export industries
per se. 228
Rothbard relentlessly shows how this initial error leads to further
mistakes. North thinks that export industries are a “good
thing,” without asking how they arise: he goes on to suggest that
an export industry that spends its profits on imports is less beneficial
to development than one that spends its receipts at home. His
reasoning has a certain logic to it: if exports, as such, are good,
should they not remain undiluted by imports?
But the premise, once more, is false: exports are not an absolute
good. North has revived a mercantilist fallacy:
He claims . . . that an export industry the receipts of which
are then used largely for imports leak away, and hinder development
of the country; whereas, export industries where the
spending “stays at home,” builds up the country, because it
retains within the country the “multiplier-accelerator” effects
of such spending. This Keynesian nonsense applied even
beyond where Keynes would apply it—i.e., to all situations
and not just depressions. 229
Rothbard now applies one of his favorite critical techniques,
which we have several times seen in operation. He pushes an
author’s reasoning to an extreme, in order to show its absurdity.
Thus, North claims that if a region has only one export industry,
development will be impeded. But he offers no definition of
“region”—as ever, Rothbard demands precision. What is the
upshot?
228 Ibid.; emphasis in the original.
229 Ibid.