Suppose that the U.S. government decided to lend $700 billion at below market interest rates to manufacturing firms. In addition, it offered to guarantee trillions of dollars of the borrowing by the firms in this sector. That looks like protectionism, and no doubt respectable people everywhere would be denouncing any knuckle-scraping Neanderthal who supported such measures. So why is it not protectionism when the U.S. government lends $700 billion at below market interest rates to the financial industry and offers to guarantee trillions of dollars of the borrowing by the firms in this sector? By some bizarre twist of logic, government subsidies to the financial industry, no matter how large, don't count as protectionism, while government subsidies to other sectors are an offense to right-thinking people everywhere. That is no doubt the way that the financial industry would like the public to see the world and apparently also the way the G-20 political leaders would like the public to view the world. It is also the perspective adopted by the Washington Post, but it is not an accurate description of reality. Protectionist measures can slow growth and they can be very harmful to developing countries. That is especially true of the protectionist measures that the wealthy countries recently implemented for their financial industries. Unfortunately, at the G-20 meeting, there was apparently no recognition of the damage that these measures had inflicted by promoting capital flight from the developing world. There was no recognition of this fact in the media coverage either.
--Dean Baker
