Perils of Protectionism

by Don Boudreaux on June 10, 2009

in Trade

Protectionism — not free trade — is created.

Be Sociable, Share!

Comments

comments

52 comments    Share Share    Print    Email

{ 26 comments }

Morgan June 10, 2009 at 11:36 am

"…he should also point out that any country would gain from free trade even if it tears down its customs walls unilaterally."

This isn't as intuitively obvious as economists think it is. "Pointing it out" won't be sufficient. It needs to be explained in a way that makes it clear to people who are more used to believing the evidence of their eyes than thinking in terms of "the seen and the unseen".

TrUmPiT June 10, 2009 at 11:51 am

Mr. Golisano, a billionaire business executive, had spent heavily to help Mr. Smith and other Democrats win control of the Senate in the November election, and was angry to hear they were now planning to raise taxes on the wealthy. He expected an audience befitting a major financial patron. -New York Times

Free markets? Free trade? I have evidence to the contrary.

http://www.nytimes.com/2009/06/10/nyregion/10albany.html?hp

dg lesvic June 10, 2009 at 12:37 pm

You just can't win here.

State a simple truth, and you're taken to task for it.

Can't we just put these people in a corner somewhere, and anyone who's interested in what BlowHard or Crabgrass have to say can seek them out.

TrUmPiT June 10, 2009 at 12:57 pm

"Free trade is simply the absence of trade restrictions – the absence of officious interference with those engaged in consensual capitalist acts."

I found the wording here to be offensive to my refined sensibilities. Usually you hear about governmental/church interference with those engaged in consensual sexual acts. The doctor co-opted the phase to make it seem like that billionaire's from Rochester privacy is being invaded upon. The truth is the rich capitalists are invading upon our freedoms by the nanosecond. We are collectively made much worse off by their interference with the operation of government and by their dominance of the economic playing fields. That point must be made as a counterpoise to the good doctor.

geoih June 10, 2009 at 1:13 pm

Quote from Trumpet: "The truth is the rich capitalists are invading upon our freedoms by the nanosecond. We are collectively made much worse off by their interference with the operation of government and by their dominance of the economic playing fields."

Explain how any capitalist (or socialist) has any authority or power over you, or anybody else, without the guns of government? Government is power and it does the bidding of those paying the most.

The day you recognise this fact, you will stop saying such silly things about the "interference with the operation of government". The operation of government is interference. You simply don't like the idea that it isn't interfering enough to your advantage.

muirgeo June 10, 2009 at 1:17 pm

"but he should also point out that any country would gain from free trade even if it tears down its customs walls unilaterally."Don

I just don't see this claim born out in the real world with regards to our trade relations with China. There are many informed persons pointing to the unilaterally of our relations as a prominent cause of ours and the worlds current economic peril.

Excitement over the cheap stuff at Walmart just doesn't seem to take in the bigger picture.

Veritas June 10, 2009 at 1:18 pm

If I refuse to buy Geico insurance, Warren Buffett is powerless against me.

If I refuse Microsoft products, Bill Gates cannot touch me.

John June 10, 2009 at 1:32 pm

If I refuse to buy Geico insurance, Warren Buffett is powerless against me.

True, but your state government might frown upon your driving without insurance.

John June 10, 2009 at 1:47 pm

The problem I have with Free Trade is that the Constitution (pre-14th that is) pretty much limited the federal government to using tariffs for revenue.
I would assume that that's because the government ensures free passage of goods, and wants to get paid for it.
That seems fair to me.

Protectionism though, that's a different ballgame.

Morgan June 10, 2009 at 2:45 pm

dg, am I BlowHard or Crabgrass?

My only point (valid, I think) is that the primary reason people aren't convinced of economic truths is that they just don't "get it".

If the benefits of path A can be seen by anyone, while the benefits of path B (even if larger) can only be seen by those with an IQ above 120 who have also studied economics, then, well, you're smart enough to see where I'm going with this.

Daniel Kuehn June 10, 2009 at 2:51 pm

Morgan -
Re: "dg, am I BlowHard or Crabgrass?"

Just try to ignore him. Insult substitutes for discussion on here sometimes.

Randy June 10, 2009 at 3:03 pm

Muirgeo,

"I just don't see this claim born out in the real world with regards to our trade relations with China. There are many informed persons pointing to the unilaterally of our relations as a prominent cause of ours and the worlds current economic peril."

Its born out in the real world for me. Trade with China (and other extra-national producers) has consistantly resulted in lower costs to me. On the other hand, trade with politically protected local producers has consistantly resulted in higher costs to me. I am thinking that perhaps the "informed persons" of whom you speak are the very same politically connected local producers who certainly have an interest in eliminating their extra-national competitors.

Veritas June 10, 2009 at 3:06 pm

Muirgeo,

Regarding China:

A popular theory in international relations is that economic interdependence and trade reduces war.

Nations that trade together are less likely to blow each other up since trade is mutually beneficial to both sides.

finance articles June 10, 2009 at 3:32 pm

Telling us the fines means nothing if you don't tell us how much they were convicted of paying in bribes. This could be peanuts, not prohibitive and in fact could encourage them to simply factor getting caught into their huge money pots. they have more money than governments at their disposal. they are "they" – the enemy of the lower and middle classes in this ongoing class war that little people have been losing forever.

good articles for slow news days: Econ & Finance Articles
.

