Protectionism: Peston provokes but gets it right
In a recent post I wrote that the view, as espoused by Stephanie Flanders, that protectionism did not cause the Depression would be used by those seeking to promote protectionism today. And so it has proved. I have heard this argument now made a number of times in meetings I have attended and, most disappointingly, it was made by The Guardian’s Larry Elliott in a rare off-form moment. And the economist Ha-Joon Chang makes a similar if more considered appeal for “limited protectionism” also resting on the same historical argument.
Most worryingly, there is a real confusion emerging between the understandable call for developing countries to be allowed to nurse their infant economies to maturity behind barriers before exposing them to the harsh world of global competition and the far more dangerous belief that protectionism is an appropriate response by advanced economies to the current crisis.
So it’s good that Robert Peston has today challenged the current perilous flirtation with protectionist measures with a blast of open-minded sense. Rejecting the notion that protectionism played no part in the problems of the 1930s, he makes it clear that free trade between advanced economies can not only break down national prejudice but offers a way out of this crisis if done right. By contrast, he rightly asserts that protectionism and nationalism are close bedfellows.
His conclusion that we should open our doors to Chinese ownership of Western assets is provocative but should also give genuine progressives some food for thought. Definitely worth a close read.