Introduction
Does free trade always promote wealth? An analysis of 19th-century Europe as a "laboratory of history" challenges this dogma. Bairoch's Paradox demonstrates that periods of protectionism often correlated with rapid growth, while liberalization led to stagnation. This article explores why the classical theory of comparative advantage fails when faced with historical power asymmetries and how modern powers, led by the US, are returning to proven methods of market protection in the face of global tensions.
Bairoch's Paradox: Protectionism Stimulates Growth
Contrary to textbook models, Europe's phase of authentic liberalism (1860–1879) coincided with a drastic slowdown in GDP growth. Paul Bairoch demonstrated that free trade imposed by an industrial hegemon perpetuated the backwardness of the periphery. Agriculture served as the transmission mechanism for the crisis. A flood of cheap American grain, facilitated by the transport revolution and low tariffs, drove European farmers to bankruptcy. When the countryside lost its purchasing power, industry lost its primary customer, halting industrialization.
Even Great Britain lost its dominance while promoting free trade. Under the protection of their own tariffs, Germany and the US closed the technological gap, while London struggled with capital drain and agricultural collapse. Modern econometrics confirms: the positive correlation between tariffs and growth in the 19th century was a real phenomenon, contingent upon institutional quality and economic structure.
Small Countries and Domestic Market Protection Models
Small European states faced a choice: serve as the hegemon's "granary" (Portugal) or build their own industry (Switzerland, Belgium). Success depended on the active transformation of the production base. Denmark, rather than passively importing, created an advanced agro-industrial complex. Formal logic exposes the contradictions here: tariffs (P) only work when there is a proper structural fit (S). Without it, protection leads to stagnation.
Modern models in France and Israel illustrate this diversity. Paris employs institutionalized agrarian protectionism, combining it with diplomatic support for industrial champions. Israel, while formally open, aggressively supports R&D, building advantages in high-tech sectors. In this clash, corporate practice is opportunistic—global business lobbies for tariffs where they protect local factories, ignoring ideological disputes over the free market.
Defensive Mercantilism: The New US Economic Doctrine
Modern US policy represents a shift toward defensive mercantilism. The CHIPS Act and the Inflation Reduction Act (IRA) are the foundations of technological sovereignty, functioning as "demand-side protectionism." Through massive subsidies, Washington aims to reshore semiconductor and green technology production. The goal is not profit, but military and resource autarky—preparing an "island fortress" for a potential open conflict with China.
The return of protectionism raises global production costs and consumer prices, but within the logic of national security, this is an acceptable trade-off. The post-hyperglobalization era forces business regionalization. Companies are abandoning the just-in-time model in favor of friendshoring, building supply chain resilience at the expense of previous cost efficiency. The US, as an energy and food exporter, is structurally prepared for partial isolation.
Summary
The European Union faces a historic challenge: it must choose between clinging to free trade and embracing assertiveness. In a world dominated by the mercantilism of great powers, the EU needs selective protection of strategic technologies and the construction of its own "manufacturing continent." Modern geopolitical tensions show that dogmatic faith in the free market is a luxury we can increasingly ill afford. The key to survival is a new synthesis of openness and the protection of developmental foundations.
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