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Protectionism or Globalisation- Is there a choice?


I saw this photo on the internet and it struck me as one of a person doing her duty well and concentrating on the dual nature of her job- policing and protecting the citizens. With other riot police behind her, what are the thoughts that are going through their minds? Do they sympathise with the protesters? By the way, it is a photo of the Hong Kong Police, not Myanmar's soldiers.

To turn it back to the topic, protectionism is as the name suggest to defend and preserve and in this case it is to protect local industries, companies and jobs. This is through measures of either completely barring any foreign companies from setting up shop in one's country or having high barriers to entry and so restrict either the number of foreign companies or to limit their scale.

Globalisation is the opposite of protectionism. It espouses integration of the world's economies, encourages the movement of capital, migration and free international trade. So basically it means that any company from United States or from any other country can set up in whichever countries it so wishes to establish a presence in.

The concept of globalisation scares a lot of people. Especially those from industrialised and developed countries whose workers are fearful that their jobs will be taken over by cheaper labour from other countries and they will be out of a job. The media reports of companies outsourcing their business functions to countries in Asia like India for example adds to this xenophobia.

However, from what little I remember of my economics classes on International Economics, it is quite clear that international trade boost the welfare of all. While protectionism decreases everyone's welfare. A simplistic analogy will be to imagine the days of humans before barter trading. A farmer will basically farm his land and get food from his farm. He may grow some tomatoes, rice, and say some lettuce and maybe keep some chickens. When another farmer comes by and occupies the farmland next to him and grow other items but also farm rice like him. The first farmer can have two reactions.

First, is to barter trade with the farmer so he could exchange his surplus tomatoes for some potatoes from the second farmer. It will enrich his diet and increase the types of food he consumes so his welfare and that of the second farmer increases. Second, he refuses to have anything to do with the second farmer and keeps to himself and hoards his farm produce.

If the scenario develops on and more farms appear on the scene, under the first reaction, the farmer will have even more types of food to eat and can choose to go into another industry, maybe retailing and buy up the farm produce to sell in the nearest town. Under the second reaction, the farmer will remain in his status quo while the rest of the world improves and changes around him.

So the answer to the question is, there isn't a choice between the two. Globalisation wins hands down. It does not mean of course that it is without its negative side effects, but the overall benefit outweighs the negativity.

The next topic, I will go and look at the American elections and try to see which side- the Republican or the Democrat will be better for the world's economy.

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