LONDON – “Laissez-faire,” French President Nicolas Sarkozy recently declared, “is finished.” Perhaps, but should we really be satisfied if he is right? If laissez-faire has run its course, what will possibly replace it as the foundation of an open, global society?
Now more than ever, it is worth remembering that the last great financial crash not only inspired the New Deal in the United States, but also plunged the world into a new dark age of economic nationalism and imperialism. Free trade is far from perfect, but the alternatives are worse. Protectionism is bad for wealth, bad for democracy, and bad for peace.
Yet a new wave of protectionism is a genuine danger. Barack Obama, appealing to swelling protectionist sentiment among Americans, threatened during his presidential campaign to rewrite the North American Free Trade Agreement unilaterally. This July, the World Trade Organization’s Doha trade round fell to pieces, partly because the US refused to lower its agricultural subsidies.
The world is on a slippery slope toward nationalism and exclusion. If a government can step in to bail out failing banks, why not to protect its failing businesses or farmers as well?