How to Enrich a Country: Free Trade or Protectionism?

How to Enrich a Country: Free Trade or Protectionism?


One of the most pressing choices facing
modern economies is whether to adopt a policy of free trade or of protectionism, that is, whether to encourage foreign goods into the country with minimum tariffs and allow industries to relocate abroad; or whether to make it hard for foreign firms to sell their goods internally and discourage domestic producers tempted by cheaper wages in other lands. It feels like a very modern dilemma, but the debates between proponents of
free trade and protectionism go back a very long way. The argument began in earnest
in Europe in the 15th century with the formulation of a theory known as mercantilism the forerunner of what we today refer to as protectionism. Mercantilism was, like nearly
every economic theory interested in increasing a nation’s wealth. But, Mercantilists argued that in order to grow richer, a country had to try to make as many things as possible within its own borders Nd reduce to an absolute minimum any reliance on foreign imports. The role of government was to help local industries by applying huge tariffs on imported goods and discouraging foreign manufacturers from competing with local players. A strong country was one that knew how to provide for itself and could achieve almost total independence
in trade a goal known as economic economic autarky. The philosophy of mercantilism
reigned supreme as the most persuasive theory of economics until the 9th of March 1776 the publication date of possibly the most important book in the history of the modern world. In ‘An Inquiry into the Nature and
Causes of the Wealth of Nations’ the Scottish philosopher and
economist Adam Smith attempted to dynamite the intellectual underpinnings
of mercantilism. Smith argued that the best way for any country to grow wealthy was not to try to make everything by itself, for no country could ever hope to do well in every sector of an economy. Smith observed, that countries naturally had different strengths in particular areas Some were great at making wine, others had talent in pottery, others still might be experts at making lace and it was on such strengths that every country should focus. This was an application at the level of nations of a theory we can understand well enough at the level of individual life. If someone has a natural aptitude for accountancy, it makes no sense for them to spend a considerable part of each day trying also to make cheese, to sew their own trousers or to learn to play violin sonatas. Far better for the accountant, cheese-maker, tailor and violinist to specialize in
the areas in which they each have the
greatest advantage and then trade with others to satisfy their remaining needs. As Smith noted: “It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.” Smith emphasized that
if Britain could produce woolen
goods more cheaply than Portugal and if Portugal could produce wine more cheaply than Britain, then it would be beneficial to both parties to exchange the product they could make at a lower cost for the one they could only make at a higher cost. The overall wealth of both countries would rise as labor and capital would always be optimally employed, directed to those sectors where native skill and opportunity was at its greatest. The job of the government was to recognise sectors where there was a national advantage, assist in the education of the workforce, but otherwise, reduce tariffs as much as possible, and step out of the way. With astonishing speed, Smith’s theory convinced
most of the economic and political classes of north Western Europe. In Britain, his ideas were first put to a practical test in relation to the primary foodstuff of the nation: corn. Grain prices had, for many years, been protected by government decrees. Cheaper foreign grain had been kept out, apparently in order to protect jobs and national wealth. But Smith’s ideas, now driven forward
by his foremost disciple David Ricardo, proposed that all tariffs on imported grain protectionist measures known as The Corn Laws were in fact obstacles to economic growth. After bitter debates in Parliament, the laws were repealed in 1846. The result demonstrated both the advantages and incidental costs of Smith’s ideas: the price of corn dropped sharply, food became cheaper and everyone, especially the working classes, had a lot more spare money to spend on other goods, This, in turn grew the overall size of the British economy, so that it significantly outperformed all of its European counterparts. But – and it was a very big but large swathes of British agriculture went to the wall. Cheap imported corn, from Canada and the United States, destroyed farms and ways of life that had persisted
for centuries. Smith’s theories were both correct and, depending on where one was standing, plainly agonizing. An enduring problem for
the undoubtedly very sound arguments in
favour of free trade is that its human costs have seldom been addressed with sufficient passion and ingenuity. The cries of the dispossessed have not been recognised for what they are: threats to the entire stability and moral dignity of a nation. As has only gradually been realised, the benefits of an open economy can only properly bear fruit if a series of steps are taken to mitigate the attendant downsides. Any nation committed to free trade must tax the sectors of the economy which have an advantage and then use the money to retrain those in the sectors of the economy with the gravest disadvantages in relation to foreign competition. Without such redirection of money and labor a nation will become highly unstable politically thereby endangering any progress that free trade has made. Secondly, governments must enable everyone in the economy to find their own natural
areas of strength; which means high levels of
investment in education and a raft of measures to
maximize social mobility. Monopolistic behaviour by the rich endangers the integrity of a
free trade system just as much as punitive import tariffs. Intellectually, free trade has undoubtedly won the argument. When a Mexican worker can make a car for eight dollars an hour, whereas an American one costs 58 dollars an hour, it is clearly wise to allow Mexico to do what it can do best, whatever the effect on
American car workers. However, defenders of free trade have been grossly negligent when it comes to instituting the political programs necessary to support the efficient operations of the system. It has forgotten the pain of the car workers, the coal miners and the steel makers. And, in democracies, there has been a heavy price to pay for this neglect, in the form of the rise of a new class of mercantilists, who have successfully argued that barriers must again increase, that a country should try to make everything within
its own borders to regain its greatness and that cheap importers are invariably the destroyers of domestic jobs. These arguments make no sense, but so long as the proponents of free trade fail properly to articulate a program to remedy free trade’s operations, whole nations will be seduced by the easy promises of the mercantilists and will suffer accordingly until the distinctive wisdom of Adam Smith can once more reassert itself.

