Here's the economist line on Trade.
Al wants to trade with Jill.
Al grows corn, Jill builds cars.
Since Al has more corn than he needs, and Jill has more cars than she needs, the trade makes both Al and Jill happier.
If Al grows corn, and both Jill and George make cars...if Jill makes cars better than than George (cheaper or higher quality), then Al will trade with Jill.
Protectionism is when George convinces his Uncle to threaten (anonymously) to beat Al senseless if he trades with Jill. Then Al buys from George, is less happy than he would have been, Jill is less happy than she would have been...maybe Al doesn't buy at all, because it's not worth the trade....but most likely, we've transfered a lot of value away from Jill (no corn), a little value away from Al, and a medium amount of value to George.
Clearly, in the first place, Uncle is immoral, and clearly the net benefit to everyone has gone down substantially. Unsurprisingly, this kind of thing only happens when George convinces his Uncle to threaten folks. It's bad for Al, bad for Jill, and good ONLY for George.
If Mechanic Mike went out and built a machine that transformed corn into cars...then George convinced his Uncle to smash the machine...it would be EXACTLY the same situation.
George uses thuggery to prevent Al and Jill who want to trade from doing so. George gets rich off his thuggery. Al and Jill or Mike are worse off. It's questionable whether the net benefit to George is higher than the net loss to Al. It is obvious that Uncle has net-destroyed significant value once everyone is taken into account...though if you have some way of counting Jill/Mike as somehow unimportant, then you can edit your calculus substantially.
Protectionism is preventing (with violence) Al and Jill from trading IN ORDER TO make a George richer and the other two poorer. Nothing more, nothing less. Frequently it even works.
Money flows, as always from the poor and weak to rich, politically connected confabulists who can spin myths that explain why their interest is "good for the country".
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I've been absorbing left wing economics. It goes something like this:
Al grows corn and trades with car maker Jill under an exclusive union contract. Both are exceedingly happy, and Al is saving money for a sex change operation.
George, meanwhile, is a psychopath in prison supported by tax money from Jill and Al.
One day a travelling evil right-winger with undetailed mind control power starts transferring wealth from Jill and Al, vacates their union contract, and makes them sign a free trade agreement. Our dynamic duo are unable to keep George in prison due to budget cuts, pace the transfer payments to aforesaid right-winger, and newly released George promptly colonizes the local indigenous tribesmen-of-color, heretofore one with nature, now raising corn for George at grinding poverty wages. George is able to undercut Al's corn sales by a large margin while he himself becomes fabulously wealthy. Al is reduced to standing on the corner with a sign reading "will work for food" and is emotionally crushed from his inability to become a post operative trans-gender.
George's wealth gives him massive political power, and he uses it to overturn all gender equality laws, and powerless Jill is now forced by circumstances to marry George and unhappily bear him twelve children.
...unhappily bear him twelve children. Who breathe out CO2.
Getting back to the actual review. It seemed a random mix of two basic ideas.
1. Even if we trade free, other countries won't.
2. Many industries need economy of scale, so give them protection until they reach economic size and then they can grow without protection.
The answers to this are:
1. If your friend jumped off a bridge, would you?
2. In theory yes. And historically one can point to a handful of cases where this worked. One can also point to hundreds and hundreds of cases where the subsidized and protected industry sucked millions of dollars per job and eventually died anyway. Look at (name non-preferred political party), could they subsidize an industry without it becoming a corrupt white elephant?
Good stuff!
This lurch towards protectionism is infuriating. Simply positing theoretical situations where the model MAY NOT work is completely insufficient a rationale for actually existing States to regulate trade.
After all, there are perfectly good, infact much more solid models for government regulation due to asymmetrical information, behavioral economics blah blah. When these stronger models don't pan out in the real world of actually existing markets and government, what makes these people think that the vastly inferior case of protectionism can be exploited efficiently by actually existing states?
This whole thing is driven by contrarianism.
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