A Defense of Protectionism

Two articles today, the first found here was by Edward Glaeser and dealt with Minimum Wage issues. He correctly states that excessive Minimum Wage rates lead naturally to high levels of Unemployment among the Poor. He attempts to explain Minimum Wage law devolves to impact the Employers of low Wage labor, who often deal on very narrow Profit Margins, and as well; have a Clientele which is less Income fortunate, unable to bear unreasonable increases in Prices for Goods and Services. The Glaeser argument is very effective, plus well written.

The basic Need to rectify the adverse consequences of a Minimum Wage law is to redistribute the impact across all Employers, not leaving it to crush Employers least able to pass on the Tax Impact to Consumers. The Answer lay in the establishment of Regional Labor Pools, where all Employers were taxed on the largesse of the Wages paid in the Operation of their Business (I would suggest a Percentage tax based upon the Progressive Tax rates of the Income Tax system; and systematically redistributed to Minimum Wage Earners on a monthly Time sequence). Economists will state that such a system would be too complicated, too restrictive of economic growth, and eventually devolve into a tax upon highly-Skilled Labor. I would respond that a Percentage system is relatively simple of implementation, will not inhibit economic growth if the Percentage charge remains below 10 percent throughout the range of labor Incomes, and that Labor and Consumers wind up paying all Taxes anyway, one way or another.

Dani Rodrik and Paul Krugman almost make me feel paranoid, compelling me to issue some Statement in defense of Protectionism. Most of evils connected with Protectionism will never occur in any environment of intelligent economic policy in the first place. Modern Economists would like to avoid the pitfalls occasioned by Business being faced with artificial Charges in the Production process. They believe these pitfalls can best be avoided by multi-lateral Trade treaties. Here is where there is a parting of the Ways.

Multi-lateral Trade treaties prevent the negotiation of bi-lateral Trade treaties of Advantage; the later the excellent vehicle to adopt not only Ricardian Comparative Advantage, but also Advantages of Economies of Scale and secured resource Advantage. Poorer nations are best protected by bi-lateral Trade treaties in the security of a stable Market. Rich nations secure Capital investment not only of the Costs of Production facilities, but also the Costs of Marketing and Distribution through a secured Market, by the realm of bi-lateral Trade treaties. Multi-lateral Trade treaties inhibit the advantage of secure Transaction markets, through forcing Market competition within economies poorly situated to engage in advanced Marketing structure; a situation which often actually destroys previous Ricardian Comparative Advantage. A simple Tariff system, without any Treaties at all, can serve equally as well to insure that the domestic economy receives fair payment for their production, and taxes the unwarranted draft of resources internationally by venue of excess production capacity. lgl