Douglas Carswell

10 MAR 2016

Protectionism hurts the poorest

The prosperity we take for granted today couldn't have happened without free markets and free trade. That doesn't stop people – even presidential candidates - saying we'd be better off starting trade wars, and only buying goods made at home. But the fact remains: protectionism is the route to poverty.

Globalisation gets a bad press. When manufacturing moves from Britain or the US to China and India, it looks like we're losing out. But the result is that we get our clothes, shoes, computers, phones, and televisions much more cheaply. And lower prices don't just make us better off. They also increase demand, and create jobs.

As Adam Smith and David Ricardo realised 200 years ago, prosperity comes from specialisation. If each of us tried to be self-sufficient, we would all be living in prehistoric penury. Instead, we specialise in what we're best at, and exchange the product of our work for what we need.

The same applies to countries. Today, Britain's comparative advantage is in services. Other countries are best at heavy industry or agriculture. By specialising in services, we get more and better manufactured goods and agricultural produce than we would if we diverted our resources into making them ourselves.

Protectionism might seem like the solution for people who have lost out to globalisation. But its effect would be regressive - like the poll tax. It would force prices up, and employment down. That would hit the poorest hardest.

In many cases, protectionism isn't the antidote to industrial decline, but the cause. Decades of State subsidies are what made companies like British Leyland and General Motors incapable of beating foreign competition.

To revive our economy, we have to allow people to specialise in what they're best at, not prop up industries that are no longer productive. We need to learn from history, not live in it. The answer is freedom.

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