A curse for those it is meant to protect
Published on November 9, 2003 By zergimmi In Politics
You only need to look at economies that are in recession to be able to see what my title means.
Economies are fluid, meaning they grow, receed and change as the needs of the market change, there are two ways to manage change, one is to put up protectionist boundries and protect the internal economy from outside influences, or recognise the change ond be prepared with good forward planning .

Protectionism does not encourage efficency nor does it encourage growth of new ideas, why bother if you don't need to. You only need to look around the world today at the countries that suffer from some level of recession to see proof of this. A good example are some fo the European countries, one in particular is Germany. This is a country that has every stimulis in the last decade to grow yet has gone against the trend and falls further into recession, many people blame the merger of East and West, however managed correctly this should have helped them not hindered. Germany like France has for a long time proped up failing industries with tarrifs and subsidies, as a result they have industries producing comodities which can be secured from other countries which are better and cheaper, or they still produce products which are no longer required. To change this they now need to completely restructure their economy, this takes time so the pain lingeres.

In most areas of economies around the world we produce many goods and services, some countries are good at producing some while others are better at others, to build a robust economy a country or economic bloc needs to realise what are the strengths and weaknesses of their economy, and move forward with a plan to capitalise where they excel. Take Australia, we have dropped all forms of protections policy, this did cause pain for us however we learnt for instance that we do not compete in producing mainstream software and hardware, so instead we looked at what we did do well and moved forward, mainly we produce the services attached to this as well as design, we now export these services, as well as speciality software products.

While we produce cars for the domestic market we found that we produce high quality components and engins, we now export engins to car makers such as KIA and Daewo, as well as components to ford, GM as well as Italy and Germany. We do not import metals, we produce many mainstream and specialist metals and export them including higrade components and materials for light weight engins, again to Asia and Europe as well as the US. We sell education services overseas. We have some of the most efficent food production anywhere in the world, and still export food to the EU and Asia.
This was not always the case, however as Australia relies heavily on exports as we have a very small population, it was sink or swim. We did not have the tax base to proup particular areas of our economy so we had to learn to become efficent and competitive, however we also had to learn what to be efficent at. We now export cars to the Arab states as well as africa and the US, yes we do send cars to you guys as well as design of new technologies taht appear in you cars and other forms of transport.

With so manay economies emerging today , older economies need to move forward and capitalise on strengths, and put developments dollars into growing these instead of proping up older style products and practices. The sad reality is that Asia does not need cars or computers, however they need education, technology etc. Protectionism does not serve the middle/working class well it only serves to defer the outcome a compound the rpoblems by creating a false economy, and tarrifs and push up the cost of imports, thus lowering the value of the internal currency, and put commodities and services out of the reach of the general population.
In Australia at our last Fedral election, the Labor opposition party made part of its policy platform a wealth tax, they lost. Why, the tax was a levy on so called luxry products, this was no big problem for the high net worth part of the population however it put these items right out of the reach of the general population, and they new it.
This tax was on imports such as cars, what it meant was the avarege person would not be able to even purchase a 4x4 vehicle. They have since dropped this platform.
Protection creates a un- level playing field, and while it protects some jobs, many more go as a result, why, the cost of investment goes up due to the high cost of imports and locally produced products, so growth eventually slows, as does jobs growth. One important point that needs to be noted however is that with the opening up of markets and the dropping of Tarrifs etc, there needs to be strong regulation of industries to stop the growth of monopolies, as this also contributes to inefiency, due to lack of competition and growth of different ideas.
Interestingly the move away from tarrifs and open economies is generally being driven by the left, which is a sign that in some cases they/we do understand the free market system, and are able to move with it, and realise we cannot build a strong robust wrold class economy with restricitative trade practices, the one lesson many on the left need to learn is that you cannot effect all change in one term of Government, and patience is important, which is why right wing parties generally ride back into power with all the work done for them, and all they need to do is manage what has alredy happened, and generally they do. Probably the third part of a good economy is the 2 party system, giving you a strong opposition to make sure that government is accountable.
Comments
on Jan 22, 2004
I have to say you are under-stating the nature of the terms you use here. Protectionism has many faces. One not mentioned here is respect for one's own standard of living. For centuries America would not interract with dictatorial and tyrannical Governments, and this was not a bad thing. It made the suffering of the Goverment accountable to itself and the world economy. To buy products from such governments is criminal conspiracy in my opinion and inslults the American worker. It leads to decreased wages, loss of productivity, tax revenue,etc.. In this regard then, 'protectionism' if it is of ideals and principles, is good and worked for centuries. Likewise there are certain basic laws of economics violated or otherwise neglected by such practices as you describe herein. The simple rule is: Import raw materials, export finished products. This is being violated to America's shame and loss, as all production is going overseas to these tyrannical States and then sold to us as we have had the money to buy them - until now. I'd rather give an American the material and say, "make me a tie" than send it overseas to a slave and say it was good economics, as the tie cost me less. In fact, it doesn't cost less and my Country suffers from the flight capital which could have stayed within our borders had I 'protected' an American worker. I'm sure there will be more posts on this so I'll come back later.