Economic Interventionism

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Erik Kain

Erik writes about video games at Forbes and politics at Mother Jones. He's the contributor of The League though he hasn't written much here lately. He can be found occasionally composing 140 character cultural analysis on Twitter.

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16 Responses

  1. I of course disagree with you on issues of trade protectionism thanks to the small part of my background that has a basis in economics.
    One thing that is important to note here is that often economic sanctions have relatively little practical effect because they are not implemented by all or even most of the world. But they nonetheless permit the objects of those sanctions to scapegoat the sanctioning country for a whole host of problems, and thereby strengthen their position in the world. Even where the sanctions are implemented globally (or near-globally), it will create a pretty substantial black market that results in the wealthiest members of the sanctioned country (usually the dictator and his cronies themselves) left perfectly able to get what they need to still live comfortably while, again, scapegoating the rest of the world for their nation’s problems.Report

  2. Avatar Will says:

    Trade restrictions have the exact same effect on foreign populations regardless of your preferred political justification. So what’s the substantive difference between vindictiveness and economic nationalism?Report

  3. Avatar E.D. Kain says:

    Actually, trade restrictions exist in abundance all across the globe. The notion that there is actually a restriction-free global economy is simply not true. And there is a major difference between erecting trade restrictions in order to prop up your own country’s economy (a la Japan post-WWII as they protected their manufacturing and steel industries and eventually built Giant-killing car companies, electronics companies, etc.) and imposing punitive trade embargo’s that arbitrarily destroy an economy. There is a moral and practical difference.

    And listen, I used to be right there with everyone else preaching the theoretically lovely idea of free trade, but in practice, as with so many things, it just doesn’t pan out…Report

  4. I don’t think anyone is saying that there aren’t a bunch of protectionist trade restrictions around the globe, only that we don’t think those restrictions to be a good thing. It’s certainly true that in certain instances, protectionism can work to bolster a country’s industry, which as I understand it is one of the conclusions that comes out of Krugman’s new trade theories. But in doing so, just about any economist (of any political stripe) will tell you that the net effect of such policies is negative on the global economy as a whole. Indeed, protectionism of Western agriculture is often viewed a major contributing factor in Africa’s failures to achieve economic development.Report

  5. Avatar Will says:

    I don’t think anyone is arguing the status quo is entirely free of trade restrictions. My point is simply that domestic protectionism – whether the political justification is punitive or welfare-oriented – has the exact same impact on foreign populations. Tariffs, in other words, are apolitical – they deny foreign producers access to our market regardless of their broader political context. If you oppose punitive tariffs because they hurt foreign populations, shouldn’t you oppose protective tariffs for the exact same reason?Report

  6. Avatar E.D. Kain says:

    Will–

    If you oppose punitive tariffs because they hurt foreign populations, shouldn’t you oppose protective tariffs for the exact same reason?

    No, because the one bolsters American interest, and the other only causes harm. In other words, its one thing if it’s a choice between two beneficiaries–us or them–and quite another if there is no choice, merely punishment.

    Also, I am well aware that the going theory for some time now has been that the net effect of free trade is that all benefit, and certainly in this “flattening” world of ours the effects of free trade and globalism on the rising wealth of nations is immense. However, it seems to me that America is suffering a huge loss, especially in our industrial sector, that will be hard to ever recover, and that is also an essential piece of a healthy economy. And the illusion that our wealth has increased at the same time is being sorely tested by the revelations surrounding this current collapse, the debt load of this nation, companies, and individuals, etc. In other words, I believe we are existing now in an artificial economy of grossly exaggerated wealth, that is in fact little more than a house of cards with a subprime mortgage.

    I’m not against trade, and I’d like it to be as free as possible and healthy, but there is something amiss when a nation starts to exhibit signs of major trade deficits and no apparent way to stop it short of actual (dirty word!) protectionism.

    Are there pitfalls in this sort of process as well? Sure. But the free market in theory and in practice are two different beasts. In practice it’s too painful for most to bear, and so we see these massive bailouts happen all at once instead of having reasonable, sensible restrictions and protections to avoid this sort of disaster.

    This gets into my insistence on governance as the process of seeking out good order above all things, and avoiding chaos as much as possible. Capitalism is a fantastic system to produce goods and generate wealth, but it can be taken to degrees in which it becomes inherently too chaotic for people to withstand.

    In any case, this is starting to feel too long for a comment. More later…Report

  7. Avatar Take the KASH says:

    The main thrust of E.D.’s post seems to hing on the rightness of collective punishment as a foreign policy tool. I’m with E.D. on this one.

    Will, you are really changing the subject, seems to me. Protectionism, good or bad is clearly a question, but not the question at hand in the initial post. It sort of reminds me of the recent action Israel took in Gaza. If I were a Jew in Israel I would probably applaud the action. On the other hand, if I was a resident of Gaza I would probably see Israel as meeting out collective punishment.

    A measured and focused economic response seems best.Report

  8. Avatar Cascadian says:

    I’m in favor of protectionism. I think that a healthy economy is one that does more than maximize it’s best product. Engineering is benefited by having actual factories nearby. It’s beneficial to the society as a whole to have white collar, blue collar and everything in between.

    The fact that agricultural protectionism is having an adverse relationship to Africa means nothing to me with all the food and safety issues coming out of China. I would hate to have a necessary component of my local economy dependent on the regulation (or incompetence) of another country.Report

  9. Avatar Will says:

    It’s interesting you use Gaza as an example, because the central point of many of Israel’s critics is that intent is a lot less important than actual consequences – ie the real, tangible impact of Israeli missiles ought to take precedence over the supposed nobility of Israeli policy-makers. In much the same way, I think the real economic consequences of protectionism are more important than the laudable motivations of the protectionists.

    If the United States was seriously threatened by foreign competition, a few punitive tariffs might be in order, but I don’t think our current circumstances – however dire – merit such a drastic response.

    As to the substance of E.D.’s earlier comments, I think your argument suffers from selection bias. Cherry-picking a few successful examples of industrial policy doesn’t guarantee that future policy-makers will continue to get lucky. Moreover, Japan’s experience with industrial policy actually incurred significant costs a bit further down the road, as economic growth slowed to a crawl in the 1990s (the “lost decade”) precisely because the relationship between the country’s political and business classes was so incestuous.Report

  10. Avatar Take the KASH says:

    Will, you write, “It’s interesting you use Gaza as an example, because the central point of many of Israel’s critics is that intent is a lot less important than actual consequences ….”

    Well that seems obvious to the point of being laughable. Dugh? I may have a lot of bad intentions, like killing the dog that poops on my lawn, but until I kill the dog the cops have no business knocking on my door. BTW, I would never kill a dog for that or any reason.Report

  11. Avatar E.D. Kain says:

    I’m going to start a series on protectionism very soon, so be ready for some econo-brawls in the near future….Report

  12. Avatar Chris Dierkes says:

    E.D.

    Excellent. I will gladly join that donnybrook whence it commences. In the meantime I will be getting my e-fisticuffs ready for action.Report

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