A Little Protectionism Could Go A Long Way

In elite economic and intellectual circles, having the temerity to accept any benefits of protectionism makes you worthy of excommunication. Blind loyalty to the idea that free trade forever and always is the only allowed philosophy. Of course, this uniformity of thought is reason enough to be sceptical.

As we discussed earlier, the US economy needs to find some way to replace the Ponzi economy and the housing bubble. For all the pain it’s caused us, it did have the nice corollary of providing jobs to a lot of folks who were otherwise unskilled or not fit for the so-called “knowledge economy”.

This is a key issue facing the economy: What do the millions of people who are unfit for knowledge labour actually do?

Absent building houses, the answer, traditionally, would be something along the lines of manufacturing — assembly line work, dirty jobs, stuff like that. But at the moment those industries are in decline too, largely uncompetitive with foreign competitors. A combination of wage and regulatory pressure makes it difficult to set up a factory here.

Consider electric cars. As it stands, electric cars designed in the US (exciting!) will probably get built in China. In this case, free trade is awesome for the elites, designers and investors get higher margins on their cars, and edge-case buyers get a cheaper product. But those outside the knowledge and design economy don’t share in it.

Now if you could train all those blue collar workers to be designers or engineers or venture investors, that’d be awesome, but that’s unrealistic. Instead, many of them will end up being supported by the elites (the taxed class) via welfare or other transfer payments.

This is the key: Rather than seeing protectionism as being good for the overall economy, it should be viewed as a substitute for welfare. Rather than having the taxed class support the blue-collar workers via welfare, the elites would suffer a little bit via lower profits and inferior goods. The beneficiaries of this would live more productive lives without the stigma or humiliation of living off the dole. For society that would be much healthier

Now there’s a problem. A trade war would be a bad thing, because we know that overall, specialisation and trade are good things. This is pretty hard to dispute. We don’t to start with a little bit of protectionism, but that end up with every country clamping down on imports and exports. The world’s bounty is a pretty great thing. What’s more, we depend on China to finance our debt and pissing them off is not an option. Slapping a tariff on Chinese-made widgets to support domestic widgets is a no-go.

So what’s the alternative?

Here’s where the whole green jobs come in. While we don’t think that building solar panels and windmills will provide that much labour, we could take a liberal attitude towards what’s green. If we allowed companies to engage in a little greenwashing, a lot of old-timey manufacturing could all of the sudden be considered sustainable. A green brickmaker! A green TV company. It’d be the same old stuff, but we’d find away to rationalize it, and it’d be all geared towards pissing off Mideast oil interests, rather than the Chinese.

In other words, we’d use the auspice of “green” to renurture our manufacturing industry with the helping hand of the government. It’s not optimal, and it would likely hurt the coastal elites a little. But it would help the left-out workers, and it would also split opposition among those intellectuals that favour green stuff and favour blind adherence to free trade.

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