who says we learn from history?

Protectionism as a policy is one of those policies which had hurt economies all over the world very severely. But the sad part is people get a feeling that by applying protectionism, government is doing them a favour. Take a recent example of USA government which is putting a condition on bailout companies to take only Americans as their employees (Big story in today’s newspapers on cutting H-1B Visa).

In a way government is saving its people and organizations by providing them a shelter. But what about the cost that the organizations has to take in the form of increased payment (more people would have created an excess of supply and decrease in wages) and loss of quality (less people to select from; leaving talented migrated people), and that too at a time when any organization needs these two things the most.This way USA is protecting economy or digging the hole further?

This reminds me of July ’08 when food prices were on their peak due to shortage of food grains. It so happens that one part of world (which is a significant player in that grain market) may not be able to produce grains due to any reason say drought for argument sake. Now there is a shortage of that particular grain in world market. Prices of that grain starts shooting up and other grains (substitute goods effect) also catch up soon. Countries start feeling scarcity of grains; they tend to go for the policy of protectionism and don’t send their own production out in order to protect their interests. But this creates more scarcity outside and further increase in the prices. Hence other nations also follow the suit (protectionism), and in the process drag market for that commodity into deep trouble. This is exactly what happened which started with Australia where continuous drought for 7 years reduced rice production by around 60-70%. At a time when all economies were supposed to come together and take steps, they were busy in forming protectionism policies for their countries.

Now USA is repeating the same mistake. Who says we learn from history?