100 comments

  1. their is also a social aspect to the benefits of protectionism for that matter! stoping globalism and protecting national identity!

  2. the fact is free trade is a great thing when economies are equal or comprable. when a a more developed country's workers compete with a poor country's labor without prices for goods going down free trade is TERRIBLE. we have the proof from the past 30 years. we need tariffs NOW.

    more to the point. the VAT system IS a tarriff so the people that made this video are either lying or don't want you to realize the facts.

  3. By doing Free Trade with Poorer nations you legitimise Child labor, Low slave wages, No working conditions, No Workers Rights, No environmental regulations.

    instead of a race to the bottom i like a race to the sky's and race to the Top your put tarrifs to protect your follow country man jobs but you also put Higher tarrifs on those nation states that abuse Workers until they right their wrong, they increase working conditions for the Workers to your level.

  4. Liked everything up until 6:00mins in where School of Life prescribes a proto-marxist approach towards ensuring free trade works. I prefer libertarian logic over this statist shit.

  5. If I had to choose between tariff or sales tax I rather the corporation pay tariff instead. If I want to enter a stadium to watch a ball game I have to pay for the ticket to get in, instead of going on for free and make the players pay for my ticket to go see them play.

  6. I'm not an expert in economy, but I'd really like an honest answer to these… if protectionism is so bad, why is it that every developed country used it while developing, and still do in sectors that they're not competitive? Of course protectionism, per se, does not bring growth or prosperity, but can't it be used as a part of a successful strategy for development? And lastly, saying that protectionism is bad for the general economy ins't like saying war is bad for the economy (in the sense that while it is true, but it doesn't mean it won't be necessary if people starting doing it against you)?

  7. I am from one of the closest economies in the world: Brazil.

    Protecionism benefits few Enterprise creating Oligarchs and Monopolies. Its a trap.

  8. It's funny though, how critics of capitalism always say that it's capitalism that encourages imperialism, when it's quite clear that every argument for colonialism and imperialism is always grounded in mercantilism. This is why I kind of laugh at the liberals and sometimes even modern day Trumpists at places like Daily Kos, who somehow imagine that you can have a mercantilist world and a peaceful existence between weak and strong nations.

    There is a reason that protectionism and nationalism always go with one another. You only want to restrain or control people and nations that you deem threatening.

  9. One of the best explanations I've ever heard about the difference between capitalism and mercantilism:

    "Capitalism identifies a market and then tries to maximize profit within it. Mercantilism, by contrast, creates markets on purpose based on what it has to offer, and then controls those markets.
    "

  10. I think a better idea is to bring back #MadeInUsa( nationalistic pride) back to the States; increasing tariffs, keep importing those with exceptional skills into America, will increase jobs, wages, internal competition for cheaper consumer prices hence a win win for all Americans and will again #MAGA.

