Tuesday, February 03, 2009

Protectionism Built in to the Stimulus Bill: What We Can Learn From Ferris Bueller

"In 1930s, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression." - Ben Stein as the economics teacher in Ferris Bueller's Day Off

Conservatives and Liberals throughout American history have made various efforts to protect American business interest using economics tools, like taxes, tariffs, and quotas.
Maybe they were doing it to keep campaign promises, maybe it was xenophobic, maybe it was to protect unions, or maybe it was to pick up votes for upcoming elections.
But under most circumstances, any form of protectionism is typically deemed, with perspective, to have been detrimental to creating economic growth.

Personally, I'm not a big fan of the way these stimulus bills are crafted as they pass back and forth between the senate and the house getting bigger and longer with more local and national special interest and agendas getting added with every line and minute the bill remains unsigned.

Despite the fact that American citizens are going to take on an incredible debt burden, I think one of the biggest long term effects of this legislation will be the way protectionism could get built into the bill.

It's a tricky subject, because I understand and even appreciate the mindset of the bill that might require all materials that are part of the capital spending to be American made.

I think the idea makes sense, in the fact that it's American tax payer dollars being spent to create American jobs and spur on the economy.

The biggest problem that American efforts at protections could spur other countries to develop protectionist policies that could deter beneficial and favorable trade arrangements. Why waste American dollars on products that we cannot make efficiently, when another company in another country makes a better more affordable product. Similarly, it would be unfortunate to see quality American products not to have an opportunity to compete in the world economy due to counter-protectionist policies.

Related to this, as America is involved in many battle fronts and is trying to encourage democratic development, the policies of protectionism have a better chance of damaging new and frail democracies, that in turn could create long term strain on international relations.

It is natural to have a knee jerk reaction to want to see policies that encourage domestic commerce over international commerce. Just as Republicans pushed for policies of protection during the Great Depression with great failure, I hope in our current economic times, protectionist policies are limited. Instead, I'd prefer efforts are put in place to help American companies compete in the global marketplace with quality low cost products.

Give people, worldwide, a reason to buy American.


Grete said...

That's crazy - I just heard a whole segment about that on NPR this week, and they even used the Ferris Bueller clips, too! :)

Jamie Dawn said...

I haven't even thought about protectionism and it having a role in this huge spending bill.
I just know that I do not want a huge spending bill to pass. It should be a genuine stimulus bill that will have an immediate impact. It should be chock full of tax cuts for businesses (who hire people which is what we need), real estate, and the middle class (as Obama promised). The big spending is a big mistake.
Good post.

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