Protectionism is All Around Us

It's not just about trade; it's about all restriction.

In political speak, a protectionist is someone who is against free trade. They want to protect American businesses, and indirectly American workers, from cheap labor offered abroad.

The underlying argument is that American workers require protection from competition.The underlying argument is that American workers require, or benefit from, protection from competition.

This same argument is used to restrict many other liberties.

Crusaders against immigration lament that low wage earning immigrants steal jobs from, and drive down the wages of American born workers.

Opponents of Uber and AirBnB claim that hotel owners, and taxi drivers, need to be protected from cheap competition offered in the sharing economy.

Even advocates of the minimum wage are protectionists. They feel that workers need to be protected from other workers who would offer to sell their labor at a lower price. This was evident in the first debate over the minimum wage, when white workers felt they needed protection against cheaper, african american labor.

The minimum wage was first implemented in the United States nationally in 1931 by the Davis-Bacon act. During the debate in the House of representatives, Rep. William Upshaw (D-Ga.) complained of the “superabundance or large aggregation of Negro labor.” Rep. Miles Allgood (D-Ala.) said, “That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.”

Opposition to immigration, trade, the sharing economy, and a wage set by the market is all the same tired argument, rebranded to hide its proven failure.

It's Always Anti-Competitive

Protectionism fails because the harms of protectionist policies are guaranteed to exceed the benefits. Any benefits transferred to the producers are passed onto the consumer in the form of higher prices. However, because less exchange takes place at a higher price, there is a deadweight loss to the economy as a whole.

Protectionism is propped up by a political system of concentrated benefits and dispersed costs that make it difficult to defeat. Imagine you own a hotel, and a bill is sitting on your legislator's desk to ban AirBnB.

You will make it known to your legislator, that your support for him, and the support of 100 other hotel owners like you, depends on him signing the bill. Meanwhile the hundreds of thousands of consumers who are hurt by this bill, care more about other things.

The Damage Adds Up

The individual consumer may not care much about the hurt she suffers from a more expensive hotel, but it adds up. Hundreds of thousands of goods are more expensive because of tariffs or quotas. Hundreds of services become more expensive for everyone because of occupational licensing laws.

Because of the incentives within the system, this will be one of the most difficult economic problems to fix. It requires vigilance, it requires us to call our representatives while they consider protectionist laws, it requires us to vote for non protectionist candidates. If we do all this, we can rid ourselves of the largest drag on our economy.

Further Reading


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