Trade protectionism and cartels threaten democracy

Andris Piebalgs, Member of the European Commission in charge of Development, went to Asunción to represent the EU in the ceremony of inauguration of Horacio Cartes, who was elected President of Paraguay in April this year. (EC Audiovisual Services 15/08/2013).

Andris Piebalgs, Member of the European Commission in charge of Development, went to Asunción to represent the EU in the ceremony of inauguration of Horacio Cartes, who was elected President of Paraguay in April this year. (EC Audiovisual Services 15/08/2013).

Trade protectionism is a very dangerous medicine for economic illnesses. On most occasions it is like a drug that kills the pain and the symptoms but at the same time it dilutes the possibility to cure the illness that causes them. If an economy loses its competitiveness in a certain sector or in the entire productive machine, protectionism is usually the first cure that the administration and the government put on the table.

Incidentally the European Commission published yesterday a report on trade protectionism across the world. According to it “There has been a sharp increase in the use of measures applied directly at the border, especially in the form of import duty hikes. Brazil, Argentina, Russia and Ukraine stand out for having applied the heaviest tariff increases”. It’s not by chance that in all those countries their bigger or smaller democratic deficit goes hand by hand with the protectionist attitude in applied economic policies. The common denominator is that all of them suffer from a pronounced ‘statism’ in politics and the economy.

At the beginning protectionism has no political cost internally because foreign producers do not vote in the country. On the contrary it ‘sells’ easily under a nationalistic banner. At the same time however it undermines slowly but surely the abilities of the local producers to become more competitive and stand out in local or foreign markets. Protectionism is also an addictive drug and usually the patient needs all the time increased doses.

Then a time comes when the commercial partners of the protectionist country decide to do the same. It’s not exactly a trade war but the consequences are equally devastating. At the end of the day international trade is drastically reduced and every country produces only for internal consumption using expensive resources and outdated technologies. The higher cost to produce more internally, leads invariably to a fall of the overall output after some time because consumers cannot afford to pay dearly for everything.

From protectionism to rationing

If the logic of protectionism is dragged to its limits then a large part of the home markets becomes ‘black’ with smugglers of cheap foreign products gaining the advantage. Then severe administrative measures are needed and the inadequate internal production ends up being rationed. This is the end and the country will soon collapse not only economically but politically too.

Argentine and Venezuela are the closest examples of this process. The monetary part of the Argentinian crisis was the last act in the sequence. After years of protectionism and inadequate internal production to cover the needs of the country and increase exports, the government tried to maintain artificially the parity of the peso with the dollar, in order to indirectly subsidize the internal consumption of imported products. A negative external account however brought soon internal monetary disintegration and crisis.

Still today Argentine is trying to restart its economy on the same protectionist principles and the small success it achieved during the past few years cannot be attributed to a betterment of the economy and an increase of internal productivity. It was the rise of raw material prices in international markets that helped Argentine, because the country is well endowed in this domain. But this blessed with abundant natural resources country can today barely feed its population.

It is true that the abundance of natural resources in many countries has become a ‘curse’, because it nurtures a rentier attitude to the local elites even to entire populations. In Argentine and more so in Venezuela this tendency led to ‘populist’ politics and semi totalitarian rule promising everybody to live as a ‘rentier’ on a public employ’s salary. In Venezuela where an army officer, the late Hugo Chavez, governed the country as President for fifteen years, promising everybody to live like a rentier. The result is that this country also blessed with huge deposits of oil, coal, bauxite and even gold to barely be able to feed its people. Both Argentina and Venezuela applied and still impose severe trade protectionist measures, while the governing elites cultivate also a chauvinist and xenophobic attitude in politics and the economy, to facilitate the longevity of their closed political systems.

Democratic deficit

All in all the free economic play needs also a free political system. The problem is that our world doesn’t suffer only of ‘statism’. Our free and democratic western economies are now threatened by the alarming trend for more and bigger monopolies and cartels in key industries. The latest acquisition of Vodafone’s operations in the US by Verizon for $130 billion stands out in this respect.

Protectionism and ‘statism’ in the developing world and monopolies and cartels in the West present increasing threats to democracy and the economic liberties.

