rodrik212_Stephen MaturenGetty Images_biden Stephen Maturen/Getty Images

The Global Economy’s Real Enemy is Geopolitics, Not Protectionism

What some decry as protectionism and mercantilism is really a rebalancing toward addressing important national issues. The biggest risk to the global economy stems not from this broader reorientation – which should be welcomed – but from a Sino-American rivalry that threatens to drag everyone down.

CAMBRIDGE – “The era of free trade seems to be over. How will the world economy fare under protectionism?”

This is one of the most common questions I hear nowadays. But the distinction between free trade and protectionism (like the one between markets and the state, or mercantilism and liberalism) is not especially helpful for understanding the global economy. Not only does it misrepresent recent history; it also misconstrues today’s policy transitions and the conditions needed for a healthy global economy.

“Free trade” conjures an image of governments stepping back to allow markets to determine economic outcomes on their own. But any market economy requires rules and regulations – product standards; controls on anticompetitive business conduct; consumer, labor, and environmental safeguards; lender-of-last-resort and financial-stability functions – which are typically promulgated and enforced by governments.