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Protectionism |
Contents:
Henry George wrote that “protectionism teaches us to do to ourselves in time of peace, what enemies try to do to us in time of war.” In war enemies attempt to disrupt each other’s ability to import products from abroad in order to hasten victory. Protectionism consists of a nation’s efforts to limit or stop its own (cheap) imports out of a mistaken assumption that they weaken the domestic economy. The term “protectionism” derives from the belief that the economy is protected by trade restrictions. In fact, only certain special interests are protected and then only in the short term. For example, tariffs or quotas on steel imports do not protect workers whose jobs require inexpensive steel as an input, such as autoworkers. Even steelworkers are eventually harmed because their employers, sheltered from competition, are relieved of the pressure that leads to better performance, and the money everyone must spend on more expensive steel products is not available for investment in new industries and jobs. Moreover, all consumers, including steelworkers, are harmed by higher prices.
Protectionism plays a role in the crisis-and-expansion process that characterizes government intervention in the economy. Since trade restrictions harm most people within a country, the government will find reasons to restrict even more products. When cheap foreign steel is restricted, domestic automakers are at a disadvantage with foreign automakers and will tend to lobby for restrictions on auto imports. When vehicles become more expensive, some other interest group will demand relief from the government. These lobbies develop a vested interest that is detached from the original cause of their hardship. If restrictions on steel imports were removed, automakers would most likely not volunteer to give up the restrictions on auto imports.
The result of protectionism is what Robert Higgs calls the “ratchet effect.” Government grows, and even when it shrinks, it rarely goes back completely to its earlier dimensions.
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