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Draghi drafts a plan to donate more money to bankers, the era of ‘money for nothin’ is flourishing

The New Year 2016 will not be benevolent to Europe

The ethics of the Medical Technology Civilisation era

You might soon be travelling without a passport – this is how

How will the EU face the migration crisis when the Turkish threats come true?

Youth2030: UN chief launches bold new strategy for young people ‘to lead’

Security Council urges countries to factor child protection into conflict prevention efforts

The Netherlands is paying people to cycle to work

Tsipras imposes more austerity on insolvent Greece; plans to win new early election soon

These clothes were designed by artificial intelligence

The Changing Scope of International Economic Relations – Chinese Leadership in the 21st Century

How China’s sponge cities are preparing for sea-level rise

‘Business as usual’ will not achieve global education goals

GSMA Announces First Keynote Speakers for 2019 “MWC Los Angeles, in Partnership with CTIA”

WHO supports measles campaign targeting millions of children in northern Nigeria

EU Parliament: A catastrophic crisis management by European leaders

Does May have enough time in Parliament to table a soft Brexit deal?

FROM THE FIELD: West Africa’s wishful gold diggers

Mexico: Helping refugees go into business, a ‘win-win situation’, says UNHCR’s Grandi

A Sting Exclusive: Disaster risk resilience, key to protecting vulnerable communities

Eliminating waste at scale – eight opportunities for blockchain

A challenge for inclusion in the Dominican Republic’s health care services

Why press freedom should be at the top of everyone’s agenda

EU-Western Balkans summit in Sofia

Greece may offer to China a European gateway

This South Korean company has built a 5G search and rescue airship

‘Race against time’ to help women who bore brunt of Cyclone Idai: UN reproductive health agency

‘Vaccines are safe’ and save lives, UNICEF declares, launching new #VaccinesWork campaign

UN chief appeals for calm as Mali presidential election draws to a close

This 12-year-old built an underwater robot to fight plastic pollution

FROM THE FIELD: ‘Race is on’ to halt biodiversity loss in Indonesia

The implications of Brexit on European business, youth entrepreneurship and junior enterprises.

What matters most to young Europeans?

Why Climate Change Matters for Future Health Professionals

‘Negative forces’ at work in DR Congo threaten ‘largely peaceful’ relations across Great Lakes region, says outgoing UN envoy

At this ‘critical moment’, UN chief urges anti-corruption conference to adopt united front

Why Eurozone needs a bit more inflation

South Eurozone needs some…inflation and liquidity

EU crisis aggravates structural differences, threatens cohesion

‘Fire-fighting approach’ to humanitarian aid ‘not sustainable’: Deputy UN chief

World ‘not yet on track’ to ensure children a better future: UN rights chief

Here’s how to achieve growth in the Middle East and North Africa

How much time has the ‘European Union of last chance’ left?

Main results of G20 summit in Buenos Aires, Argentina

WEF Davos 2016 LIVE: “If we do not do properly the Paris agreement, then all 16 remaining goals will be undermined”, UN Secretary General Ban Ki-moon cautions from Davos

The Next Web 2014, the biggest European conference on Internet so far and the Absence of Brussels from Amsterdam

Sustainable Development Goals: making the world a better place

Advanced economies still have plenty of work to do to reach Sustainable Development Goals

Does EURES really exist?

UN commemorates International Day of Solidarity with the Palestinian People

Ethiopia planted 350 million trees in a day. And its fight against deforestation does not stop there

Lack of access to clean water, toilets puts children’s education at risk, says UN

Volkswagen scandal update: “We want clarity fast, but it is equally important to have the complete picture”, Commission’s spokesperson underscores from Brussels

Eurozone’s sovereign debt not a problem anymore?

Marginalized groups hit hardest by inequality and stigma in cities

Is there a cure for corruption in Greece?

Here’s how blockchain could stop corrupt officials from stealing school lunches

Draghi’s 2018 compromise: enough money printing to revive inflation and check euro ascent

UN chief urges peaceful, free and fair elections in Cameroon

Transparency and tech together can safeguard taxpayers’ money

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s