On the Fallacies of ProtectionismSubmitted by dwalters on Sat, 07/06/2013 - 12:35
Arguments for protectionism - the act of governments to protect X industry or X people through policy from some evil or "unfair" disadvantage - tend to suffer, seemingly universally, from a common source of neglect - failing to consider the long-term consequences of such policies. Henry Hazlitt thought this phenomena important enough to bring it up on the first page of his great work, Economics in One Lesson:
a... factor that spawns new economic fallacies every day... is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.
Let's consider an example. It has been argued that protectionism may be warranted on the part of other countries in order to protect their citizens from the prying eyes of PRISM. Quoting:
Suppose I am an Icelander. Does my right as an individual to purchase services from top companies like American ISPs trump my countries' [sic] interest in having ISPs operating outside the control and legal reach of American secret courts and NSA wiretaps?
What measures can a small European government like Iceland's legitimately take in order to ensure it has its own ISPs, supposing that the pure market outcome deems them unprofitable or inferior to American ISPs?
In the first paragraph, the term "my countries' [sic] interest" is used. What does this term mean? A country is nothing more than a politically organized group of individuals living within some imaginary geographical boundary - key word individuals. Presuming that said country has a democratically elected government - as authoritarian varieties practice tyranny regardless - a portion of the people exist that voted against the current elected officials. So, it turns out that "my countries' [sic] interest" is actually the current government's interest.
Thus, the first paragraph could rightfully be translated as:
Should a group of people elected by a majority of Icelanders be able to impose their political and economic will on a sizable minority of Icelanders who voted against the current government?
This is why Thomas Jefferson reportedly said:
"A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine."
To move on to the policy matter, let's address the question posed in the second paragraph. It essentially asks, "What measures can be taken by the government to ensure PRISM cannot be used against Icelanders?" I think you will find that the "measures" required to achieve this goal through government policy are quite tyrannical.
The first measure that may be taken could possibly be subsidizing domestic ISPs. The subsidization must be paid for by the people through taxation. However, there is no guarantee that the people will use these subsidized services. So, the people would be paying for near complete waste. Further, subsidization encourages inefficiency and dependence on the part of those receiving assistance. Icelanders would likely find themselves saddled in perpetuity with inferior services at a high price while they would still probably use more efficient competitors. This solution would not work. So, we must consider another option.
Since subsidization would almost certainly fail, in order to achieve their goal, the government would have to employ more draconian measures. To completely "protect" the people from PRISM, the Icelandic government would have to restrict internet users from accessing sites that are known to be compromised. This would place the government on a very slippery slope, as the government would then be able to argue for further censorship of the internet in the name of protecting the people. Eventually, there would be a PRISM program "under every bed."
Censoring the internet still wouldn't solve the problem, however. Even if users aren't accessing compromised sites, their packets may still pass through affected servers. So, this sacrifice of liberty for safety would be all for nil.
One measure the government could take to mitigate the problem would be to inform the people of how they are being spied upon and recommend alternatives without resorting to protectionist policies. For instance, the government could recommend that the people use StartPage.com or IxQuick.com rather than Google.
I would also like to take this opportunity to address another argument posed in the article that I referenced. Quoting:
...if country A has certain standards it applies in the law in regard to pollution, waste disposal, or labor conditions, then isn't it appropriate to limit free trade to those countries and companies which also adhere to the same standards of behavior? Those who operate outside said standards can obviously make the same product at a lower cost, all else being equal, and so profit at the expense of those others who adhere to the common standards.
History has shown that as countries develop, the standards mentioned in this paragraph also improve. Contrary to popular dogma, outrage by the people reduces the prevalence of pollution while governments tend to cover it up. The recent, massive spew of oil into the Gulf of Mexico is a good example. There were a few proverbial slaps on the wrist, but the perpetrators never truly paid for the true damages that occurred and will continue to be realized. If the government thought that the people would be complacent about it, they would allow toxic waste to be dumped in your backyard. Mitigation of pollution comes with economic development.
Improvement of working conditions also comes with economic development. For instance, children in other countries work because, in many places, the family could not survive otherwise. As the economy has declined here in the US, many more households require two incomes to sustain the quality of life that once was possible with one income. How would the standard of living change if the US passed "women labor laws"? Of course this is silly, but the already poor standard of living would decrease even more with the passage of child labor laws in severely underdeveloped countries.
Considering these things, do you suppose limiting trade with underdeveloped countries would hasten or prolong pollution and relatively poor working conditions? Answer: Protectionism fails on this account as well.
In conclusion, there are always fallacies that underlie the arguments for protectionism which one can discover by considering the entire picture rather than maintaining a laser beam focus on short-term goals. After all, getting rid of poverty altogether by handing out printed money to everyone sounds good on the surface, but libertarians are all to aware of the consequences associated with that measure. Protectionism will always fail to meet its intended mark.