Thursday, February 22, 2007

Peace, Prosperity and Pants

Free-market economists hear a lot of reasons for why protectionism is a good idea. One of the stranger ones I've come across lately is national security. We need a lot of factories in case we get in a war. That way we can start making war machines right away. It's all about mobilization.

But if it is truly worth making society less wealthy to gain a tactical advantage, why not take it to the next level? Why not start producing an army of tanks now? We could have even more mobilization. We could travel a less and pay Boeing to start churning out stealth bombers instead of planes. American Eagle can sew legions of uniforms. I bet Starbucks could come up with some delicious instant coffee. Even if we don't end up using this stuff before it rusts, it will at least act as a detterent. That's actually a lot better because now people aren't dying in a war. Isn't that worth a new pair of pants?

What's nice about trade is it lets us have both the detterent and the pants, even if we don't have the tanks. Buying Japanese cars makes their auto-industry happy. Giving investors a profitable place to invest their money makes them happy too. What their people will do to them, not us, helps the government from being a war monger. But the effect is the same: peace, prosperity and pants.


B Tween said...

What does a country do in the case of say China, which has few formal protections in place (laws, etc), but behaves in a seriously protectionist manner (pegging their currency to the greenback and a cultural prohibition against being a big market for us)?
Aren't we stupid if we forego the weapons protectionism provides?
Yes, it means prices at WalMart will be higher, but at least we're on a more level playing field.
Is protectionism always bad?

David said...

China is our trading partner. How does making it more expensive to trade help us? It would be as if I smashed apart my neighbor's new snowblower and then proclaimed we were on a "level playing field" because now we both don't have a one.

Trade is not a battle because trade helps both people. Some sectors lose, but some win and people in general are made better off because things are cheaper.

The only time I could possibly defend protectionism as a threat to deter protectionism in other countries. But the virtual guarentee of abuse of such a loophole drives me to prefer trade barriers be outlawed.