Protectionism Is About Much More than Nationalism

Freedom fighters around the globe are aware of the rise of new and serious attacks against free trade. There are bilateral agreements that “harmonize” regulations and may favor crony capitalism, European agrarian policy tariffs that protect farmers, alt-right and populist nationalists claims against delocalization of companies, and so on.

This short list of examples, reminds us though that protectionism is not only an issue of populist nationalist parties that stem from rivalry among nation states and fear of foreign “enemies.”  They do not necessarily stem from nationalistic concerns, but may simply be a result of ordinary special interest politics as with the Common Agricultural Policy which which subsidizes European farmers to produce crops which are often grown more cheaply in developing countries.

Unfortunately, many people continue to be unaware of the multitude of lesser cases of commercial protectionism, based on regulations that are designed to benefit guilds or some specific type of commercial interest.

What is protectionism?

A protectionist measure has the aim of shielding a business or industry from the spontaneous changes in the market that could affect it.

Unhampered markets, as Mises pointed out in The Anti-Capitalist Mentality, rely on market “democracy” because consumers and companies are free to exchange products and services. Thus, each market action is a referendum on the value of each business or industry.

There is no top-down effect, but pure spontaneity built on voluntary actions. However, consumers can change their minds about any specific business at any time. The reasons are diverse: there may be a more cutting-edge product offered elsewhere. Consumers may perceive quality to be higher with competitors. New entrepreneurs may be able to offer lower prices. Some companies may response to these challenges with new innovations of their own. Though others may prefer to do nothing mroe than demand government “protection.”

Business “guilds” — to use a European term — have evolved from the status of pre-Christian Roman mutual aid networks to groups of people dedicated to the same craft who seek government-granted monopolies. These government-granted favors grant them a reprieve from the discipline of the marketplace.

This is the way it works:

First, consumers might become keen on services like BlaBlaCar, AirBnb, Uber, Chicfy, Amovens, SocialCar and Cabify. These services provide what consumers perceive to be less expensive, and often higher-quality, services.

But taxi drivers and hotel owners feel threatened by these new producers, so they seek to outlaw the competition by declaring short-term rental apartments and non-licensed taxi services to be illegal.

Other attempts at outlawing competition include “Sunday shopping bans.” In some cases, advocates for the ban are motivated by religious considerations, as in Poland.  With the exception of religious case as it has happened recently in Poland, left-wing governments are totally skeptical towards liberalization of shopping in general. In Spain, for instance, governments continue to restrict shopping hours to benefit certain groups of small business owners who don’t want to compete with larger businesses that can better provide services seven days per week.

Naturally, these policymakers don’t trust the shoppers themselves to shop when it best suits them, or to choose to restrict their shopping to smaller retailers, should they wish.

Ultimately, though, every refusal to liberalize options for consumers faces one unbeatable foe in the form of e-commerce as provided by companies such as Amazon and Zalando.  Political restrictions on local merchants will only help to drive even greater profits for e-commerce merchants as shoppers are forced to do business online when stores are closed by law on Sundays. The restrictions only destroy jobs and put obstacles over the growth of brick-and-mortar companies seeking to better serve consumers.

Ángel Manuel García Carmona is a Student of Computer Engineering at the Open University of Madrid (UDIMA).


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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