BeyondGenius.com

Companies today cross borders in search of a competitive edge, whether it be cheap labor, tax breaks, or acquisition of a valuable but troubled competitor. The pursuit of profit is for all intents and purposes both universal and amoral. The invisible hand of the marketplace has no qualms about hitting a “national champion” of a business upside the head any more than it would a shifty, border-spanning multinational. The global economy is no respecter of nationalism.

Governments, however, are more fond of some companies than others. Besides being sources of national pride for innovation, domestic companies are sources of tax revenue and employment: most especially employment. Large companies (or small companies in well-organized domestic industries such as shrimping, cotton, and sugar farmers) employ lots of citizens and lots of voters. Voters like to have a say over when they leave their jobs; they don’t like being told their services are no longer required. Thus, when voters in even relatively small numbers lose their jobs, there’s a clamor for protection from the “unfair” competition that threatens their jobs and wails about job security. Elected officials tend to be particularly sensitive to these cries. Thus, they try to figure out how to protect businesses from competitors.

The problem? It comes at the expense of the consumer and the taxpayer (who for the most part are one and the same). Your job is saved to be threatened another day. Me, my family, my friends, your friends, your friends friends and YOU have to finance your salary through higher prices and higher taxes (either now or later, depending on how you feel about government deficit spending). This kind of distortion is usually hard on an economy, but also largely invisible since it’s spread out incrementally over so many people.

You might not notice how much Economic nationalism plays well. Officials can wrap themselves in their respective flags, take about how they’re protecting citizens and showing how the industry in question flourishes. The costs can be buried in the crushing myriad of inflationary pressures and swept under the rug. It hurts consumers. It hurts taxpayers. It hurts investors when a government prevents a desired acquisition (as happened in the last year in France with Dannon), and it does so at the benefit of a relative few. Protectionism is a costly mirage of security and ultimately profits us nothing.