Protectionism

[Marlo Stanfield]

Is economic protectionism bad policy in general?

Do we gain more by sending jobs to other countries where the labour is cheaper?

Looking back over the past 15 years of globalization, has the US gained from outsourcing or in retrospect would have it been better to try to keep those jobs at home?

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[tsoPANos]

I think that we need to find a balance between these two.
That's the best solution.
Saving money while still heling the local economy.
Globalization could be harmfull to the local ecomy under certain circumstances.

[trader001]

Subsidy and protectionism are economic weapon.

It takes time to build up an infrastructure for an industry, killing your competitors with subsidy then raise the price up after all your competitors are gone. Robber baron and standard oil have done it in the past, it is now being done on country level.

[Marlo Stanfield]

I think that we need to find a balance between these two.
That's the best solution.
Saving money while still heling the local economy.
Globalization could be harmfull to the local ecomy under certain circumstances.

In Brazil they set an electronics import tax so high that companies are setting up factories to produce the products right there in Brazil.

It was brought to my attention today by a new story about $36 million worth of phones and tablets being stolen from a Samsung factory that they had set up in Brazil to avoid those import taxes. So some jobs were created as a result

Is this type of policy good, or is it going too far? Sounds crazy at first to have such high taxes, but if multinationals are coming and setting up factories, is it a net gain?

[Marlo Stanfield]

Subsidy and protectionism are economic weapon.

It takes time to build up an infrastructure for an industry, killing your competitors with subsidy then raise the price up after all your competitors are gone. Robber baron and standard oil have done it in the past, it is now being done on country level.

Do you know of any modern of current examples of a country or a corporation doing this?

[dadugan]

Subsidy and protectionism are economic weapon.

It takes time to build up an infrastructure for an industry, killing your competitors with subsidy then raise the price up after all your competitors are gone. Robber baron and standard oil have done it in the past, it is now being done on country level.

Do you know of any modern of current examples of a country or a corporation doing this?

Solar companies in China seem to be doing this. And since Chinese YUAN is being subsidized by average China citizen, one can also argue all the producers/exporters in China are doing it to kill their competitors abroad.

[Marlo Stanfield]

Subsidy and protectionism are economic weapon.

It takes time to build up an infrastructure for an industry, killing your competitors with subsidy then raise the price up after all your competitors are gone. Robber baron and standard oil have done it in the past, it is now being done on country level.

Do you know of any modern of current examples of a country or a corporation doing this?

Solar companies in China seem to be doing this. And since Chinese YUAN is being subsidized by average China citizen, one can also argue all the producers/exporters in China are doing it to kill their competitors abroad.

What are they doing exactly? Producing solar panels below cost in order to push out competition? How does a stronger Yuan help them in this regard? I thought that a weaker currency benefitted exporters?

I have heard some things about the Chinese solar industry, but I'm not exactly clear on what the situation is.

[Full Spectrum]

Protectionism sometimes is needed to prevent financial hemorrhaging, such is the case of Iceland(due to oversized banking sector coupled with 2008 crisis)and Japan(has no natural resources, and is protecting it's farmers?). But these are due to national borders, and protectionism is mostly a tool of nationalists and advocates of Autarky(you decide whether good or bad). Protectionism although is prevents capital from flowing to highly developed regions to low developed ones, which capital is needed to build foreign industry, such is the case of Japan(ironic), Korea, China, Vietnam, and etc.

Pros:
Protects domestic industry from foreign competition
Holds wealth domestically
Gives citizens and companies of said country higher privileges in the market

Cons:
Furthers poverty in under-developed regions
Makes prices generally higher
Gives non-citizens and foreign companies lower chances in market

[GangkisKhan]

Protectionism sometimes is needed to prevent financial hemorrhaging, such is the case of Iceland(due to oversized banking sector coupled with 2008 crisis)and Japan(has no natural resources, and is protecting it's farmers?). But these are due to national borders, and protectionism is mostly a tool of nationalists and advocates of Autarky(you decide whether good or bad). Protectionism although is prevents capital from flowing to highly developed regions to low developed ones, which capital is needed to build foreign industry, such is the case of Japan(ironic), Korea, China, Vietnam, and etc.

Pros:
Protects domestic industry from foreign competition
Holds wealth domestically
Gives citizens and companies of said country higher privileges in the market

Cons:
Furthers poverty in under-developed regions
Makes prices generally higher
Gives non-citizens and foreign companies lower chances in market

Developed country should let the investors do whatever they want. Money and profit invested abroad will be taxed and bring home the same benefit as having a domestic industry.

[Full Spectrum]

Developed country should let the investors do whatever they want. Money and profit invested abroad will be taxed and bring home the same benefit as having a domestic industry.

When you say "money and profit abroad will be taxed" are you referring that those will be taxed in the country they are being invested in, or in the home country? Just curious as to which one, or both(USA)?

[Ron~Popeil]

Free markets bring peace and prosperity. Restrictions on free markets bring conflict and economic meltdowns. Bit coin gives us a shot at a truly borderless and free economy. 

[pening]

Do you know of any modern of current examples of a country or a corporation doing this?

It may be a shorter list of those that aren't.  Certainly most countries are involved in some protectionism and subsidies to some industry or another.  The entire defense industry is one massive form of subsidy.  Agriculture is largely subsidised in developed nations and in many developing nations.  Individual industries or companies can enjoy subsidy by way of targeted tax breaks, or outright cash incentives.

Back to the original question: Do we gain more by sending jobs to other countries where the labour is cheaper?  

