Some time ago I watched a video on the demise of Harley-Davidson and was reminded of the fallacy of relying on protectionism. I didn’t know HD had lobbied the American government to impose duties on Japanese motorbikes, but the result was predictable – a short time of stabilised profits for American companies but as they would invariably not be as innovative as their competitors, in the long run they would lose most of their business.
This happens again and again and yet protectionism is built in to most nations and, if left to themselves, monopolies would create the same effect within countries.
Seth Godin recently argued that this was a new feature in the modern world:
But in our modern world, a world built on community, connection and the magic that comes from combining ideas, the opposite is true. When people deprive others of education and opportunity, they’re not helping themselves, they’re depriving themselves of the benefits that would come from what others would end up contributing. We don’t benefit from treating others poorly, we pay for it.
I don’t think this is new, or even restricted to the modern world. Rather, when we look at history, nations that have been excessively protectionist may have gained an advantage in the short run but again, in the long run, the other nations have surpassed them.
But protectionism sounds so very appealing to those who are being protected right now.