Protectionist Irrationality

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Josh Claybourn explains the fallacy behind protectionism. If he's right, this is on the order of the gambler's fallacy.


Protectionism never made much sense to me. OK, I mean it makes sense that you don't want to lose you job to someone in another country, but I mean it never made much sense to me from a economics point of view.

The only protectionist argument that I've found compelling is the following: The countries which are offering cheap labor are able to do so by treating their workers inhumanely. Morally, we should not support such inhumane practices by buying products made in such a manner. Therefore, we should not trade with countries which support these inhumane practices.

This is of course not an economic argument, but a moral one, and one that makes sense to me. But I haven't heard any of the politicians making this argument recently.

The problem with this argument is that it succumbs to the major objection against other kinds of sanctions. It's quite clear that U.N. sanctions against Iraq hurt the people of Iraq. I'm not sure how preventing free trade with countries that allow labor abuse will help the people in those countries unless it leads to the governments to change the laws (which is the goal, but sanctions rarely achieve such things -- look at Cuba).

The only response I can think of on this matter is to increase labor regulations for companies based in the United States that operate elsewhere as well, but I'm not sure if the Constitution allows that. It might be the sort of thing that would need an amendment. It might also lead companies to base themselves somewhere else and only primarily operate here, which would then force the laws to be about companies that operate in the U.S. even if based elsewhere for them to be successful. Is this feasible? I have no idea.

yeah, I have no idea either. There is just the basic fact that as a nation we have only a few ways to influence the behavior of other sovereign nations, and legislation by definition is not one of them. Letting the market take its course doesn't work so well because the market frequently rewards illegal or immoral behavior. Sanctions, as you point out, run into their own difficulties. Sigh.

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