Protectionism vs. Autarky: Why separating the two terms is necessary to distinguish fact from fiction

In recent years, the terms ‘protectionist’ and ‘autarkic’ have morphed into the buzzwords of choice for journalists when describing someone or something that is not explicitly pro-free trade. By and large, they are used as linguistic ammunition for opinion writers when attacking either something they don’t like or on a subject that is simply out of their element. By doing so, they are often grouped together and even used as a synonym in many cases. Yet in reality, there is a canyon of contrast that separates the two, both in theory and in practice. They have lengthy historical backgrounds, and both terms are still being practiced to some extent today. But before getting to their modern applications, let’s get down to brass tacks: what exactly are protectionism and autarky? Simply put, protectionism is the shielding of domestic industries from outside or foreign competition. As for its application, there a few methods of implementing protectionist trade policies; the first and most popular way of doing so is the implementation of tariffs. A tariff is a special type of tax that is levied on imports, making foreign made products more expensive and domestically made products comparatively cheaper. If say, a 50% tax was levied on Japanese cars, then American consumers will start buying more cars from Ford and Chrysler than Honda.

Subsidies for developing industries are another commonly used method of protectionist policy. Through the medium of tax breaks and cash payment, subsidies give domestic industries an edge over the non-subsidized foreign competition. Instead of making foreign cars more expensive through a tariff, a tax break or subsidy would simply make American cars cheaper. Another more extreme example would be the use of import quotas. The term is quite literal, as the government would only allow a certain amount of imports to be available domestically.

Autarky, on the other hand, is something that more so falls under the category of fantasy than economics. The term derives from the Greek word autarkeia, meaning ‘to be self sufficient.’ Autarky is just that, a radical implementation of economic self-sufficiency. In theory, a nation would strive for complete economic independence from the global economy, almost as if it had been cut off from the rest of the world. Hypothetically, if a country were to achieve autarky, they would not participate in the world economy. Trade with other countries would be a thing of the past. But, unlike protectionism, autarky has its roots in extreme ideology, not economics.

The results of protectionist policies are generally disappointing. It sounds like a good idea at a glance, but it is surely not the most effective way of protecting a country’s economy from foreign industry in the long-run. While they save jobs from moving overseas for some time, protectionist policies are only effective in the short-run. Industries rely on each other for materials to create their products - for example, by making foreign made iron ore more expensive, iron mining jobs won’t move overseas. However, domestic steel is now more expensive to produce due to higher iron ore costs, which makes industries that relies on steel turn to cheaper foreign steel. Protectionist policies will save jobs - but only for a limited time.

One of the most successful implementation of protectionism would have to be Reagan’s protectionist crusade against Japanese electronics in the mid 1980’s, which led to a revival in the American electronics industry. The most unfortunate example, however, would be the Hawley-Smoot Act of 1930, which rose prices for the already cash starved US citizenry, allowing for a hastier decline into the Great Depression.

While protectionism has a mixed track record, autarky has proven to be disastrous when attempted. Failed and ailing nation states have tried to achieve autarky; think of Stalinist USSR, North Korea, Revolutionary Catalonia, Khmer Rouge Cambodia, and other ‘utopian’ failures. The term was more or less used as a key point in their ruling party’s rhetoric than in actual practice, and those that indeed tried to get to the point of autarky failed miserably. Generally, autarky is only attempted when a selfish and idealistic ruling party is completely disconnected from reality. Technological innovation comes to a halt (as technology doesn’t magically cross borders), and domestic industry has little to no ability to grow. In the realm of agriculture, depending on agricultural output and population size, people starve. Unfortunately, most of countries never even came close to achieving complete self sufficiency. The most autarkic nation in modern history would be North Korea, which claims to be self sufficient but still relies on China for food and natural resources - and still has an underfed populace.

In short, autarky and protectionism are two mutually exclusive terms. A protectionist economy is not autarkic, and an autarkic economy has simply ascended the realm of protectionism. While one is radically more damaging than the other, both are attempts at solving the problem of import dependence. However, there are other methods of doing so. Simply making our workers comparatively competitive, or allowing our economy to evolve (with some growing pains), might just do the trick. But that’s a discussion for another article.

 

Sources:

 

“Closed Economy - Benefits.” Accessed January 13, 2018. http://www.referenceforbusiness.com/encyclopedia/Ca-Clo/Closed-Economy.html.

“Industrial Production - 100 Year Historical Chart.” Accessed January 13, 2018. http://www.macrotrends.net/2583/industrial-production-historical-chart.

kanopiadmin. “Ronald Reagan: Protectionist.” Text. Mises Institute, July 30, 2014. https://mises.org/library/ronald-reagan-protectionist.

“Protectionism | Economics.” Encyclopedia Britannica. Accessed January 13, 2018. https://www.britannica.com/topic/protectionism.

“Protectionism: Protecting Whom? | FreedomWorks.” Accessed January 13, 2018. http://www.freedomworks.org/content/protectionism-protecting-whom.

Staff, Investopedia. “Autarky.” Investopedia, June 24, 2010. https://www.investopedia.com/terms/a/autarky.asp.

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