Trade Wars Ahead

The free market and the theory of comparative advantage are great when your country is producing high value products that provide high value jobs. However, things become a little different when other countries start to out compete you in these industries. After years of preaching the gospel of free markets and the evils of protectionism in the blink of an eye the US has turned on a dime. It is hard to keep up with the slew of protectionist measures that are coming out of Washington and the queue at the door for capital injections is getting longer on a daily basis with the US auto makers currently at the head of the line. Governments tend to avoid tariffs for their inflammatory nature but subsides, capital injections, or whatever seemingly passive techniques they can dream up, are instruments of protection pure and simple.
It is ironic watching the Chyrsler's hedge fund owners Cerberus demanding a government bailout and in the US these auto bailouts may be popular but none of this takes away from the fact that such bailouts will only make matters worse. Chyrsler are in difficulty because they are making cars that consumers do not want. Toyota and Honda do not need to be bailed out in these difficult times. So more US wealth will be destroyed by promoting the production of cars that consumers do not want. Money will be redirected from taxpayers toward these companies and not used in a manner that could produce wealth in the future. More worryingly these protectionist measures will soon be seen for what they are. They are not a way of saving the world economy but a measure to save nationalist industries and this will create a high risk of trade wars. When these wars break out the final engine of trade that is keeping the world economy afloat will be shut down.