  11. I don't get it.
    Always I read that tariffs and protectionism (deadweight loss etc) are bad, but why do all countries do it?
    Its not possible that simply "everyone is stupid". Is it a Game Theory/prisioners dilema thing where if someone does one thing, you have to do same in order not to lose?
    I think there must be more to this then those oversimplified explanations…

  12. Wealth creation is not a zero sum game. A free market in labor is no different than a free market of commodities. Economies that grow are one’s that embrace natural market functions and incentives.

    The economic flow of international trade rises every voluntary participants standard of living. Owning capital and conducting trade on an individual level directly between parties isn’t disparaging, where as protectionist policy that stagnates local market growth is consequentially backfiring due to central economic planning forgoing creative destruction brought about by automation and innovation, as well as putting aside economic opportunity costs.

    Protectionism supports a coercive middle-man in an economically intervening nation-state, centrally legislating market restrictions that cause producers to go abroad to begin with, and facilitating subsidized services in a market where rulers choose winners and losers, thus perpetually creating in cycle the same circumstances the theory purports to correct.

    Free trade in its spurring of innovation and availability of products and resources succeeds where protectionism and market regulation fails even wherein its own intentions.

  13. Merchamtalism.started in Roman empire
    It came back in Venece and Mediterranean flourished .
    But there Is only so much that merchamtalism can bring on its own.
    Early US history was all about protections.

  14. Simplistic nonsense. Notice how free traders try to equate an agrarian world to today's manufacturing world. In agriculture natural advantage actually exists. In manufacturing it doesn't. When this fool (and Adam Smith et al ) talks about "best at" it means they're cheaper. Cheaper wages resultes in reduced aggregate demand. The USA auto workers at 58$ will contribute far more to the US economy than the 8$ Mexican.

  15. All totally correct, however you should mention the repeal of the corn act was also assisted by the results of the Irish famine, during which low cost corn was not permitted to enter the country. Protectionism causes significant misery – however its not noticed because those suffering had always suffered so we do not notice any change. I also like the previous comment, if the government and especially capital markets using fiat currency are psuedo-corrupt, the benefits of free trade is minimized.

  16. The US is so geographically diverse and so culturally diverse that the comparison between the archaic concept of mercantilism and modern US protectionism is comparing apples to Oranges. America can essentially afford protectionist policy because they don’t need goods from other regions due to their size and diverse landscapes. Especially considering that most other countries produce goods of lower quality than American goods.

  17. This really is spot on…adjustment assistance and re education is critical…. walls just block progress… Adam Smith was amazing … he also supports a strong government and civic society … good government that is….

  18. It's not an either-or question. Free trade on goods that make sense, protectionism on goods that don't; like goods dealing with national security, ie steel ect.

  19. I've literally not heard a single person arguing for protectionism state there should be a return of complete autarky.

  20. So why do people cry about government regulation cause if there was no oversight then corruption sets in and fouls the sysyem. Theres no way around it, government regulation is absolutely necessary right

  21. By having states shouldnt that work like a free trade system within our own country? We could be protectionist globaly, but internally free trade so then we reap the benefits of both worlds? Or am i missing something herr?

  22. We just treat the states like countries and trade with each other. I guess that would be a whole other form of government….or would it?

  23. Pure Laissez-faire Capitalism has the flaw that ultimately leads to wealth concentration and to totalitarianism. There can be no such thing as a pure form of unregulated free trade – there must be rules that limit the power of the wealthier countries and those countries with an overwhelming competitive advantage in some industrial or economic sector. International trade is a complex issue that completely eludes the simplistic solutions of both nationalism and rabid free traders. This requires a central government that imposes regulations – this avoids a Darwinian bloodbath of industries and of the individuals who make up the system and for whom the economy actually exists.

  24. But wouldn't the same arguments about a safety net apply not just to those workers displaced by free trade, but also to those displaced by Schumpeterian creative destruction in the same country? E.g. typewriter manufacturers displaced by word processers, horse-and-buggy industry workers displaced by motorcars, icebox industry workers displaced by refrigerators? Mercantilists thus have much in common with luddites.

  25. This video is like all the others in that it does not address the real problem. As the world (technology, AI, robotics) progresses there is less and less need for low to average IQ workers. This problem grows bigger every decade. There isn't enough free trade or protectionism (depending on your beliefs) that can deal with the fact that there are no jobs for people with IQs under 85. In 20 years there will be no jobs for people with IQs under 100. Imagine that world for a minute. In 50 years there might not be jobs for anyone. For free traders there won't be anything to trade, and for protectionists there won't be any money to run your Universal Guaranteed Income scams, because 50-90% of people will be unemployed.

