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If Not Complete Protectionism, Why the Mediocre Option for Colombia?

By: Javier Garay - @Crittiko - Sep 19, 2013, 6:57 am

Colombia is an “in-between,” mediocre country. In almost all international rankings, Colombia is near the middle: economic freedom, human development, economic competitiveness, and business climate, to name but a few examples.

2013 Index of Economic Freedom, Heritage Foundation

This reflects an historical fact: no real attempt was ever made to achieve either a high degree of economic freedom or to install a completely protectionist or mercantilist model like those I dealt with last week. We are dealing with the intermediate option, the mediocre option, to give it a name.

Amid the difficult circumstances the country is now facing, however, attacks on free trade agreements have overwhelmingly focused on ignoring economic freedom and stressing protectionism.

In a nutshell, many assume that Colombia is unable to compete in the international arena if not under the wing of a government protecting the national economy. This idea gains apparent support from the alleged experience of developed countries like the United States, France, Japan, and South Korea.

In this forum, I cannot provide an in-depth study of each of those nations. But allow me to focus on the consistent pattern of the protectionist position, as manifested in Colombia, and the trumped up case studies.

The first aspect that becomes clear is the contradiction between reality and perception. We see that no one is proposing the adoption of a fully-protectionist model in Colombia (isolationism, when taken to the extreme). Rather, proponents call for the middle-of-the-road, mediocre one.

As noted, this model has already been in place for a long time, even though people are unable (or unwilling) to notice. I can assure you without a doubt, though, that the model and its accompanying rhetoric emphasize more protectionism than openness or a free market economy — both in the past in the populist proposals for the future.

The second aspect I want to stress is that this protectionist push is arbitrary. None of its advocates will answer questions such as: to what degree must the state protect; for how long; and which sectors should be protected? At best, they will say that it depends on future research bureaucrats will have to carry out (assisted by lobbyists seeking a bigger piece of the pie).

Third, the idea is dangerous. The ambivalence Colombians have shown towards restraining the state has led to the excesses known to all and denounced by most. Just consider the gross violations of human rights across the generations — and now people want to give more power to the state? How are we then to keep those same excesses from taking place again?

Fourth, shallow rhetoric aside, this is a regressive idea — to the benefit of the cronies and not the common people. With or without international trade, there are always winners and losers. The difference lies in that, in an open economy, the consumers decide who wins and who loses, not the bureaucrats.

To prevent the emergence of losers one would need to suppress natural evolution and innovation that renders some items and firms obsolete. In order to keep a small group from facing economic instability for a while, should government officials force Colombians to make the mistake of investing in agriculture, funding corporate welfare, or clinging to an incipient basic industry forever? Such a road would destroy development and foster a permanent class of privileged individuals, and not on account of merit or serving the needs of consumers.

Fifth, the idea is paradoxical. If the recent farmer demonstrations proved anything, political elites have neglected these citizens. However, the proposed solution is for the same state of affairs and more pleading with these elites, even though historically it has failed to solve their problems.

This rush to maintain and even strengthen the ruling class — the ones supposedly enjoyed by the United States, South Korea, and France — is not only unfeasible, it is cruel towards those who need solutions to their economic problems right now.

Along the same lines, the sixth aspect we have to point out is that the protectionists focus on the wrong features of successful nations. In all of them, we can see that development did not stem from protected sectors or barriers to competition, let alone a complete shutdown of international trade. Even if said actions were executed, they were executed in specific circumstances and only for brief periods, and definitely not during the stages of “take-off” towards development.

It is true that all states are interventionist to some degree. That is why classical liberal thought is always relevant. It is also true that the French government shows a greater degree of interventionism than that of Germany, which is in turn more interventionist than its US American counterpart. We could posit a similar ranking for South Korea, Japan, and Singapore. However, in both groups, which countries are the most successful? Which created more wealth? Those with economies comparatively more open or protectionist? Under any level of examination, the results speak for themselves.

We can conclude that trade protectionism, industry interventionism, and middle roads are a recipe for mediocrity. Unfortunately, mediocrity, as Colombia has shown throughout its history, is not enough for progress. It is barely enough for survival. Mediocrity, as Friedrich A. Hayek famously proved in The Road to Serfdom, slowly breeds the recipe for failure: a socialist model. I can only hope the current situation in Colombia does not unwind into a future case study for Hayekian analysis.

Translated by Mariano Filippini.

Javier Garay Javier Garay

Javier Garay is a professor at the Externado University of Colombia. He has written two books on international issues, such as development, after his doctoral dissertation focused on the same topic. Follow him on Twitter @crittiko and through his personal blog, Crittiko.