Towards a New Economic Protectionism:
Industry, Sovereignty, and the Future of Economic Policy
Industry, Sovereignty, and the Future of Economic Policy
In an era of globalization, free markets, and hyper-connected supply chains, the idea of economic protectionism was once considered an outdated relic of the past. However, recent global disruptions, from the COVID-19 pandemic to geopolitical tensions and supply chain vulnerabilities, have reignited the debate over whether nations should adopt a more protectionist approach to safeguard their economic interests. It is time to reconsider protectionism—not as an isolationist retreat but as a strategic recalibration of economic policy.
The fallacy of absolute free trade has been exposed in recent years. The promise of boundless globalization—where goods flow freely, production is outsourced to the lowest bidder, and comparative advantage reigns supreme—has left many economies vulnerable. Over-reliance on foreign manufacturing, especially in critical sectors such as semiconductors, pharmaceuticals, and energy, has exposed severe weaknesses. When supply chains break down, entire economies can be brought to their knees. Protectionism, when applied judiciously, can help mitigate such risks.
A modern form of protectionism does not advocate for blanket tariffs or autarky but rather for policies that prioritize national resilience. Countries should incentivize domestic manufacturing, invest in key industries, and impose strategic tariffs on imports that undermine local production. Policies such as "Buy American" or the European Union’s push for technological sovereignty are not necessarily regressive; they are pragmatic responses to economic volatility and security concerns.
The intellectual foundation for protectionism is far from new. Friedrich List, the 19th-century German economist, argued in his National System of Political Economy that free trade benefits only those nations that have already developed strong industrial bases. He famously critiqued Adam Smith’s notion of absolute free trade, stating that "any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness." This logic remains relevant today as nations seek to secure their economic futures against predatory trade practices and unfair competition.
Similarly, Alexander Hamilton, one of the architects of the American economic system, advocated for an active role of the state in fostering industrial development. In his Report on Manufactures (1791), he argued that "the superiority antecedently enjoyed by nations who have preoccupied and perfected a branch of industry, constitutes a more formidable obstacle than is commonly imagined to the introduction of the same branch into a new country." His policies helped lay the groundwork for the United States' transformation into an industrial powerhouse.
Henry Charles Carey, a key economic advisor to President Abraham Lincoln, further developed these ideas, asserting that national self-sufficiency was essential to prosperity. Carey criticized British free-trade policies, which he saw as tools of economic domination rather than mutual benefit. He emphasized that protective tariffs and internal improvements were necessary to create a strong national economy, arguing that "protection to home industry secures the farmer a market, increases the value of his land, and raises his wages."
Critics argue that protectionism leads to inefficiency, higher consumer prices, and trade wars. While these concerns are valid, they overlook the costs of unfettered globalization. Offshoring jobs has hollowed out industrial sectors in many developed nations, leading to economic stagnation and social unrest. Moreover, the environmental impact of long supply chains is significant. A localized approach to production can reduce carbon footprints and promote sustainable development.
However, the assumption that protectionism inherently fosters inefficiency needs to be questioned. One must ask: did local enterprises truly fail to improve and enhance efficiency, or were they simply not given the chance? Too often, the emphasis is placed on competition with foreign brands rather than on the fundamental goal of ensuring quality goods that meet local demands. Many domestic industries have historically risen to the occasion when provided with stable policy support, adapting, innovating, and refining their production processes. Protectionism, when structured wisely, does not shield inefficiency but fosters a business environment where enterprises can focus on long-term advancements rather than short-term survival against subsidized foreign competition.
As an observer, one must also consider that the desire for improvement within the local sphere is not solely driven by competition with foreign brands. Rather, it is rooted in the intent to provide much-needed goods and services with the highest quality, serving as a benchmark for efficiency and innovation. Local enterprises can compete among themselves, not out of necessity to ward off foreign competition, but to refine their processes, enhance their products, and create sustainable industries that prioritize national interests.
Furthermore, the reduction of self-reliance, self-mastery, or self-sufficiency into mere moralistic arguments risks rendering these essential principles moot and academic. Neoliberals often preach free markets as an extension of personal initiative, yet in practice, their policies have subordinated both individuals and entire societies to the whims of the market. This economic framework has made humanity subject to market forces, much like a bird (society) enclosed within a cage (the market). True economic sovereignty demands a reassessment of this paradigm—one that prioritizes national resilience and individual self-determination over the blind pursuit of market liberalization.
If one may ask, why is China thriving amid controversy? The world often cries foul about intellectual property theft or unfair practices, but what is undeniable is the sheer efficiency of the Chinese economic system. Decades ago, China's opening-up was not simply a surrender to the whims of Western capitalism but rather a carefully orchestrated strategy. The Chinese leadership allowed foreign investment and market forces to play a role in development, but always under the guiding hand of the state, ensuring that economic growth aligned with the broader goal of national rejuvenation and socialist construction. This approach allowed China to absorb foreign technology, develop domestic capabilities, and gradually emerge as a global economic powerhouse on its own terms.
What China did is not unprecedented. A similar approach was taken by France under Charles de Gaulle, who pursued national economic independence through state-led development while carefully navigating market forces. Likewise, the early Soviet Union, despite ideological differences, focused heavily on centralized planning to build industrial strength from the ground up. Other nations, from South Korea to Japan, have historically used state intervention to nurture domestic industries before gradually opening up to global competition. The fundamental lesson is that economic planning—whether through state-led initiatives or strategic market guidance—has been a key driver of national economic success across different political and economic systems.
For those who have undertaken domestic development seriously, global competition is secondary—for the priority is to ensure the welfare of the people through quality products and services driven by better efficiency. This approach takes seriously the dictum Salus populi suprema lex esto—the welfare of the people is the supreme law—not merely as a legal principle but as a guiding philosophy in economic policy itself. Economic sovereignty does not mean disengagement from the world but rather a shift towards balanced trade policies that serve national interests. A new economic protectionism, focused on strategic self-sufficiency rather than isolation, is not just a political imperative—it is an economic necessity in an increasingly unpredictable world. As Friedrich List noted, "The power of producing wealth is infinitely more important than wealth itself." A nation that prioritizes its own productive capacities ensures not only its economic security but also its long-term prosperity.