Tag: Protectionism

What Is This Thing Called ‘Protectionism’?

Donny and his magic Sharpie are rolling out tariff after tariff all in the name of protecting America’s jobs and manufacturing….but we can debate their effectiveness but first how many actually know the history of protectionism?

I can help…..I am a bit of a history buff and want my readers to understand protectionism and the history behind it…..

While Britain has for the most part had a strong commitment to free trade, it’s a very different story in the US, which has a long history of protectionism. This means that President Donald Trump’s tariff wars are playing out very differently politically on his side of the Atlantic. And there is no certainty that domestic opposition will be strong enough to curb his enthusiasm for using tariffs as a weapon.

Britain’s political economy is still shaped by the battle over free trade that took place nearly 200 years ago. The bitter debate over the Corn Laws, which put high tariffs on imported food to protect UK landowners, led to a political triumph for the new Liberal party. It also led to wide support among working people and manufacturers for a policy of free trade.

Britain’s domination of the world economy in the 19th century owed much to the triumph of free trade. And the British public still largely backs free trade today.

In contrast, many American politicians in the 19th century believed that US industry needed protection from its more efficient rivals. It was Alexander Hamilton, one of the authors of the US constitution and America’s first treasury secretary, who introduced tariffs in 1789. Hamilton cited the need to protect America’s “infant industries” from foreign competition.

By the end of the 19th century, US manufacturers had surpassed their British rivals. Protectionism, however, remained a cornerstone of American international economic policy. It was the expanding US domestic market and not exports to foreign countries that was driving the growth of America’s giant corporations – which were closely allied with the ruling Republican party.

Between 1861 and 1933, US tariffs on foreign imports averaged 50% – among the highest in the world. Tariffs also contributed nearly half of all government revenues. Federal income taxes were only introduced, after much opposition, in 1913.

https://theconversation.com/protectionism-has-a-long-history-in-the-us-so-its-return-should-not-be-all-that-surprising-252073

To help further….is protectionism good or bad?

Key Takeaways: Protectionism

  • Protectionism is a government-imposed trade policy by which countries attempt to protect their industries and workers from foreign competition.
  • Protectionism is commonly implemented by the imposition of tariffs, quotas on import and exports, product standard, and government subsidies.
  • While it may be of temporary benefit in developing countries, total protectionism typically harms the country’s economy, industries, workers, and consumers.

Protectionism is a type of trade policy by which governments attempt to prevent or limit competition from other countries. While it may provide some short-term benefit, particularly in poor or developing nations, unlimited protectionism eventually harms the country’s ability to compete in international trade. This article examines the tools of protectionism, how they are applied in the real world, and the advantages and disadvantages of limiting free trade.

https://www.thoughtco.com/protectionism-definition-and-examples-4571027

In reality (you knows that thing that the Trumpites do not want you to understand.) is really bad historically….

Protectionism is currently in vogue, gaining support from both the left and the right. This isn’t the first time. As protectionism’s popularity ebbs and flows, it remains a constant presence. Each resurgence is driven by variations of the same argument, particularly the infant industry argument.

The argument is straightforward: protectionism, through tariffs or subsidies, helps young industries grow by shielding them from foreign competition until they can compete on their own, ultimately leading to more economic growth than would have occurred otherwise. As right-wing public intellectual Oren Cass recently summarized, “the way America went from colonial backwater to this globe-spanning industrial colossus was not free markets and free trade. It was aggressive protection of our domestic market.”

The problem is that, with each resurgence, the same replies can be made: the increase in domestic production of protected industries is not worth the lost welfare of consumers. In fact, there is not a bit of the statement made by Cass that squares with American economic history.

Protectionism’s Bad Economic History

The great American economist, Henry George, has some interesting take on protectionism…

Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.

More on George’s thoughts….

