Protectionism- A LONG debate with kenpruitt666

Recently I’ve engaged in a very lengthy debate with a fellow WordPress blogger, kenpruitt666. His blog is very well written, and I have no doubt that his writings are full of intellectual rigour and professionalism. It’s clear that he’s a very intelligent chap, even if we don’t agree on this issue.

Surprisingly enough, I’m willing to concede that I’m losing the debate. This I do without bitter feelings, because I don’t underestimate the capabilities of my opponent. He truly is a tough nut to crack. You can see his blog here: http://kenpruitt666.wordpress.com/2013/06/20/debunking-more-republican-protectionist-nonsense/

I really do encourage you to check it out.

However, for the sake of banter, I’m going to release one last reply. This is because I feel one long blast is needed, and should be made in the form of a post rather than a comment.

I’ll start by stating that consumer benefit doesn’t hold us all in the thrall you claim it does. A business will satisfy consumers only to the point when it is shrewd business to do so. There is only so far they Will go, and you can be sure that the little they do, is only done under the knowledge that what they give you will be well worth their while.

This argument applies to the whole market system. A business will hire ten employees, because it needs them to do things which they cannot presently handle. It is not in their interests to provide them with any added benefits beyond what is normally expected of them by culture or law. At the slightest chance (allowing for individual conditions) they will sack as many as possible, and replace them with technology. That is- businesses only employ people until they stop having to, and market forces even urge them to replace jobs with technology. This cycle, is of course self-defeating, as those sacked employees will now be unable to contribute to the economy, and eventually the effect will be negative on the employer. Businesses are only moral when it suits them, and only provide you with what you need so far as it suits them.

What I want you, and others, to understand is that the market system is not perfect. Human beings are affected by other things than a simple drive for profit, and we must change our system to accommodate that, or we will continue to live in a world which we can be certain doesn’t work for the benefit of the majority.

Secondly- you seem to think that there are some perfectly free economies, and that we should all aspire to be like them. There is no such thing as the free market, there never had been, never will be. It is always necessary for the government to step in at some point, in at least a small way, and the writings of a billion intellectuals won’t change that simple fact.

Protectionism is done to save jobs. Would you have the government turn a blind eye when a key industry in their nation is being wiped out by foreign competition? To stand idly back whilst thousands of jobs are lost and millions of workers pushed into poverty? The role of the government is to protect its people, and that includes protection from foreign markets.

You seem to think that if the government does that, and simply ignores the chaos down below, that the invisible hand of the market will sort things out for the better in the end. Don’t even get me started on ‘the invisible hand of the market’. It’s not a thing. It doesn’t exist, and if it does then it certainly doesn’t work in the interests of you or I. Markets don’t hold the key, governments do. Because one is elected and the other isn’t. One is worn to protect a nation and its people whilst the other is based on the fickle, short-term motives of billionaires and financiers.

If country A and country B both engage in protectionism against the other, in small doses, each will conserve its own jobs. The countries will each come closer to self-reliance, and that can only be a good thing. Who knows what the future will bring? But countries will need to stand on their own at some point. That is not to say that I don’t support global initiatives. Indeed, they are the only way to instigate change. But that should come through the UN, not McDonald’s.

You go on to say that production will shift from other industries to the protected industries, through some complex economic mechanism which you know I won’t understand. But that is precisely the point! Governments will protect certain industries for a while, because they want to grow those industries, because they know what is best for their country, unlike the volatile international markets. I’m not suggesting -no one is suggesting- that countries can shield themselves from the world for ever and ever, but developing countries must do so for a short while, whilst they prepare their economy to compete.

You also say that: “other industries pay for one industry’s protection”. They will, for a short while. Protectionism is not a permanent or perfect measure. It is not the answer to everything, but neither is market economics. But the point is that sometimes it’s necessary, because one industry needs special attention from its government at that particular time. Other industries may suffer in a small way for a short time, but they can cope with slightly raised prices for a few months. Eventually those tariffs will come off, but the protected industry will be better able to compete and the whole economy will be better off for those few months of raised prices.