  26. Free trade was free for everybody but for the United States. We have subsidized the world and we been lied to by our leaders, they sold us out. Everybody sold their goods freely in the United States and they shut us out from their markets. Keep talking about the logic and the benefits of free trade only fools people in that everybody is honest. Every country that trades with the United States have cheated and our leaders are incompetent and gutless to deal with it until Trump came along. Let's do tree trade. Let's get rid of all tariffs. How can EU justify charging 10% tariff on our cars when we are only charging them 2.5%? Maybe better question is how come we are not charging them 10% tariff on their cars?

  27. Good overview but wrong about the harmful effect of monopolies and about the need for, presumably, government programs to deal with workers who lose their jobs

  28. Free trade is murderous, take a look at Mexico. 12th economy in the world with 4th largest oil reserves in the world, GDP at 1.2 trillion. So what? Shall we forget the 60 million Mexicans that are living in extreme poverty?

  29. Free trade is great granted all other trading nations also lift their tariffs. But when you trade with other nations who impose tariffs on your exports, they have the advantage. They're allowed to dump their goods into your country without accepting your exports. So putting up trade barriers can act as temporary leverage to get them to take their barriers down. Obviously, you need to be one of the largest consumer nations (US) in order for this to work or the exporting country won't care. Also, the manipulation of currency by other trading nations creates other problems. Another issue probably unforeseen by Smith at the time is the fact that it's not always the foreign country producers who are manufacturing goods. Sometimes, its your own countrymen who set up shop overseas for cheap labor and low taxes, then try to export back to their home country for a massive profit, taking advantage of the lack of tariffs. Adding a tariff can then prevent that business leaving the country in the first place with the foreknowledge that you cannot manufacture and sell back to the home country. The cost imposed by the tariff must outweigh the amount that company will save by moving to another country. Any imports that do make it through with the added tariff, the government can use that tax revenue to subsidize exporting industries. I don't like any of this and wish that all countries would trade freely but that's not the reality at present.

  30. Free trade needs to be encouraged because, even though there are states that are able to produce most of the goods and services within their borders, NO state can produce all of the goods and services its needs within its borders. I like the idea of countries exchanging, for free, the surplus goods and services that they have. The regular global trade is, at the very least, restricted. As a matter of fact, I'll say it's halted. There's no real trade because those in the States are holding back what the world needs, such as air-to-water makers, canned or bottled oxygen, cleaning aids and/or tools and heirloom seeds (some of which are super foods). But interesting about the States, I just read something that they don't have a surplus of anything. And I know, for sure, they definitely DON'T have a surplus of food stuffs. So, they're definitely out of the free trade. Since those in the States are holding back regular global trade, the rest of the world should trade, FOR FREE, all the goods and services that they have in surplus. Free trade is not only free from the restriction of cost, but it is also free in movement. There's hardly anything holding states back when they're participating in free trade.

  31. A viable independent country depends of a whole variety of skills. When free trade entails those skills being lost to another country then in due course the first country becomes non viable as an independent country. Besides the loss of skills the workforce ends up with less choice of jobs and jobs that tend to be rather boring. That results in a dumbing down of the population and all sorts of escapism and social disintegration. In the UK you can see it all happening. Adam Smith warned that this would happen – "unless the government took steps to prevent it happening" which it doesn't. Of course if we are heading for a one world government non of that matters, for most there will just be a new form of slavery.

  32. Great video, but some points are wrong.

    "Monopolistic behavior by the rich endangers the integrity of a free trade system just as much as punitive import tariffs."

    This is untrue. You got it the other way around.

    It has been empirically proven that adopting free trade policies allows more foreign competition, which reduces monopolistic behavior. Ironically, it has been found that protectionist policies themselves are among the chief reasons for the creation of monopolies and oligopolies. Big business cannot exist without governmental privilege. The adoption of protectionist policies fosters environments where these very monopolistic behaviors thrive.

  33. The Brainwashing begins at 4:49 where objectivity goes out the window and a Seriously Naive and short-sighted opinion is dressed up as Critical Analysis & Logic..

