Economy

Stupid Donald’s Trade War and the weakness of protectionism

A boy cleans the street after Kristallnacht (10 November 1938)

A boy cleans the street after Kristallnacht (10 November 1938)

The drums are beating and the lamps are going out all over the world; we shall not see them lit again until our own suffering compels us

We stand on the precipice of an era of organised intolerance, bigotry and race hatred. The founding ethos of this poisonous era is of protectionism: protection against commercial competition, protection against cultural engagement, protection against social integration.

The rhythm of the war drums speaks of fear, of the other, of invasion by outsiders.

A French ironmaster says: “We must protect ourselves from the invasion of English iron!” An English landlord cries: “We must repel the invasion of French wheat!” And they urge the erection of barriers between the two nations. Barriers result in isolation; isolation gives rise to hatred; hatred, to war; war, to invasion. “What difference does it make?” say the two sophists. “Is it not better to risk the possibility of invasion than to accept the certainty of invasion?” And the people believe them, and the barriers remain standing.

And yet, what analogy is there between an exchange and an invasion? What possible similarity can there be between a warship that comes to vomit missiles, fire, and devastation on our cities, and a merchant vessel that comes to offer us a voluntary exchange of goods for goods?

Frédéric Bastiat, Economic Sophisms, 1845

We have been here before, and it did not end well.

As illustration of the risks of a trade war, I would ask my strategy undergraduate students to stand in a circle. Then, performing an awkward set of calisthenics between them, I’d link them with a network of black cotton thread. Lines tight between individuals in the circle, crossing, re-crossing, and criss-crossing; invisible, chaotic, and delicate.

“You want it all,” I’d say to one. “Pull on the threads you control.”

And they’d drag their direct trading partners towards them. But as those students moved, they’d fall into the threads linking other students. There was no way to attack only one, and everyone was affected by a disruption to the network.

Volumes have been written on this already and I have no intention of adding to it, save to focus on one area: the fragmentation of social and political networks.

On Sunday, Italy voted in their general elections. Populist parties, promising an end to the European Union, and the forced deportation of racial minorities and refugees, have won a significant stake, and are likely to form some type of coalition government.

Between the genocides in Syria, and the collapse of liberation struggles in economically deprived parts of northern Africa, over 150,000 migrants and refugees crossed into Europe in 2017. In 2016, over 335,000 people arrived. About 75% of them settle in Italy.

One can debate the responsibilities of host nations. One can point out that Lebanon, with a population of only 6 million people, hosts almost 1 million Syrian refugees.

Yet Italy is an integral member of the European Union. Surely their partners should help in some way?

In 2015, Jean Claude-Junker, the president of the European Union Commission, set other EU members the target of absorbing some of the burden by taking in 160,000 refugees. By September 2017, only 29,000 refugees had been relocated.

Italy has reacted in rage and frustration, and fell into the arms of the Northern League, a white-supremacist party advocating for ethnic cleansing against anyone not of pure Italian stock.

And maybe you think, “Well, the EU had it coming.”

Perhaps, but the destruction of the EU would seem to make matters worse for Italy. Lebanon relies on a vast EU subsidy to maintain their refugee camps. Italy alone has no resources to support so many.

The chaotic response from the EU would seem motivation for further integration, and a collective response. As the EU trembles, newly “liberated” members will soon discover their insignificance in the face of global tragedies, and their smallness will leave them incapable of riding out the storm.

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