George Today

He\’s swallowed the protectionist line….completely, entirely and sadly.

Neoliberal economists claim rich countries got that way by removing their barriers to trade. Nothing could be further from the truth. As Ha-Joon Chang shows in his book Kicking Away the Ladder, Britain discovered its enthusiasm for free trade only after it had achieved economic dominance. The industrial revolution was built on protectionism: in 1699, for example, we banned the import of Irish woollens; in 1700 we banned cotton cloth from India. To protect our infant industries, we imposed ferocious tariffs (trade taxes) on almost all manufactured goods.

By 1816 the US had imposed a 35% tax on most imported manufactures, which rose to 50% in 1832. Between 1864 and 1913 it was the most heavily protected nation on earth, and the fastest-growing. It wasn\’t until after the second world war, when it had already become top dog, that it dropped most of its tariffs.

Sigh. During that period the US was almost certainly the largest free trade economy on the planet (the only one that could have been larger was the British Empire and I seem to recall that there were an awful lot of restrictions on what the colonies could do). This does not go to show that free trade is a bad idea, nor that protectionism makes you rich.

Further, there are two components to trade barriers and costs. There are the tariffs imposed, to be sure, but there are also the transport costs. Such transport costs were falling so fast in that 1864 to 1913 period that they completely overwhelmed the effects of the tariffs. The barriers to trade were falling fast throughout the period….some might say that was part of the cause of the growth.

Protectionism, which can be easily exploited by corrupt elites, does not always deliver wealth; but development is much harder without it.

Interesting argument really….those countries which are not currently developed. Do we think that they are governed by corrupt elites who would take advantage of the possibilities for enrichment? Or by those benevolent and omniscient beings that would be required for protectionism to work even in theory? Ethiopia? Zimbabwe? Equatorial Guinea? Sudan?

There is also the one most obvious point about protectionism. By its very nature it insists that the poor must pay more for their consumption than they would in a free trade world. That\’s the very point, to make it possible for more expensive domestically manufactured goods to find a market.

Even if there were a tension between current free trade and the protectionism required for future development (something which I reject) the argument in favour of protectionism insists that those currently shit poor should pay more to the local capitalists.

This isn\’t an argument which I expect those of a progressive nature to put forward.

8 thoughts on “George Today”

  1. I’ve never understood why, if protectionism is such a fine idea, people aren’t agitating for it to be enforced on a smaller scale. Surely if a nation benefits from restricting trade, it makes sense for the state/county/region to also restrict trade.

  2. A Turkish friend of mine told this tale of buying a car.

    The car is ordered:
    Colour White,
    Model Some crap Fiat years out of date. Delivery date, 6 months later,
    Price about twice what a decent car cost anywhere else.

    Goes to take delivery, car is black. Asks for a white one, is told “of course sir, if you wait another 6 months.

    That is protectionism.

    Today the company that sold that car exports hundreds of thousands of cars (in all colours) to satisfied customers around the world. Production volumes are orders of magnitude greater.

    That’s the free market.

  3. Agreed. Monbiot’s historical argument seems to be: “The U.S. once used trade barriers, and look how rich it is today!” Yes, just look how rich the Smoot-Hawley Act made us. Boy were they rolling in it back in the ’30s! Lucky bastards.

  4. When Britain was getting rich it was a Christian country, so that must be the cause, so let’s impose Christianity on everyone. Same logic, isn’t it?

  5. When Britain was getting rich it was a Christian country, so that must be the cause, so let’s impose Christianity on everyone. Same logic, isn’t it?

    No.

  6. Of course Stuart A is right: that’s the not the logic at all.

    The logic is “we must impose Christianity on the benighted poor”.

  7. In 1805, the British economy was 4% of the world.
    40 years later we abolished the Corn Laws, a major step to Free Trade.
    30 years after that, Britain was 9% of the world economy.
    Doesn’t look like Free Trade is a handicap, then.
    As of 2008, 4% of the world again? Approx? But vastly richer than in 1875 too.
    (The above numbers are by value, of course, not PPP)

  8. All of the above discussion is illustrative of one important centrality: the paramount importance of THEORY in determination of economic consequences.

    It is normal (and extremely common) that theory-dependent explanation is derided by very many–in favor of explanations offering historical exemplars or statistical “evidence.”
    It’s commonly observed that “that’s OK in theory–but not in actual practice.” To this can only be observed that, if theory be sound, no “experience” can stand in contradiction (the likely culprit being actual error in observing experience or in its interpretation in a particular case). No offering of percentages or archival data can inform us otherwise; the only useful argument–whether for argument’s sake alone or for the formulation of policy–is a logical refutation of the theory itself and the formulation of a correct–or more correct–one.

    From the original–not so long ago–discovery of regularity in economic phenomena, there have been, by and large, two very broad distinctions between “species” of those called “economists.”

    On the one hand, there have been the (very few, relatively) who have sought to learn and to describe, as accurately as possible, what is “going on” in the real world and to formularize
    such in hypotheses, theories, and laws. On the other hand are vast numbers engaged primarily in constructing systems of apologetics for a bewildering array of attempts (chiefly, almost entirely by governments) to countermand, for one or another reason) to thwart and countermand the normal consequences of mens’ economic behavior.

    Most governmental interference in economics is BAD: that is to say, that they produce outcomes so considered by their very promoters, requiring either abandonment of the original interference or its enlargement by more forceful punitive measures, expansion to a wider sphere of activity, etc.

    Free trade simply forces all to act most economically (if they wish to “do their best”) in regard to the activities they’ll pursue: to specialize in the activities in which they (and their environs) provide the greatest comparative advantage and consume the least resources for the production of desired output.
    That process results in the greatest gain for all concerned consistent with peaceful cooperation. Any interference is a step in the direction away from peacefulness.

    Economists didn’t make these rules–they’ve just tried to explain them so that others may actually be able (beforehand) to appreciate the certain consequences of attempts at interference. But–what the hell, “in the long run, we’re all dead” anyway.

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