MWG June 10, 2009 at 3:47 pm

"Excitement over the cheap stuff at Walmart just doesn't seem to take in the bigger picture."
-Muirdog

By bigger picture, do you mean the rising standard of living in China, or the rising standard of living here in the US?

K Ackermann June 10, 2009 at 5:03 pm

MWG, excluding management, wages for workers peaked in 1972, and have been declining since (in today's dollars).

Productivity has increased 90% in that time period.

Private debt is running at 340% of GDP.

A good chunk of our standard of living was fueled by easy credit, and that standard is at risk.

Obama seems perfectly willing to get us back into a consumer-led economy, and to me, nothing could be more boring, demoralizing, and stagnant than that.

I'm going to make my own economy and export.

dg lesvic June 10, 2009 at 5:08 pm

Morgan,

I don't know anything about you, and don't know what you're talking about.

Gabriel is Blowhard, and Crabgrass Kuehn, you know what you are, and what I am.

The weedwhacker.

MWG June 10, 2009 at 5:29 pm

"MWG, excluding management, wages for workers peaked in 1972, and have been declining since (in today's dollars)."
-KA

Wages mean absolutely nothing without looking at what those wages can buy. (Which is why I made no mention of wages in my first comment.)

http://www.reason.com/news/show/118611.html
http://reason.tv/video/show/61.html

"A good chunk of our standard of living was fueled by easy credit, and that standard is at risk."
-KA

That statement sound very scientific, especially with terms like "big chunk" and "easy credit". "Easy credit" (Depending on how you define it) has been with us for maybe the last 10-15 yrs. So how do you explain the rising standards of living here in the US before "easy credit"?

muirgeo June 10, 2009 at 7:27 pm

By bigger picture, do you mean the rising standard of living in China, or the rising standard of living here in the US?

Posted by: MWG

Our standard of living is relatively stagnant since opening trade relations with China. Unemployment is reaching 10%, wages are stagnant and here in LA where I'm visiting some area homes have the same value they did 20 years ago. And we have all accumulated huge personal and governmental debt in the process and the dollar has been devalues.

THAT bigger picture…

muirgeo June 10, 2009 at 7:33 pm

So how do you explain the rising standards of living here in the US before "easy credit"?

Posted by: MWG

Are you kidding? That's been my whole point. When we had good regulation, when we had a consumer driven economy and we actually made things we did great. The economy had real growth back then. Now the rules have changed such that speculation and shortcutting true production are much faster roads to riches. It's destroyed our economy. Your philosophy put to the real world has been nothing less then a disaster.

S Andrews June 10, 2009 at 7:55 pm

LA where I'm visiting some area homes have the same value they did 20 years ago

Between 1801 and 1900 the economy grew 5400% as measured by the faulty GDP, yet an average person could buy the same quantity of goods for $65 in 1900 that he did for $100 in 1801. Housing is a consumer good, it's price will go up only based on inflation, and as Robert Shiller has pointed out, housing prices have mostly tracked inflation for much of the 20th century until starting the late 1990s.

I am sure that when you said "value", you meant to say "price".

If price of a durable consumer good is the same after 20years, it makes it cheaper for someone coming into the market now to be able afford it.

S Andrews June 10, 2009 at 7:59 pm

Are you kidding? That's been my whole point. When we had good regulation, when we had a consumer driven economy and we actually made things we did great.

Single most important thing that happened that afforded easy credit was not deregulation. It was completely going off the gold standard. There was nothing restricting the expansion of credit. America defaulted on it's obligation to pay the rest of the world in gold. It happened in 1971, followed by massive monetary expansion and high inflation. It never really stopped. 5000 year monetary history came to a stop in 1971, prove that it was inconsequential.

Infact show me by how many pages the federal rules and regulations have been cut short over the last decade or two.

vidyohs June 10, 2009 at 9:21 pm

My own humble opinion is that Morgan led off with a very insightful and correct point.

If there is one subject of which Americans appear to be most ignorant of, after sex, it is capitalism, economics, trade, markets, and individual it all is.

Oh, and after ignorant, did I also mention confused, discomboobalated, and frightened of.

vidyohs June 10, 2009 at 9:23 pm

Oh chit,

and individual it all is.

should have been…..and how individual it all is.

MWG June 10, 2009 at 9:52 pm

"Are you kidding? That's been my whole point. When we had good regulation, when we had a consumer driven economy and we actually made things we did great. The economy had real growth back then."
-Muir

When did we have "good" regulation? The 70s? 80s? When we made thing? Are you kidding? Manufacturing has gone UP over the last 30 years.

vikingvista June 11, 2009 at 12:40 am

Good US regulations would be like those that…

…resulted in thousands of US bank failures in the 1930's while Canada had virtually none.

…kept consumer spending at Great Depression levels for nearly 15 years.

…led to double-digit inflation.

…rapidly led to an explosion in fatherless families and subsequent poverty.

…permitted GSE's to securitize high risk mortgages.

…created a social safety net modeled after after Bernie Madoff.

Previous post:

Next post: