I worry that any kind of protectionism beyond what we have already seen will draw a retaliatory response, leading to an extremely deflationary and bad outcome. Right now we are really on the edge and that leaves us with few exit strategies that don’t end up with catastrophic dislocations – the kind that create social upheaval, war, and so on.

The problem with protectionism is that, while it may protect workers in one country, what is good for the goose is good for the gander. And the abrupt shift to a less globalized world would not produce good geopolitical outcomes.

Is it worth the risk? No.

It is the defining feature of globalization. Of course, as we know, there is a great divergence between the owners of capital and labor. Take the rally, for example, many firms were able to use the weak labor market to their advantage to cut costs. Do you the small “d” “depression” would last long enough in Western European countries and North America to encourage protectionist measures in those countries. While protectionism might lead to a net decline in wealth, it would be beneficial for laborers who produce labor intensive goods since it takes away power from capital by raising capital’s exit costs. For example, if a company wants to relocate to a cheaper country under a protectionist regime, it can do that, but the exit costs would be losing market share in that country. Free trade benefits capital by removing exit costs.

Capitalists oppose protectionism for their own interests; it is easy to understand why. Well, if labor arbitrage is gone, then capitalism is gone since there would be no way to make profits other than to actually technologically innovate.