13 August 2009

Is protectionism a bad thing?

The chief economic bugaboo among politicians at all levels these days seems to be protectionism. American protectionism specifically. Prime Minister Harper whispers his concerns in President Obama's ear at every opportunity. The premiers cry out for a new trade deal to save us from Buy America policies, frightened by Canadian municipalities' threats to apply their own buy-local policies in retaliation.

But is protectionism such a bad thing? Indeed, it seems odd for Canadians to wail against protectionism when a version of it just saved our financial bacon. Despite enormous pressure from the U.S. to deregulate, i.e. globalize, our banking system, Paul Martin resisted. If he hadn't, our system would have crashed just as the Americans' did, and Stephen Harper wouldn't be able to boast about what good shape our financial house is in.

John Maynard Keynes, the economist we keep returning to because of his good sense, once said, "Ideas, knowledge, art, hospitality, travel -- these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; and, above all, let finance be primarily national.” Keynes was talking about the conservative virtue of self-reliance -- let us be open to the world but let us take care of our own needs. That worked for our banking system, why not for other things and for other people?

So I have a certain sympathy for those Americans who choose to depend primarily on their own resources. Why shouldn't they take care of their own people -- their own companies and their own workers -- first? Why shouldn't they seek self-reliance? And why shouldn't we?

In any case, what is so often pedaled as "free trade" is nothing more than corporate advantage. NAFTA is a good example. It allows American corporations to freely exploit cheap labour in Mexico but does not allow Mexican workers the right to exploit high wages in the U.S. What kind of "free" trade offers freedom to corporations but denies it to working people? Some freedom. The protectionism so feared by politicians and business people is revealed as essentially protection for corporate profit, particularly through exploitation of cheap labour.

Recent events have suggested that strength in the economy is like strength in nature. Strong systems need flexibility and that means they need variety. The more uniform the international economy is, the more a failure in one part affects the whole system. Our banking system remained strong precisely because it retained its individuality, its independence.

Sadly, all political parties have joined the "free" trade bandwagon. Premier Gary Doer has threatened Manitoba municipalities with legislation if they reject a new trade deal with the U.S. "If we have an agreement with the United States, it's my responsibility to deliver it in my own province, through the legal means we have possible," he has said. The right of local governments to choose their own economic path would be overridden. One wonders what happened to the "democratic" in New Democratic Party.

Knee-jerk acceptance of globalized trade, with its erosion of local democracy, workers' rights and self-reliance, is dangerous. We have just witnessed a good example of just how dangerous it is as the whole international system crashes because of irresponsibility in the United States. Protectionism, or self-reliance, or independence -- choose your term -- deserves more than simple dismissal. The fact it was advocated by John Maynard Keynes tells us that.

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