  34. I like this part in the video. He says "Monopolistic behavior by the rich endangers the integrity of a free trade system just as much as punitive import tariffs."

    That's spot on! Import tariffs only increase the price of the raw material or good, and these prices are always passed on to the consumer, hurting mostly the lower wage earners, then the middle class, then the rich. So, say the U.S. places an import tariff on both aluminum and steel, cars will be more expensive. Also, mining operations in the U.S. will generate jobs, but it will also create more carbon emissions and contribute to climate change, and climate change hurts everybody!

    Now lets say the country that the import tariff was placed on creates an export tariff. This only drives up the price for the importer, because the exporter will pass that cost on to the importer. This in turn, drives up the cost even more and makes the cost of the automobile even higher. Now, because demand for the automobile will be lower because the price is higher, the mines in the import country will produce more if demand for the product is there. But if population is dying because of climate change and the mine is killing the automobile makers' customers, that equals less demand.

    Sometimes it's good to stay right where you are and don't start a fight that both sides will lose. In the case above, the importer tried to harm the exporting country. In retaliation, the export raised the price of that good again on the importer. The importer would have had a more stable market and sell automobiles to everyone because demand would remain relatively high. Driving that price up hurts the lower income bracket and sales fall away. And, due to more mines in the world, the importer has created jobs in mining, but that increased his carbon emissions, hurting himself and all of the world. Mr I-Don't-Play-Play nice, hurt EVERYONE!

    You can guess who will be the target of harsh words will be when climate change starts to take it's tole. It will be the county that fired the first shot! He refused to play in the Paris Climate Accord game, and he started a war.

    People are quick to temper! Play nice, and you'll have fewer regrets.

  35. The Brexit, French riots and Trump's presidency are somewhat related. The common thread is Globalization. Especially the movement of production of goods FROM the countries that consume the goods. Balanced Trade is OK but Free Trade ends with the family wage jobs drained out of the consuming country.

  36. There is a big assumption in this video – if you retrain people you will solve the job loss caused from increased open trade. This is an assumption because there is very little evidence to show that retraining programs work.

  37. The problem is, a third world country sells leather for 2 dollars and they import leather shoes for 30 dollars. How would you fix that?

  38. What? No, you don't have to train anyone to do anything. They can get a loan and go to a tech school or whatever they need to do on their own. You don't need a government involved anywhere in that.

  39. If you only buy a new car every 4 or 5 years is it beneficial to the whole country if purchasers save a couple of thousand on each purchase from a low wage manufacturing country but their nation loses thousands of "$58" an hour jobs? Even if you are not a car worker your potential access to a share of billions of dollars of auto worker wages being spent in country is lost while you might gain 1K a year from reduced car costs. Saving a $100 a week by having access to cheaper imported manufactured goods is not a good deal if you lose out on the chance to have a $40 an hour industrial job instead of a $15 an hour job in a warehouse full of imports. What I am saying is if local made goods are more expensive because of higher labour costs than imported items but you, and your countrymen, are employed in higher wage jobs producing those goods is free trade such a winning idea? Elsewhere in these comments people have mentioned how much of the cost advantage of imports is often at the expense of exploiting workers but there is also the environmental costs of shipping all this stuff round the World. China was a poor country which advanced rapidly by limiting access to it's own markets and exploiting free access to other countries mostly advanced nations. Interestingly these advanced countries have not "advanced" at all in the last forty odd years if you strip out the growth of their total debt, both national and private. Debt is just using tomorrow's income today and eventually that will have to end—in a bang. China has lately jumped on that band wagon as well. In short free trade has not achieved the growth that it is credited with.

  40. FAKE NEWS THIS VID
    VERY DANGEROUS ALSO, cuz it’s available in many languages.

    Reason and the only reason the west is rich is cuz of 1- hundreds of years of gunboat trade 2-hundreds of years of free slave labour 3- hundreds of years of absolutely looting other lands even the very word “loot” entered the English language cuz of some English army general went into a different but wealthy country, massacred the entire population and simply loaded ship after ship of that country’s treasury and goods, shipped back to England, they ask him back home what’s all this, he says it’s LOOTED.
    Similar did the others and same is doing USA NOW think all the free oil from Iraq that powers their industries think nearly free resources coming from other nations only for USA to demand that all the money which came from America has to be used to buy USA made ammo, guns etc
    Think big boys in the west changing other people leaders and installing a peace of trash by use of actual force or by threatening use of force if so and so is not done which favours them and them only? People are not all silly all the time but in the face of overwhelming force people are excepting subservient existence, and it’s not even secret western media says “ oh Americans can’t be expected to do so and so job, so let’s get people who will do this shit for us from a country A which we have looted and most likely installed our puppets on them, so now they are fleeing cup in hand they will do our dirty jobs just to survive.

