Last month’s provocative piece by Ha-Joon Chang on the need for increased economic protectionism to help overcome the recession has received a scathing response from Philippe Legrain, a contributing editor to Prospect and author of Open World: The Truth about Globalisation . In a web exclusive on our main site, Legrain claims that greater protectionism would only serve to reduce people’s purchasing power, and would result in higher import taxes and therefore less demand for our imports:
“Higher taxes and lower exports as a cure for the global recession? This is the economics of the madhouse.
Instead, Legrain argues that the key to easing the global crisis is to boost global demand, and calling for “coordinated government action combining large fiscal stimulus packages, unconventional monetary policy measures, and the nationalisation and restructuring of zombie banks that are dragging the economy down with them…This would boost employment, especially if combined with cuts in payroll taxes and increased help for workers to retrain and find new jobs.”
Will greater protectionism really brings us closer to depression era economics? Or is Chang right in his assertion that that “free trade has never worked very well, but is going to malfunction even more in coming years”? Let us know what you think.