Protectionism vs Globalization

[Arcticflame]

It's been proven time and again that Protectionism hampers the economy.

Every single major (reputable) economist in the last 500 years has supported the idea of free trade between nations.

The basic premise is that protectionism limits the market for your producers which in turn reduces production, and lowers consumption, thus it lowers your GDP. GDP = Consumption + Investment (+ Government + some other crap I don't remember, but I'm 95% sure none of it is relevant). If producers are not consuming resources, then they're most likely going to save it, and it does nothing to help your GDP.

Protectionism actually deepened the Great Depression back in the 30s.

You are talking in purest form. Most nations have some form of protectionism in place, and none have true free trade.

 

[Bagaloo]

Freetrade, because being isolationist will never help your economy in the end.

Not true. By being protectionist of one industry, a nation can build said industry up without beoing crushed by already established foreign industries. Then when it is sufficiently large enough to hold its own in a global market, the protectionist policies can be removed and hey presto, your nation has a newly established industry that can't be crushed immidiatly by foreign imports.

 

[Kyouran]

It's been proven time and again that Protectionism hampers the economy.

Every single major (reputable) economist in the last 500 years has supported the idea of free trade between nations.

The basic premise is that protectionism limits the market for your producers which in turn reduces production, and lowers consumption, thus it lowers your GDP. GDP = Consumption + Investment (+ Government + some other crap I don't remember, but I'm 95% sure none of it is relevant). If producers are not consuming resources, then they're most likely going to save it, and it does nothing to help your GDP.

Protectionism actually deepened the Great Depression back in the 30s.

You are talking in purest form. Most nations have some form of protectionism in place, and none have true free trade.

Purest form or not, he's still right.

No one familiar with the words 'invisible hand' needs to be told twice that competition in the market is a good thing. Remove it and quality drops while prices rise, and as a consumer, aka everyone, this hurts.

Additionally, trade between nations is its own industry. How many people are employed in the business of transport or courier, even if it's between two neighboring cities instead of halfway around the world?

Finally, and we know this here in the USA, trade is rarely a completely one-way affair. Often we both export to and import from another locality, which makes each of us simultaneously on both sides of the issue. We are bound to feel it just as badly as our trade partner if we cut off trade with them, on both sides. Consider goods X and Y. If they're good at making X and we're good at making Y, then the solution is obvious: import X, and export Y. Even if they're better at making both X and Y than we are, they still benefit from trade, though the explanation gets into some rather hard-to-follow economics.

Bottom line is that nations generally don't benefit from cutting off all contact from the rest of the world.

 

[Arcticflame]

Bottom line is that nations generally don't benefit from cutting off all contact from the rest of the world.

I entirely agree, but I don't think anyone truely believes that pure protectionism or pure free trade works well. We are arguing which shade of grey works best. That's what I'm saying.

 

[munkyforce]

Freetrade, because being isolationist will never help your economy in the end.

Not true. By being protectionist of one industry, a nation can build said industry up without beoing crushed by already established foreign industries. Then when it is sufficiently large enough to hold its own in a global market, the protectionist policies can be removed and hey presto, your nation has a newly established industry that can't be crushed immidiatly by foreign imports.

The problem with that is, when do you start exposing said industry to competition? Protectionism creates vested interests, so it's possible that government will not have the political will to remove trade barriers. For example farming subsidies in Europe and the US.