Protectionism and Hypocrisy

By The Greek - Economy & Markets:

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Perhaps not coincidentally placed in the capitol of a great fallen empire, the Group of Seven (G7) industrialized nations congregated in Rome today. They'll meet through the weekend to deliberate upon the global economic crisis. There is a widely shared ideological hope for a united front against it. Many of the voices echoing out of Italy today have warned of protectionism though, and many foreign powers have pointed toward the United States accusingly. My concern is that those fingers may be crooked and nails full of scum. I demand equality of global government action first. Otherwise, some of the accusations of protectionism are born from the mouth of hypocrisy.

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Reality Trumps Ideology

We are suspect of what substance might come from the meeting of the G7. Despite all the good natured wording and communal warnings of protectionism, can we say absolutely that the concerns of unique citizenry will not dictate the actions of elected officials? Can we here in the United States, where senators from southern states like Alabama opposed domestic auto industry aid because their home states house foreign auto makers, say with confidence that international trading partners will not favor their own national voting interests? Will we ignore ours for the sake of the world, when we can't even agree between states?

Let's face it, if America's national leaders cannot even place the nation's interests higher than those of their unique voting constituents', then isn't it obscene to expect more from foreign partners. And who are we to talk? We're the nation requiring upcoming infrastructure work to use American made steel. So despite our experience with The Great Depression, where protectionism reportedly doomed us to it, we still seem destined to repeat those protectionist faults again. The Greek thinks there's another good reason for the bias, which extends beyond naive logic.

America has a Right to Demand More

We have a right to direct our aid disproportionately toward our own providers, since our efforts toward economic stabilization have been far greater than those of most other nations. If every member of the world community pledges government aid in equal measure to their global economic importance, then nationalistic clauses like our "buy American" requirement in the fiscal stimulus law wouldn't make any difference to the whole anyway.

"But if America is going above and beyond, while risking the future value of its dollar in doing so, then I say we have every right to require our companies to buy American!"

But if America is going above and beyond, while risking the future value of its dollar in doing so, then I say we have every right to require our companies to buy American! If the world expects fairness, then we should demand equality from the world as well, and I'm speaking in terms of the government aid extended and currency risks born. Otherwise, America bears a heavy burden that could result in the future decimation of the dollar and runaway inflation. Meanwhile, others give half effort and benefit from American recovery anyway, while never risking the future devaluation of their currencies. So, let the world step up before we withdraw our clause. But we should withdraw our clause if the world obliges just the same.

The IMF published an article today in which its chief, Dominique Strauss-Kahn, is quoted saying, "Large stimulus packages have been implemented, especially in the United States—you will have seen the latest developments here in Washington and on Capitol Hill. The same is true, even if it's not on the same level, in most European countries, where some room was available for stimulus packages." I say it has got to be on the same level, at least rational to global GDP contribution.

Has the World Obliged?

In answering this question, I must immediately consider the last meeting of the ECB, which represents the financial interests of our most similar global partner. This conglomerate of nations matches well against our great marketplace, and economic stagnation is readily apparent in Europe, just as it is here. So, why then did the ECB hold rates steady at its last meeting? We here in the United States have gone all the way to zero; we couldn't make capital less costly, and we're actively working on other means to spur the economy. Why and how then can Europe take a breather? Is it to protect its currency while benefiting from our efforts? Admittedly, there are great intricacies to the ECB's decision making, and I did not read its last statement fully or watch the press conference, so I feel a bit naked on this last comment, and so you have an opening to rebut.

Nations are making strides, and even today Australia's senate passed a small stimulus package. People remember China's huge $586 billion value stimulus plan announced late last year, and it really presents an adequate case for China's global interests. Still, because of global dependence on China and its domestic emergence, it will likely manage to grow GDP in the mid-single digits this year. Even so, China has plenty more reason to work so hard for global economic health, since its halved growth rate will cost it 20 million jobs.

Germany pumped a fraction of this amount into its economy, and its GDP is comparable now to China's, which recently surpassed it. However, the EU is acting in unison, so it might be unfair to paint Germany short-handed just yet. Also, China has export demand to crutch with domestic growth stimulant, and it has absolute large numbers of jobs to refill. The fact is that fiscal capacity is a realistic constraint for many nations, and so equal or rational participation may be impossible without seeing more Icelandic-like blow-ups.

Like everything these days, fiscal fairness is not a black and white issue. Still, the largest national economy in the world seems to have the right to proportionally direct some extra capital toward its own economy when it is doing and risking so much toward that effort. Besides, because we are so important to the world, our own prosperity also benefits the world.


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