The Agenda

Against Protectionism

As Mike Masnick explains, “protectionism” is about more than trade. It’s about politicians and rent-seeking pseudo-entrepreneurs who build regulatory walls around aging business models that are vulnerable to disruptive upstarts:

Big companies often get stagnant, focusing less on innovation and more on protecting a market. In the Clayton Christensen world of the Innovator’s Dilemma, they focus on incremental innovations and market protectionism. And, as Andy Kessler noted in his most recent book, the innovators, who get around those things and unleash value, are often derided as thieves and criminals for undermining established business models. But what comes out of those upstart efforts is, generally, much better for the consumer. And, on top of that, the collapse of those big firms often allows many of the folks, who did have good ideas and knowledge within those firms, to spread out and to join the more innovative upstarts, which will actually implement and execute on those good ideas, rather than be stymied by bosses who don’t want to undercut the old business models. 

This is why we should always be wary of efforts by politicians to protect jobs, companies, industries and business models. These efforts may come from a reasonable place — in the belief that it’s for the best to “protect” such a large company. But history has shown over and over again the value of creative destruction and disruptive innovation. While it may take down old legacy players, what rises in its place is almost always better for everyone.

In my perfect world, this would be the conservative credo. But instead many conservatives join progressives in defending the interests of rent-seeking legacy firms, unwittingly and otherwise. (And for a case study in how more competition yields economy-wide dividends, check out this short piece at VoxEU by Nicholas Crafts.)

I highly recommend following Masnick’s link to Andy Kessler’s February guest post over at Techdirt.

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