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Economic Protectionism Ain't All Bad

 
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BLOGS BY WALTER WENTZ

Walter Wentz and Charlie

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Economic Protectionism Ain't All Bad

Uttering that view in an economics class would be the rough equivalent of urinating on the cross. Open any macroeconomics text and you will see that the root of all evil is protectionism. Protectionism violates the law of natural advantage that says goods and services should be provided by whomever can deliver them most cheaply.  This makes the global economic system efficient and all economists worship the God of Efficiency.

Let the truth be known: Every country practises protectionism to some degree, but none will admit it. For example, I have a good friend here in the Midlands of England who has a manufacturing plant, but who cannot get into the French market because his competitors there are subsidised by the French government. The British authorities are too timid to do anything about it so he does without sales and potential employees do without jobs at his factory.  Tough.

In America the federal government is putting together an economic stimulus package which includes protection for domestic industry such as the steel companies. This will raise the cost of a new car, but not by so much as to be noticed. What is noticed is the loss of jobs in the steel and auto industries. In the recent election campaign the mantra of Barack Obama was to protect old jobs and create new ones FOR AMERICANS. The rest of the world be damned, The Brits, Poles, Chinese etc. don't vote in U.S. elections. Obama is giving lip service to free trade, but is covering the ass of American workers with a bit of good old protectionism. Is this good for the global economy? Of course not, but it is very good for Mr. Obama's re-election.

Protectionism is lousey economics and great politics. Citizen are interested in jobs, not macro-economic theory. Keeping foreign competitors out of the U.S. market may not go down well with the professors at Harvard and Yale, but it goes down a treat in the homes of Youngstown, Ohio, and Pitsburgh, Pennsylvania. I am afraid the study of economics is a farce without a strong dose of sociology, psychology, and hard-ball politics. In fact the main reason God put economists on the earth was to make Gypsy forturne tellers look respectable, not to explain economic phenomena. Economists should seldom be taken too seriously. I know this because I am one. In fact when I was still in the real world, that is how I earned my living and a very good living it was.

Other than garner votes, what does protectionsim really do for us? Well, it distributes the slight pain of higher costs over millions and millons of people who hardly notice. Simultaneously, it delivers massive benefit to a relatively small number of people, such as the steel workers who keep their jobs. The steel workers sure as hell do notice.

Protectionism has one other great virtue: It helps the national defence. Sometimes it is essential to the national defence. For example, America can hardly field a large military force if it does not have the steel to build the guns, ships, and planes. In time of war, real all out war, it cannot depend of foreign sources for its supply even though it might save a few dollars if it could do so. By protecting domestic steel makers it has the suppliers in place ready to go once the fight starts.

I have said my bit. Now it is time for you to decide who is right.

Professor Walter B. Wentz - Living in the beautiful Cotswolds

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Protectionism Ain't All Bad