    The only way every country can be rich is…if every country is truly free and absolutely safe from any and all threats.

    No fake independence no fake anthems no fake puppet leaders no fake flags no fake constitutions.

    They are rich because they are militarily powerful and people have the power to change bad leaders and bad decisions quickly and timely. It’s so difficult to see who is a free thinker and leader and not difficult to see a bad policy for what it is. Can you change a sitting French or American puppet who is only there because France uk or USA etc wants him there ? His obviously bad policy that makes his people poor and make his masters rich? Is he accountable for his decisions? Is he worried about his people and they will change him soon if he doesn’t come up with the goods ? Or will they keep him there and his shit decisions for 20-30-40-50 years and then replace with similar puppet?

  41. The best way to view free trade is not through national statistics prism that most protectionists adhere to. When viewing the advantages of trade not inhibited by government interventions and manipulations, you must view why the transactions are mutually beneficial to the parties involved, not how they will impact a false dilemma about trade deficits at the state level. Government isn't going to enrich the nation nor will it ever protect anything efficiently from an economic perspective. This is the lesson of 20th century geopolitics.

  42. you forgot the part where foreign workers come and replace domestic ones. so domestic workers don't have good jobs to buy the cheap good anymore.

  43. What the west does: encourage protectionism to gain wealth. Then when wealth is gained, encourage 3rd world nations to have free trade.

  44. Settle down with the "most important book in the history of the modern world", Ibn Khaldun described specialization and trade in this Al Muqaddimah hundreds of years before Smith, and used a lot of ancient Greek, Egyptian and Far East contributions to the field. Here's a good summary: http://faculty.georgetown.edu/imo3/ibn.htm. Westerners need to be open minded about contributions of other cultures that build the foundation on which the modern (remember the dark ages, when westerners were considered savages) western civilization was built upon.

  45. The fact that life in Britain changed rapidly is hardly evidence of a flaw in Smith's idea. It's evidence of just how effective it was. So, as much as I sympathise with anyone in the world, now or at any time in history, who has suffered hardship for any reason, I do not sympathise with the view that freedom is a flawed policy. On balance free trade made life for the ordinary Brit immeasurably better.

  46. I think both are important, don't be too into free trade to the point everything is outsource to you and don't be to into protectionism were you will basically be stuck in the same period for decades like every close of country in the world. Balancing the two is the way to go if you ask me.

  47. Meanwhile in the real school of life,

    British: We want wine.
    Portugal: We don't need wool.
    British: Warrrrrrrrrr…
    Portugal: wtf…

  48. The solution is Balance. Focus on producing what you have an advantage in while also trying to be as versatile as ur ability allows you to reduce dependence in countries with added advantage.

  49. I noticed, while watching this that the ill effects of Adam Smith's philosophy were down played. The term "learn to code" kept popping up in my head as the trite and condescending natural response to the economic suffering of others. In the US we have been fed a steady diet of free trade when all around us, the countries that we trade with, are heavily biased against our goods. How can you have "free trade" when your trading partners erect barriers to your own products? Now the free trade destroyed great swaths of the our manufacturing base they have turned their attention to open borders. The justification for this sounds very much like the defense of free trade. It will be great for businesses and the wealth of nations but it will stink for the average citizen. It's a good thing we can count on government programs to provide retraining and healthcare as well as bread and circuses.

  50. Like Marxism I suspect Smith’s theory works in an ideal world. We don’t live in an ideal world.

  51. i believe the answer is both and it should be based on jobs and industies by each state we should pick and choose which industries are protected based on employement oppurtunities and profits provided to a whole state and be prepared to change industries in a state as needed example coal country should switch to windmill country with support from us government to retrain its people

  52. Seemingly, protectionism only occurs when free trade fails during its implementation, whether due to bad or unethical decisions.

