Twitteretter

Modern economic theory, á la Friedman and Hayek, would have us believe that protectionism is bad. As citizens, we are quite conditioned to buy into this idea. But it is a red herring. Protectionism is bad or good depending on perspective. It is bad for the most developed economies, as it prevents their companies from accessing other markets, winning them and sending the resulting loot back home. Fledgling competitors in less developed countries cannot stand against fully grown industrial or commercial giants. But, for less developed economies, protectionism is the only way to successfully foster own industries. A great current example is the birth and growth of WeChat, Ali Baba, Lenovo and Huawei in protectionist China, not replicated in the EU, which opened up its markets to the US giants and has not developed a competitive chat app, search engine, marketplace or computer manufacturer. We gave away the crown jewels of the future economy to an apparent friend who may turn out otherwise...

In the last few weeks, amidst difficulties to procure PPE and ventilators, amongst others, experienced by all countries, a school of thought has started to gain traction. We got it wrong with globalisation and need to bring back to each country the manufacturing of strategic or critical goods. This is a natural kneejerk reaction to current difficulties, but may not be very smart. Globalisation is the global implementation of division of labour, by which we all become richer by each community manufacturing goods they have the capability and skills to manufacture, gaining from scale and concentration of labour and with supply chain contributing to GDP. Should we give that up to avoid this situation again? What is the sustainability of many companies in many countries making goods we may not need for many years? What we need may be rather a more geographical sparse supply chain for these goods and a better legal framework for fair supply in times of crisis. May be too civilised for us ye...