Washington Post columnist Anne Appelbaum used her column today to whine about the growth of protectionism. Remarkably, she managed to overlook some of the most obvious and costly forms of protectionism. For example, she complained that German banks, which are partly owned by the government, are giving subsidized loans to German firms. However, she somehow failed to notice that the United States is giving $700 billion in government subsidized loans to its banks from the Treasury and trillions more through the Fed. These loans are supporting the jobs of highly paid bankers who might be unemployed if the situation was left to the market. The government is also maintaining its protection for the pharmaceutical industry, by providing patent monopolies. It is a continuing thrust of trade policy to increase the extent of this protection in other countries. Of course higher-paid workers continue to enjoy protection in the form of licensing and professional barriers that prevent them from having to compete directly with their counterparts in the developing world. Economic models do not care about the class of the person enjoying protection. Protection for bankers, doctors, and lawyers affects the economy in the same way as protection for autoworkers. The graphs used to model the impact are exactly the same. The difference is that the cost of protection for highly paid workers is almost certainly much greater and the "free traders" never talk about it.
--Dean Baker
