Proctectionism Is Local Too As Florida County Discusses Favoring Local Businesses

Last Updated Jul 28, 2009 6:43 AM EDT

One of the things that countries did that extended the effect of the Great Depression was to practice protectionism. This meant passing tariffs and laws that favored the companies in their own countries and kept out exports from other ones. This may have helped preserve some jobs at the time but not only increased costs for those businesses in operations but made it hard for other countries who relied on exports to recover as well.

As different governments have tried to deal with the current global downturn in the world economy protectionism may seem something they would try again. It is much harder with the various trade agreements and the World Trade Organization (WTO) rules between nations. The U.S. did write rules favoring U.S. produced materials and goods into the "Stimulus" bill algthough the law does state it has to be in agreement with the U.S. treaty obligations. Unfortunately much of the money will flow threw the states and local governments who do not have these obligations as only the central government may sign them. This process has been heavily criticized by Canada as it has grievously affected some of the companies who export to the U.S.

Now Pinellas County in Florida is discussing writing contracting rules that will favor locally headquartered businesses for the stimulus money contracts. The idea is worthy as it is supposed to maximize the job retention in the area. It is also being criticized as it might lead local companies to bid higher then others. This means that the government wouldn't get the best value for their dollar.

The Federal, states and local governments all have rules in contracting about favoring small businesses or selected minorities or disadvantaged groups. The goal of these is to use government funds to grow them and protect them from the stereotypical large, behemoth company that can underbid them with cut throat prices. This is certainly a worthy goal. These rules are coming into conflict with the idea that the "stimulus" funds were to get out into the economy as quickly as possible to "save or create" as many jobs as it could. This isn't happening as unemployment keeps growing. The stimulus funds aren't flowing quickly due to contracting processes and rules.

Now the Obama Administration is saying the goal of the "stimulus" was not to quickly jump start the economy but to stabilize the economy and let normal economic growth take place. Interestingly this is not how it was sold to the country back in March. One could say that they were even playing politics with things.

If the economy does not improve quickly there will be more pressure on government to protect favored groups - be they local companies or jobs. There might be the return of the days of the Great Depression where towns posted signs telling people to move along as there was no work even for their own inhabitants.

  • Matthew Potter

    Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com.