Its a very interesting question that often polarises people along ideological lines.  From a pure economics point of view protectionism is bad, and letting cheap labour take the jobs is better for the wider economy as a whole as prices are kept down while profits kept up.  win all round.  But from a social-economic point of view, where peoples livelihoods are considered of course its not so black and white with winners and losers.  

The idealist would hold that people can skill up and take better, less manual jobs, and we have more leisure time.  The realist will note that leisure time costs money (what can you do for free these days? not alot), there aren't enough "better" service/office jobs to go round, some people dont have the skills and if we are honest aren't going to no matter how good you try to educate (face it people have different abilities and aptitudes).  So some people will be left behind.  Protectionism is ultimately an attempt to redress this imbalance, but its is contrary to all society really wants (all the benefits of free trade), so it gets hidden from view with politicians, and most economist, pretending it isn't going on.

 

[Marlo Stanfield]

Do you know of any modern of current examples of a country or a corporation doing this?

Its a very interesting question that often polarises people along ideological lines.  From a pure economics point of view protectionism is bad, and letting cheap labour take the jobs is better for the wider economy as a whole as prices are kept down while profits kept up.  win all round.  But from a social-economic point of view, where peoples livelihoods are considered of course its not so black and white with winners and losers.  

The thing that gets me is that I can imagine that in the modern world where we have multinational corporations who are extremely adept at paying as little tax as possible, that even in the pure economic and idealist view points that you outline it can still be a net loss for the country and people. Think of it like a game between three economic actors: the multinational, the country, and the people of that country. Ideally what would happen is the multinational would move jobs overseas and benefit from lower production costs, the country would benefit from more taxes from the increased profits of the multinational, and the people would lose some income in the long term but gain from the higher tax base of their country. Total economic production should increase and I think this is the way I think a lot of people think about it.

However, what I think is a more likely scenario in modern times is that the multinational reaps all the economic gain and very little of that gain if any is shared with the country or the people losing their jobs. The total amount of loss is very unlikely to be made up by the multinational since the accountants have devised some incredible clever systems for multinationals to avoid sending profits home. The global economy gains of course.

So what I suspect is that it's actually irrational for some countries to not have protectionist policies designed to maximise their economic gain. And part of the problem is, especially in a place like the US, is that it's the multinationals who are buying government officials to bend policy to their gain. And I'm pretty sure that a large part of people in the western world as actually lost quite a bit in the last 15 years of globalization. Some people have gain tremendously, but lower and middle class people? I find it pretty unlikely that they have benefited economically, despite being told for years that they would. Globally many have benefitted, but I think some governments are playing a losing game economically speaking.

[DannyElfman]

Subsidy and protectionism are economic weapon.

It takes time to build up an infrastructure for an industry, killing your competitors with subsidy then raise the price up after all your competitors are gone. Robber baron and standard oil have done it in the past, it is now being done on country level.

Do you know of any modern of current examples of a country or a corporation doing this?

Solar companies in China seem to be doing this. And since Chinese YUAN is being subsidized by average China citizen, one can also argue all the producers/exporters in China are doing it to kill their competitors abroad.

It isn't just Solar companies in China but much of China's exports are subsidized by the chinese government and allowed to be sold at below cost. Another good example is the chinese textile industry

[theonewhowaskazu]

Leave it up to the free market. Made in <your location> is a valuable marketing tool and will be used as such. There is also the matter of "freshness" (potentially, depending on product) and shipping costs. These serve as adequate incentives to purchase locally.

[Ninietz]

Protectionism sometimes is needed to prevent financial hemorrhaging, such is the case of Iceland(due to oversized banking sector coupled with 2008 crisis)and Japan(has no natural resources, and is protecting it's farmers?). But these are due to national borders, and protectionism is mostly a tool of nationalists and advocates of Autarky(you decide whether good or bad). Protectionism although is prevents capital from flowing to highly developed regions to low developed ones, which capital is needed to build foreign industry, such is the case of Japan(ironic), Korea, China, Vietnam, and etc.

Pros:
Protects domestic industry from foreign competition
Holds wealth domestically
Gives citizens and companies of said country higher privileges in the market

Cons:
Furthers poverty in under-developed regions
Makes prices generally higher
Gives non-citizens and foreign companies lower chances in market

Does it not have to do with the evolutionary process of an economy ?
In some cases protectionism is preferred for a temporary measure as the economy would just be too hars for the people ?
But then again too much protectionism is no good for the economy and it people... As competition will decrease.

A fine balance between both is needed to guarantee to living standards of the people themselves.

[Full Spectrum]

Does it not have to do with the evolutionary process of an economy ?
In some cases protectionism is preferred for a temporary measure as the economy would just be too hars for the people ?
But then again too much protectionism is no good for the economy and it people... As competition will decrease.

A fine balance between both is needed to guarantee to living standards of the people themselves.

In the evolutionary process of an economy of a nation, yes and I agree on most of this. But protectionism when I was referring to furthering poverty is that protectionism tends to keep money in a closed system making the people rich in said country at the expense of people living in poorer regions of the world as their labour isn't paid for at all. Foreign investment causes economic growth in poor nations, a simple fact that even Krugman acknowledges.

[DhaniBoy]

protectionism in economic policy is not entirely a bad policy, there are some important points derived from the policy.
these points, among others: the policy can protect the domestic industry by raising taxes overseas industry and lowering taxes in the country. so that the domestic industry can be developed, labor can be absorbed more, and of course with higher levels of well-being, it is because the domestic industry employers do not have to think of a large tax payment ...
meanwhile with the policy, the government does not have to send its workers abroad with very low wages .... 

[yunkie]

If you were low IQ and from a poor family you would like some external help.

[Eastwind]

If you were low IQ and from a poor family you would like some external help.

That is not constructive.