Protectionism is often a point where I tend to disagree with a lot of people. I think the rise of developing nations into more significant roles in the world economy makes this topic come up more often. The BRIC countries (Brazil, Russia, India and China) have been growing and developing a new role in our globalized economy. This makes a lot of sense, when you consider the fact that globalization helps spread wealth around. Wealth that decades ago would have stayed in one region for much longer, all of a sudden can go between continents in the matter of seconds. Outsourcing manufacturing jobs is not new at all, however, we see more and more outsourcing of other services to different nations and the spread of money and knowledge just allows innovation to occur more often in new places. When you put all this into context, it makes sense. If you consider that there is a finite amount of wealth in the world (which isn't necessarily true but the analogy helps my point) and all of a sudden a lot of the wealth that use to be generated and spent in North America and Europe is being diverted to emerging economies.
Well, isn't that a good thing? Don't we want to spread the wealth? More often than not, I feel that the answer is yes but no. Yes, it's good to give the opportunity for other nations to develop, and more innovation to occur. That's good. We want struggling nations to be able to lift people from poverty and maybe even develop a middle class. These are all great things, I agree. However, I also feel that we need to look at what the side effects of these things are. For instance, think about why this money started to flow to developing areas. This happened mainly because companies realized that in order to stay competitive; they needed to lower costs, and one way to achieve that, is to outsource work to places with cheaper labor, cheaper land and maybe cheaper taxes. The bottom line is that jobs that use to be done within developed countries, moved abroad. Considering people can keep having cheap products, people that are employed in NA and Europe are happy.
It still doesn't look that bad, after all, they just eliminated unskilled work pretty much. People will just have to get more educated to do other types of jobs. On the other hand a big effect this has in the economy is that companies are making a lot more money, and that money isn't really trickling down to the bottom as politicians like to claim. Richer companies, can afford to be even more competitive, which smothers the little companies (ie. Walmart). This destroys reasonably paying jobs, destroy small companies and innovation from the little guys. A company that doesn't have to work hard to monopolize a market, has less incentive to innovate. On the other hand the developing nation which is now seeing a lot more wealth running around, isn't really used to this, and labor policies don’t always benefit the little guys either. Workers on average are making more there, but the wealth distribution is just becoming more segregating. So the nations that use to provide everyone with a great share of the wealth, now are doing less of that. While nations that always had larger wealth disparities, are just raising the lower class from the dirt while they fill up their pockets with money.
The reason why North America in the middle of the 20th century was so prosperous was the fact that the economy worked for the people. There were always class differences, and I think there should always be such. But the bottom line was that the financial agenda was to keep the country running smoothly and efficiently, providing a piece of the pie for everyone. Capitalism was controlled and worked well. When Capitalism takes over everything else, and making money is the sole goal of a society, human greed affects how the system works. It begins to alienate the elite from reality, instead giving them the sense that capitalism wants them to make money no matter what. Once this infectious mentality spreads to governments, the real problem emerges. That's when democratic nations become plutocracies, and values go from being about the welfare of the people, to the welfare of this constructed concept of the economy.
That's why I think protectionism isn't all that bad. It's a bit like capitalism, in that it is an idealistic concept, but I think it is important. Going back to the idea that there is a certain amount of wealth available, I think a nation needs to ensure enough of this wealth stays within the borders, and even more importantly, is distributed well. Of course that means people can't have as much "stuff" that's made elsewhere, but ensures a healthy job market and a healthy economy, that is sustainable and fair. Individual governments only have power over their own policies, so they can't ensure that China or India treat their people fairly, however they have the power to try and make their own country as good as it can be. By making sure business practices are done responsibly, and with the people's welfare as a priority.
(I also wrote a little on
free trade in the past if you are curious to see that)
