Understanding Protectionism

Often, protectionism is said to be basically equivalent with opposition to automation. This is a mistake.

The protectionists looked at a typical poor country, say, Honduras. What did they see? Little internal production, mass reliance on outside manufactured goods, a decent degree of internal primary exports, and outside foreign aid, as well as giant trade deficits all around. Then, they looked at a rich country, say, the U.S. in the 1960s. What did they see? A thriving manufacturing sector, high manufacturing output per capita, and a roughly balanced trade, with high imports of primary materials.

Then they saw what was happening to the U.S. in the 1980s: a stagnation in manufacturing output per capita, mass imports of manufacturing goods from abroad, and giant trade deficits all around. And they started saying that the U.S. was becoming a third-world country. Instead of paying its way for its imports by producing goods to sell to the world, the U.S. began to import far more than it exported, and to finance its imports with massive debt and real estate sales -something which the protectionists considered as a drain from the United States.

Contrary to many less insightful critics, protectionists did see that the U.S. got rich due to automation. The problem they saw that, during the 1980s, the automation was increasingly moving to other countries. The problem they saw with the poor countries was not lack of employment, but lack of internal production. They saw outsourcing not simply as something leading to internal job losses, but as something reducing internal output. Automation, unlike outsourcing, obviously has never been claimed to reduce internal output.

The protectionists always saw a country as losing from higher prices of its imports if the demand for these imports was inelastic. Protective tariff revenue went to the government. Revenue from higher import prices went to other countries. The goal of protective tariffs was to reduce imports so that the country imposing those protective tariffs could replace its imports with internal output.

There is much wrong with the above protectionist doctrine. But it is by no means equivalent to opposition to automation.

Author: pithom

An atheist with an interest in the history of the ancient Near East. Author of the Against Jebel al-Lawz Wordpress blog.

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