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The different variants of protectionism

Freedom as a Social Project

The different variants of protectionism

  • What is protectionism?
  • The "pillow" of customs protection
  • The customs of competitive examinations
  • Labour protectionism and anti-immigration laws

What is protectionism?

Protectionism is one of the most significant manifestations of unfreedom, and one of the most durable. To understand it, we must recall that competition is naturally imposed on human beings by the finiteness of available resources. This scarcity creates a need for acquisition and distribution, which can be achieved either by contract or by politics.
Bastiat identified the fundamental nature of protectionism with devastating precision in his Sophismes économiques (1845):
"The protectionist argument, stripped of its embellishments, amounts to this: we wish to sell without buying. We wish to receive without giving. We wish to produce without consuming, and to be enriched without enriching others. In a word, we wish to violate the fundamental law of exchange, which is that both parties must gain, by arranging for one party to gain without the other. This is not a policy; it is a wish. And it is a wish that, fortunately, the nature of things will always frustrate."
Protectionism appears as a response to this competition of methods, ideas, and products. It offers a solution to those who do not wish to keep pace with progress and who feel overshadowed by the more enterprising individuals. These individuals seek not merely to protect themselves but to extract wealth from the enterprising population and to live at their expense.
In other words, protectionism is not a policy for the poor; it is a policy for the established, at the expense of the poor. It raises prices for all consumers to preserve the profits of specific producers. Democracy, by giving power to the masses, naturally tends to produce this protectionism, for the masses are generally little inclined toward progress. The typical response to innovation is a dismissive "What use is it?" This tendency is often accompanied by hostility toward the rich, fuelled by envy and the belief that they do not deserve their wealth.
Indeed, Bastiat identified what he called the "seen and the unseen" as the key to understanding protectionist reasoning. The protected factory is seen; the factories that do not exist because protection raised costs and reduced investment are not seen. The workers who keep their jobs are seen; the consumers who pay higher prices for inferior products, and the workers in other industries who bear the cost of protection, are not seen.

The "pillow" of customs protection

Protectionism in international trade is the most familiar form of this notion. Yet freedom calls for free trade: the ownership of things acquired through work legitimately confers the right to exchange them for other products and services. The liberal system rests on complete free trade, which allows everyone to use his property as he sees fit through mutually beneficial exchanges, enriching society and satisfying needs while making work genuinely remunerative.
Nineteeth-century authors described the effects of protection with a vivid image: the "pillow of customs protection." The less enterprising producers simply rest on their laurels, since competition from abroad is not permitted. Bastiat illustrated this with his celebrated petition of the candlestick-makers, who appealed to the French parliament to block out the sun on the grounds that it was offering unfair competition to the domestic lighting industry:
"We are suffering from the ruinous competition of a foreign rival who works under conditions of production so far superior to our own for the production of light that he is flooding the domestic market with it at a fabulously reduced price. This rival is the sun. We ask you to be so good as to pass a law requiring the closing of all windows, skylights, and curtains, so as to shut out the light of the sun and thus open up a market for our candles."
In other words, when foreign entrepreneurs discover innovative methods of production, or offer better products at lower prices, domestic producers protected by customs duties can sleep tranquilly on their protective pillow. This prevents domestic consumers from acquiring better products and creates a form of economic domination by domestic producers over their own population.
Indeed, Frédéric Passy and Paul Leroy-Beaulieu both emphasized that protectionism, far from being a policy of national solidarity, was in fact a policy of class warfare: the warfare of established producers against their own consumers, and of well-organized industries against the diffuse and unorganized public.

The customs of competitive examinations

The protectionist idea extends well beyond international trade. What nineteenth-century French liberals called the "customs of competitive examinations" represents the same logic applied to the freedom of work. These limitations are designed to protect certain professions by requiring passage through state-administered examinations and state-approved schools before allowing anyone to practice.
Charles Dunoyer, who had devoted his career to establishing the connection between industrial freedom and political freedom, identified the mechanism clearly:
"The competitive examination is the customs duty of the liberal professions. It says to the candidate: you may enter this profession, but only after paying a toll. The toll takes the form not of money but of time and submission: you must spend years learning what the state has decided should be learned, in the manner the state has decided it should be taught, to the satisfaction of examiners chosen by the state. The result is that the profession is protected not from incompetence but from innovation; not from quackery but from genius."
In other words, the customs of examinations do not protect the public from harm; they protect established practitioners from competition. The profession shielded from competition by the routine of examinations does not attract the geniuses, innovators, and inventors who would take it to the next level.
This approach substitutes the preventive system for the repressive system, the only one accepted by liberalism. The repressive system is founded on individual responsibility: if I infringe the rights of another, I must make reparation. The preventive system, by contrast, organises regulations in advance that are supposed to prevent such infringements, but itself begins with an infringement of rights by forbidding the non-harmful use of freedom. Arthur Mangin, along with Charles Dunoyer and Charles Comte before him, led this fight for freedom of work, in direct continuity with Turgot's struggle against the guilds.
Mangin's example of the freedom of medicine and pharmacy, a reality in England and the United States but fiercely contested on the European continent, illustrates the principle in its most provocative form:
"In England, anyone may set up as a pharmacist. The English public has not been poisoned as a result; quite the contrary, English pharmacists compete vigorously on quality and price, and the English consume medicines of better quality at lower prices than their French neighbours, who are protected by a corporate monopoly that serves only the monopolists."

Labour protectionism and anti-immigration laws

A modern application of protectionism concerns the restriction of immigration. In the eighteenth century, it was commonplace for foreigners to hold public office (Minister Necker, for instance) or to serve in the army (the Swiss Guards). This openness contrasts sharply with the return to protectionism in public functions that we observe today.
The Société d'économie politique, which brought together the great French liberals of the nineteenth century at its monthly dinners in Paris, closely examined the anti-immigration laws emerging in Anglo-Saxon societies. These countries, having dominated the native populations, were entrenching themselves and refusing competition from other peoples who wished to participate not through conquest but through contract and exchange. Molinari was among the most forceful critics of this tendency:
"The anti-immigration law is the supreme form of labour protectionism. It says to the foreign worker: your labour may not compete with our labour, on pain of expulsion. It is, in effect, a guild law extended to the boundaries of the nation. Its effect is identical to that of the old guilds: it raises the price of labour for those who are admitted and reduces the quantity of production for everyone. The nation that excludes foreign workers is impoverishing itself as surely as the guild that excluded foreign masters."
These authors identified labour protectionism as the future dominant form of protectionism. While the protectionism of big business aims to shield domestic producers from foreign competition on products, worker protectionism seeks to shield domestic workers from competition with foreign workers. The notion of protectionism thus reveals different shades of unfreedom: in the exchange of property through customs duties, in the freedom of work through competitive examinations, and in the freedom to travel and work through anti-immigration laws.
Indeed, the logical structure of all these forms of protectionism is identical. In each case, a group of insiders uses political power to exclude outsiders from a market, raising prices for consumers and reducing the overall wealth of society. The only beneficiaries are the insiders themselves, whose privilege comes at the direct expense of everyone else.
Quiz
Quiz1/5
What was the historical contrast between 18th-century attitudes toward foreign workers and modern protectionist policies?