Why the Concept of Economic Nationalism Does Not Work

by Laura Ehrenberg-Chesler on June 16, 2009

in blog,Crossvault Capital,Economic Indicators

The rush to protectionism continues to gain strength around the world.

First there was the provision in the stimulus bill.

Then, US politicians went on the warpath against foreigners with H1- B work visas. Workers in Britain have been protesting against foreigners, and Russia has placed a punitive tariff on auto imports.  History has taught us that protectionism is counterproductive, and can be particularly damaging to an economy in an economic downturn.

The Great Depression was characterized by multiple acts of protectionism. Then President Herbert Hoover virtually banned immigration and signed the Smoot Hawley tariff.

This protectionism, coupled with declines in global demand similar to the environment today, almost destroyed world trade and capital flows.

When a product is designed in the U.S., with R&D from Israel or Sweden, components from Taiwan, and customer support provided in India, the notion of Economic Nationalism, in the context of today’s global economy is fundamentally flawed. Disruption will take place because of the ubiquity of broadband and when needed, access to global transportation hubs.

Let’s hope our lawmakers come to their senses and begin to promote global trade rather than trying to stifle it.

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