As the worldwide recession unfolded, an increasing number of cries for protectionism appeared. When times are tough domestically, people often respond by demanding protection from foreign competition to protect jobs. When everyone does this, things get worse (such as during the 1930s). A quick skim of the news suggests that protectionism has risen over the past few years. The Global Trade Alert claims hundreds of instances. However, Dani Rodrik questions whether protectionism has actually risen. He writes
Moreover, we do not even know whether these numbers are unusually high when compared to pre-crisis trends. The GTA report tells us how many measures have been imposed since November 2008, but says nothing about the analogous numbers prior to that date. In the absence of a benchmark for comparative assessment, we do not really know whether 192 “protectionist” measures is a big or small number.
Given the short time period, it is hard to distill a trend. He also argues
The reality is that the international trade regime has passed its greatest test since the Great Depression with flying colors. Trade economists who complain about minor instances of protectionism sound like a child whining about a damaged toy in the wake of an earthquake that killed thousands.
I agree. The 1930s have not reappeared. He claims that “ideas, politics, and institutions” are the reasons for the lack of increased demand for protectionism. In true Rodrik-style, the welfare state prevented demand from rising.
But the relative docility of rank-and-file workers on trade issues must ultimately be attributed to something else altogether: the safety nets erected by the welfare state. Modern industrial societies now have a wide array of social protections – unemployment compensation, adjustment assistance, and other labor-market tools, as well as health insurance and family support – that mitigate demand for cruder forms of protection.
Social welfare programs diffuse protectionism by reducing the costs of losing a job. Maybe. But I wonder if it also a result of human capital accumulation that allows people to change careers more quickly than they could in decades past. Losing a job then would not have the same expected costs.
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