Planet Money explains wonky economic terms in ways laypeople like myself can understand and they also use historic examples to explain current events. In a recent podcast they spoke about the danger of tariffs and protectionism.
This is a broad topic but she demanded that all cell phones sold in Argentina be manufactured in Argentina. Some companies, like Apple pulled out of the Argentinian market, but Blackberry agreed to build a factory in Argentina.
President Fernandez then demanded that Blackberry build their factory in a place that supported her Presidential bid: Tierra del Fuego, Spanish for “Land of Fire.” It’s at the southern tip of the country, the place where explorers begin their journey to the South Pole. Blackberry soon learned that they needed to pay workers enormous wages to locate there.
Two years later, when the first Argentinian Blackberry came off the assembly line, it was two years out of date and twice as expensive as the current Blackberry sold in the United States.
This phone was a bonanza for the black market. Smugglers made horrific profits smuggling Blackberries into Argentina and Argentinians paid less money for newer, better phones.
Because of this and other protectionist policies, inflation rose to 40% per year. The factory in Tierra del Fuego couldn’t sell the Blackberrys they were turning out. After cutting production for two years, Blackberry closed down the factory because they couldn’t find a way to sell the expensive obsolete phones.
And the protectionism wasn’t just with Blackberrys. Instead of finding ways the Argentinian government could invest in valuable exports they spent their energy propping up unsustainable manufacturing. As for their exports, if you’ve tasted an Argentinian Malbec, you know what I’m talking about.