  53. Free trade will only work if both parties bought and sold equal amount of goods to each other.
    Otherwise, it might as well be like how China keep sucking the money out of US and everyone else.

  54. Not sure the example of car production in Mexico is a very good one, since I suspect that's largely due to American auto unions. Employee benefits aren't really a comparative disadvantage, otherwise you have a drain of resources to the nations with the lowest labor protections.

  55. no such thing as protectinism there is free trade or controlled trade and controlled better ask china n japan dont let the bankers make a salve plantion of your country by using forign labor n importing aliens fight for your nation and make it strong

  56. Wow, what a fantasy. Thank God the founders ignored Adam Smith and founded the country on protectionism. The founders passed the first Tariff Act in 1789,. By 1830 the tariff was average 61%, and that was on 92% of everything entering the US. Under protectionism America produced the greatest manufacturing economy in history, that produced a middle class that was the envy of the world.

  57. America was built on Protectionism. Tarrifs and the encouragement of domestic industry made us rich. If you have tarrifs, you don't need an income tax and so people can invest and grow the economy by saving.

    All the developing nations that gained economic success, like Japan, Korea, Taiwan, were only able to grow their economy in the 20th century through protectionism.

    Also, this is revisionist history. Adam Smith was never very influencial compared to economists like List– whom was extremely influencial in America.

    Also, Smith was only working with the model at the nation state level. His models don't scale up to the world wide level where there are huge disparities on the cost of labor.

    Free trade works wonderfully within a regional market, up to the nation state level. But when you scale up beyond that, it just doesn't work for the whole of society.

    This doesn't mean you have to have a total autarchy. But every nation should strive to produce most of what it can. Protectionism can mean you simply tax foreign goods, autarchy literally means the nation is 100% self-sufficient. So it's an exaggeration to say that protectionists want an autarchy. It's about maintaining balance and protecting vital industries for the overall social health of a nation. It's Nationalist in nature, not simply about maximizing profits.

  58. I do believe in free trade. Though I don't see why a bit of protectionism policy can't also be done. It seems it should be about balance and not one or the other. Especially considering a large reason certain nations can do things "cheaper" is because they exploit their workers. Which apparently we don't bring up when talking about why those countries can do things cheaper. Its an economic system built on basically slavery.

  59. Interesting video but lets not forget that import tariffs were the main source of the US budget income from the revolution until 1913. Many people say that US developed its industry due to these tariffs. Abraham Lincoln was quoted "“Give us a protective tariff and we will have the greatest nation on earth".

  60. Both are bad ideas if you use only the pure form of one. You need a mix of both, you need tariffs to protect local producers to not only protect jobs, but to also protect you country from future sanction that my cripple you economy. But you also need the tariffs low enough so that international markets can compete against your local markets on an even plain to encourage competition.

  61. Regarding the ongoing U.S.-China trade war, my logic is this:

    "Protectionism towards our nation's enemies! Free trade towards everyone else (friend or otherwise)!"

    "Those who conduct protectionist measures against us are our enemies."

    "Therefore, we must implement protectionist policies towards those that do so to us."

    Ultimately, I believe a balanced and discreet approach between free trade and protectionism would be best for our economy.

  62. Offshoring your your labor is a wonderful idea, until you realize your labor is also your customer. How does it serve you to make your customer poor?

  63. Depends. That really is the best answer. Anyone expecting a straight forwards one is an utter idiot. Free trade only works if you already have a strong domestic market competitive enough to endure against other internationals. Otherwise it will get crushed by other companies who have more experience, and are already used to competing globally. Anyone arguing balance ask them to further explain exactly how balance will work?

  64. This discussion is all well and good, but the problem is that the person discussing it has an English accent. Any American good enough for the role?

  65. seems to me the problem wjth protectionists is that they fail to know how to properly adapt to situations. If they have an issue with foreign industry destroying their jobs why not just try to outdo the competition then? This nonsense about fairness reduces the incentive to improve.

  66. This is totally logical if all was done with each country having its own banking and money printing system backed by precious metals, gold and silver. THE FREE TRADE SYSTEM cannot work financed by a private central banking system backed by welfare through the taxation of labor.

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