Books, Uncategorized

The Evils of Protectionism

Digging One's Own Grave

“We are suffering from the intolerable competition of a foreign rival, placed, it would seem, in a condition so far superior to ours for the production of light that he absolutely inundates our national market with it at a price fabulously reduced. The moment he shows himself our trade leaves us—all consumers apply to him; and a branch of native industry, having countless ramifications, is all at once rendered completely stagnant. This rival, who is no other than the sun, wages war mercilessly against us, and we suspect that he has been raised up by perfidious Albion (good policy nowadays); inasmuch as he displays toward that haughty island a circumspection with which he dispenses in our case. What we pray for is that it may please you to pass a law ordering the shutting up of all windows, skylights, dormer-windows, outside and inside shutters, curtains, blinds, bull’s-eyes; in a word, of all openings, holes, chinks, clefts, and fissures, by or through which the light of the sun has been in use to enter houses, to the prejudice of the meritorious manufactures with which we flatter ourselves we have accommodated our country.”-Frederic Bastiat, Economic Sophisms

In the above quote, the great Economist Frederic Bastiat compared the clamor for protectionism to a petition of candle makers to shut out the competition of their most efficient competitor-the Sun. The arguments of present day protectionists are no less ridiculous. It is a widespread notion that free trade means off-shoring American jobs to poor countries like India and China. Even if it is true, it is not at all clear why this should be reprehensible. Americans are not the master race to which the rest of the world should sacrifice its interests.

At the same time, many in countries like India and China consider such outsourcing as nothing less that slavery. However, multination companies often pay a wage which is much higher than what local companies would have paid. In the words of Tom G Palmer, “People want to work at those factories. They line up. They compete. Are they competing to get exploited? They’re competing for higher-wage jobs.”  Unfortunately, the inbuilt prejudice against foreigners reinforces such xenophobic notions on both sides.

Contrary to what people believe, free trade means property for all in the long run, irrespective of the temporary sacrifices it demands. The fundamental fact which is being forgotten here is that both parties which engage in trade benefits from it. As it is repeatedly pointed out by competent economists, the only difference in international trade is that it occurs across the border. The primary benefit of international trade is that it paves way for a structure in which countries focus on what they are good at delivering. As a result of international trade, we end up with a much richer, prosperous world.

One of the most painful things protectionism imposes is war. Frederic Bastiat once wrote: “When goods don’t cross borders, soldiers will.” Things haven’t changed a bit one and a half centuries after the times of Bastiat. Trading partners rarely wage wars. If there is any way to put an end to war between countries, it is to renounce the philosophy of protectionism and statism. Shedding crocodile tears on the after effects of war while turning a blind eye towards the fountainhead from which war springs is plain hypocrisy.

One Comment

Leave a Comment

Your email address will not be published. Required fields are marked *