Dubious Defense of Protectionism

I recently came across an interesting article in the French magazine Marianne by Maurice Allais, the sole French Nobel Prize winner in economics (1988). The article is titled "Contre les tabous indiscutes", which literally translates to, "Against Unmentionable Taboos". As the title would indicate, it is a defense of what he perceives to be "unmentionable taboos". One such defense, that I will discuss here, and find particularly problematic, is that of protectionism.

Allais claims that protectionism has been deemed taboo as a result of the G20's doctrinal approach to free trade. He proceeds to counter this taboo while outlining both good and bad forms of protectionism. For Allais, bad protectionism occurs between two countries with similar incomes, while good protectionism occurs between countries with disparate incomes. For Allais, good protectionism is justified by wage and production cost disparities. He doubts higher income countries' ability to compete with lower wages in developing countries. He cites the vast outsourcing he believes is causing French unemployment to rise, and what he vaguely terms "aggravated social situations". Allais argues an absence of his brand of protectionism will destroy industry in richer countries, sending unemployment skyward. In addition, Allais contends developing countries will be helped as they will not have to deal with corporations leaving as soon as wages rise.

As a Frenchman, Allais' primary concern appears to be rising unemployment in France. While his concerns are normal, his responses to and prescriptions for these concerns are misplaced. At one point in his article, Allais points out that free trade is not an end in and of itself, that it is simply a means to an end. This is true, yet Allais fails to recognize this same notion with respect to French industry. At one point, Allais writes, "To me, it's scandalous that companies close sites in France, only to open new ones in areas with lower costs." For me, this is not scandalous at all; in fact it makes sense. Allais ignores a critical aspect of capitalism: creative destruction. Capitalism in operation is never in stasis, resources are constantly shifting, and this includes industries. To think there is some normative set of industries for a certain country is to miss the quintessence of capitalism. The apt response is not to give a crutch to a specific industry, but to shift to new industries, new sources of comparative advantage. If Allais feels government action is necessary, perhaps his government can promote and expedite innovation, smooth the shift to something new.

Allais paints a picture of a future France devoid of industry, with millions of French out of work with nothing to do. This is a static view of economic reality. Are those millions unemployed not free to find work in a more competitive industry, perhaps start their own business, or learn new skills? In other words, adapt? Protecting inefficient domestic industry helps a specific industry in the short-run, at the expense of future economic competitiveness and standard of living. While this trade-off may sound abstract, future economic uncompetitiveness can manifest itself in many forms; including the unemployment Allais fears.