Henry George wrote one of the best critiques of protectionist trade policies in 1886 at a time when President Grover Cleveland was pushing for tariff reductions from a very high average rate in the US of 47% at a time when free trade Britain had tariff rates of less than 1% and France of 1.5%. Central to his argument was that protectionism was a form of coercion or force which prevented two parties divided by a line drawn on a map from benefitting from mutually beneficial exchanges. Those who did benefit from tariffs and other forms of protection were the powerful lobby groups who controlled the political parties (in this case the Republican Party) and were successful in lobbying Congress for favourable legislation. George also pointed out the bellicose nature of protection, noting that it was a domestic form of economic warfare which was usually reserved for times of war to blockade one’s enemy’s ports in order to harm them economically. The domestic protectionists were in effect “blockading” their own citizens from the benefits of external trade. One could turn the argument on its head by arguing that trade “sanctions” (a euphemism for a blockade) designed to hurt an enemy also harmed one’s own domestic consumers who wished to trade with foreigners. Since both parties to a trade benefit from the transaction, by preventing trade from taking place across borders there is an equal or greater harm imposed upon one’s own domestic consumers for every harm inflicted upon the enemy. A final observation is that George objects to the use of martial language in describing trade, such as an “invasion”of foreign goods, or language used to describe natural disasters, such as “floods”, to an activity which is in essence peaceful, voluntary, and productive.

Donny and his magic Sharpie are doing more damage than good….and people are too damn ignorant to see the damage being done.

I hope this post was a bit of help for those that are struggling to understand all this protectionism stuff.

Class Dismissed!

I Read, I Write, You Know

“lego ergo scribo”

Recession Breeds Protectionism

Do you recall during the debate on Obama’s stim plan there was a section called “buy American” ?  If so then you will recall all the fuss over it, some saying that it would stifle “free trade”, while others called it protectionism.  After a bit of debate it was removed from the plan as to keep the peace at home and abroad.

World Bank President Robert Zoellick expressed concern Thursday that Group of 20 countries continue to restrict trade flows despite vowing to resist protectionist policies.

Among those restricting trade were 17 members of the Group of 20 (G20) nations, a bloc of advanced and major developing economies that vowed not to cut trade during an emergency summit in November. They include the US, China, India and the European Union.

The study said the national measures to date were limited and would have a small effect on the global economy but warned that protectionism was a slippery-slope that was tried once before during the Great Depression of the 1930s.

Many countries have sought to protect local industries from demise over the last several months through a variety of new tariffs and government subsidies. The global economy is expected to contract this year for the first time since World War II.

The International Monetary Fund’s updated World Economic Outlook, released Wednesday, predicts world economic growth of negative 1.3 percent this year, marking “by far the deepest global recession since the Great Depression”. Not since the 1930s has the global economy undergone a collective contraction.

Member states are deeply divided over how to respond to the crisis, with each seeking to promote its own national business interests at the expense of its rivals. Few if any concrete decisions are expected to emerge. The focus is reportedly on working out how to implement the limited measures agreed to at the G20 leaders’ summit held in Britain earlier this month, including who is to pay for the proposed $500 billion extra emergency loan money for the IMF.

The recession looks like it will last awhile longer……the world recession will hurt everyone.  The deeper it gets the harder that countries may push protectionism.

Bush Defends Free Markets

Please!  Stop using that term!  It is a LIE!

Setting a tone for an economic summit on his turf, President George W. Bush plans to tell world leaders that reforming financial markets alone won’t help if they abandon the free market and restrict trade.

Bush, in his comments to be aired in his weekly radio address to the nation, made public a day ahead of the G-20 Summit, also highlighted the need for broader reforms to adapt the international financial systems to the 21st century.

“And the answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market principles that have delivered prosperity and hope to people around the world,” he said.

But the broader focus is on the deteriorating economy, which has millions of people grappling to keep their jobs, their homes and their hopes. The most severe economic downturn in decades threatens to end Bush’s tenure on the most sour of notes before President-elect Barack Obama takes over.

To rally a more coordinated world response, Bush is convening representatives of some of the world’s biggest industrial democracies, emerging nations and international bodies in Washington. He will host the leaders at a White House dinner Friday and review causes and solutions for the financial mess Saturday.

In the short term, the world leaders are expected to focus on ways to stimulate economic consumption, free up credit and ensure that international financial institutions have the money to respond. Goals include making financial markets more open and less risky for millions of investors.

Some critics have blamed lax oversight and failures by regulators in the U.S. and elsewhere to detect problems before the current meltdown. It began with the collapse of the U.S. housing market, froze up credit lines and the broader financial sector and rippled overseas.

In the United States alone, the nation’s jobless ranks zoomed past 10 million last month, the most in a quarter-century, as 240,000 more people lost jobs. In the latest dire sign, American automakers say they are struggling to survive.

Just how many times do I need to say this….if the markets need reforming by governments then they are NO LONGER free markets!  Calling them such does not make them so.  Sorry people the free markets died many years ago.  Please do not take my word for it–GO!  Read Adam Smith.  The idea of free markets today is just a slogan that has nothing to do with reality.