Praise for protectionism

October 10, 1997|By Mark Weisbrot

WASHINGTON -- President Clinton's quest for ''fast track'' authority to negotiate new trade and investment agreements is not going very well.

About the only thing he has going for him, besides big money on his side, is that opponents can be scorned as ''protectionists.''

It's an interesting phenomenon, how this came to be such a dirty word. Surely it cannot be a result of our own economic history; the huge tariffs on British textiles were vital to this country's early industrialization.

The continued protection of Northern manufacturing was a major cause of our Civil War, with the Southern slave owners unsuccessfully attempting to hoist the banner of free trade. And we maintained that protection well into the 20th century.

The experience of the rest of the world provides even scantier support for the notion that ''protectionism'' should be regarded as a vile epithet.

The fastest-growing economies in this half-century have been China, South Korea and Japan, which have zealously protected their domestic markets.

Few imports

South Korea, which has come as close as almost any underdeveloped country in this century to approaching the income levels of the developed world, still imports less than 1 percent of its autos.

But memories are short and knowledge of economic history apparently scarce. All it takes is six years of cyclical upswing in the United States, and the Japanese economy in a sling, to convince the opinion-makers that a free-trade free-for-all is as natural and inevitable as the seasons.

Those who would question the logic of a global race to the bottom are written off not only as protectionists, but as dinosaurs and demagogues crafting an appeal to the ignorant.

The converse is also generally accepted: A belief in the virtues of free trade and globalization has become a badge of the educated elite, who fancy themselves as having learned something about ''comparative advantage'' in their college economics courses that the unwashed masses are just not intellectually capable of grasping.

How, then, to describe the absurdity that most Americans must suffer an absolute decline in their standard of living in order to ''compete in the global economy''?

Harvard economist Robert Lawrence says we cannot pay $10 an hour for "unskilled" labor in a global economy; in fact, he says, no nation can.

Is that so? How is it that we could afford such wages 15 or 20 years ago but not now?

Productivity has been growing every year. That means that we can produce more goods and services with the same amount of labor-hours. Which means that we should all be able to buy more goods and services, or more leisure, each year.

But we can't, or at least the majority of us can't. Median wages have actually declined over the past 24 years. That one statistic speaks volumes about the net benefits of globalization.

The globalizers claim that cheaper imported goods will more than compensate for the disruption and downward pressure on wages caused by increasing international trade and investment.

This trade includes, of course, what is produced overseas by our own multinational corporations like Nike, who pay $1.60 a day to their workers in Vietnam.

But it hasn't worked out that way. A declining real wage means exactly that whatever benefit we have gotten from cheaper imported goods has been more than canceled out by other forces that include runaway factories and increased global competition.

Of course, the upper 5 percent of America has done quite well in the age of globalization, and this goes a long way to explaining how we have reached this sorry state of economic analysis.

These are people who are mostly insulated from global competition, and ''protectionism'' for them is seen as quite benign.

Take the recent decision of the federal government to pay the nation's medical schools some $400 million to train fewer doctors.

It seems that doctors' salaries, which average $170,000 and reach more than $500,000 for some specialists, have been threatened by an ''oversupply'' of physicians. So we have to pay the medical schools to reduce this supply, as we used to pay farmers not to grow corn.

One would think that this would arouse the indignation of our brave champions of the free market. They should denounce this needless intervention, and point out the obvious benefit to consumers of letting market forces work their magic on the salaries of doctors. No such luck.

Such is the double standard that goes unnoticed in the debate over globalization.

The rich will maintain their protection, and transnational corporations will actually increase theirs as new rights and privileges are carved out for them in international trade and investment agreements.

The harsh, unsparing discipline of the free market applies to everyone else, who must learn to sink or swim in the ''new global economy.''

Mark Weisbrot is a research associate with the Economic Policy Institute in Washington.

Pub Date: 10/10/97

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