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> economic theory says protectionism makes the pie smaller for everyone This theory is really lacking when it comes to modeling the effects of real world prote
by groestl 8y ago
> economic theory says protectionism makes the pie smaller for everyone
This theory is really lacking when it comes to modeling the effects of real world protectionism.
Imagine a country A, with all the natural resources, a country B, with a well developed pharma industry, and a country C, hosting an industrial sector.
Without protectionism, the pie might be large, but most of it is allocated to country B and C. Country A ends up with depleted natural resources, no factories, and a trade deficit which denies them access to drugs and industrial goods.
With protectionism, country A can manage their trade deficit, which allows them to bootstrap the industry it direly needs as soon as all their natural resources have been mined and exported.
- skookumchuck 8y agoIf that were true, when we impose sanctions and embargoes on countries, their economies would surge.
- groestl 8y agoIt's readily visible that Country A wouldn't go anywhere without trade, so I don't know why you would think that sanctions and embargoes (which are actively hostile to a country's economy) are a drop-in replacement for protectionism in the model. There are a trillion ways to tie your shoes wrong, and only a handful ways to do it right. It does not help when the one who does the tying is the one who wants you to fall.
- skookumchuck 8y agoThey can always trade their labor and offer a business-friendly legal environment. They can also borrow money to start businesses.
- balladeer 8y agoYou don't even have to use a hypothetical scenario. You just described the Indian state of Jharkhand in "A". Extremely rich in natural resources, as underdeveloped and exploited as it is humanely and inhumanely possible overall (yes, there are small pockets like Tata Nagar but that's about it).