“Angola gets low-cost technology from America, and America gets low-cost agriculture from Angola. Both parties benefit. If Angola believed that they weren’t better off as a result of the trade, they would either renegotiate or they wouldn’t trade at all”

I’m sorry. It took a few moments for me to calm my breathing after reading that. As I stated, technology has better value than agricultural products. America has the right environment to produce technology, because it had employed protectionism for a few hundred years. Angola is not permitted to do so by the IMF, and is forced to continue to focus on agricultural products.

The price of laptops on the world market is far higher than that of sugar, for example. It is far higher, and also less volatile, because there is less speculative financial gambling on it.

The price of sugar goes up and down, and so do the lives of those who farm it. If Angola is to develop, it needs to move on to higher cost industries like technology manufacturing. You claim to be the economic big-balls, and yet you don’t recognise that, the simplest economic truth, which I learnt in Year 7 in Geography.

Those small farmers in Angola, struggling to get buy from the small proceeds of their sugar, can only offer up their year’s work to the mercy of the financial markets, and hope to be lucky that day. You cannot possibly say that both sides are benefiting there. It is well-known that some products are worth more than others.

You also seem to think that Angola can simply ‘renegotiate’ whenever they feel like it. Obviously they can’t. The IMF gives loans to Angola, to cover payments for loans they took out thirty years previously. In return for those loans, they are forced to adopt ‘good economic policy’. They are forced to privatise publicly owned services. To get rid of their central bank. To de-regulate every market in sight. And also, to strip their borders of any protection that might be there.

Soon, international capital flows arrive in Angola. Things seem to be going well, for a short time. Businesses are springing up everywhere, most of them foreign-owned, and employing the locals. Home firms have been swept away, but who cares? The foreign firms do the job just as well.

But then comes the hurricane. It strips the land, decimating settlements and destroying property. In a flurry of nervous activity, the foreign investors are suddenly not so supportive as they had been. They instantly withdraw their capital, and now the country has an economic as well as natural disaster to contend with.

Development in the Third World, cannot come from foreign investment. If so, then international trade will become a lopsided, totally unbalanced thing, as it already is in most parts of the world.

Third World countries don’t have any power. They can’t simply re-negotiate trade. They take whatever scraps we throw them. And something must be done about that if we are to ever live in a fairer world. We need to stop kicking away the ladder from developing countries, preeching free trade whilst we employ the harshest protection against them.

“You don’t seem to understand that if domestic industry is adequately satisfying the wants/demands of the consumers, foreign industry can have little to no impact on domestic industry. The reason foreign industry puts domestic industry out of business is precisely because domestic industry is inefficient; they are not satisfying the wants/demands of the consumers as adequately as they should be or as adequately as others can. The consumer is no worse off, and in fact, foreign investment creates new jobs, new processes of production, and improves the lives of the foreign population as a whole. The only thing which would keep this from happening is government policy/political instability of a given territory.”

When a country first starts developing, it is sure to have inefficiency. It is sure to displease consumers in some way or another. But how much do you really think consumers care? Consumer satisfaction is not the be-all and end-all, as I explained at the beginning. Consumers will have to put up with it if they are ever going to feel the benefits of their country’s development. What’s good for consumers is not always good for a country, in fact, it rarely is. Slightly higher prices are no reason to excuse decimating local businesses.

“If a domestic government has indeed liberalized their markets, then the foreign firm will get nothing from the government. No subsidies (tax breaks are NOT subsidies), no bailouts, no special favors, nothing. He will get the opportunity to do business within the private sector, and that’s it. So you needn’t worry about foreign firms getting something from domestic governments if they liberalize their markets.”

I don’t mean subsidies, I mean tax breaks, and a degradation of worker’s rights and working conditions. And lastly, it is not a myth. It has happened in numerous occasions. When the tsunami struck Thailand, they weren’t so badly effected, precisely because they had developed using protectionism, and had a stable economic base to work from.

My arguments are no more full of fallacies than yours are.

Its been an interesting discussion, kenpruitt666, and thank you for playing. You are welcome to post comments below, but I’m done with this argument, and your thoughts will receive no reply.

 

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