Accompanied by the refugee crisis, globalization, urbanization, and growing welfare, the current wave of protectionism has hit the global trade. Many people are unaware what has happened and often comment without actual understanding of the situation. We are, in fact at the beginning of a new global cycle and it would be unpractical to see things like how they used to be, otherwise everything would look awkward.

Our world is always in cyclical developments. Scholars engaging in theoretical education often adopt a standard set of textbook theories, which are not integrated with the reality, and they do not assume responsibility to explain everything; therefore most of these are merely textbook discourses. If we look at what happened in the past, the development of the current situation is in line with the cyclical characteristics. We have gone, in fact, from one cycle to another.

After conducting researches on the Erie Canal in New York, Anbound's chief researcher Chan Kung had written about the major impact of the canal on the American economy. The Erie Canal was built during an era of great investment in infrastructure, an era where much success had been achieved. The construction of the Erie Canal had established a water highway system in the northern United States during that time and provided great convenience for economic development. The position of the New York City today can be attributed to its rise at the mouth of the Erie Canal. In addition, the construction of the railway is also an important aspect. From 1868 to 1873, the United States built a 33,000-mile railway track within just five years. The leap forward of the infrastructure in the United States was even faster than that of China today.

The problem lies in the fact that there are always two sides of the same coin. The era of large-scale investment in infrastructure represented by the Erie Canal and railway construction would inevitably lead to a huge revitalization of financial capital. Much of the capital used to build the Erie Canal came from various fund-raising activities and bonds, which would cause the market to thrive suddenly, and the capital to rapidly increase; various service industries around capital activities then would begin to develop. However, as time passes, capital activities continued to grow and compete for returns, and this capital return was also superimposed by the flourishing of capital industrialization. Capital costs rose sharply, and all social costs would then begin to rise as well. A large part of the growth rate of the social income level and the profitability of the manufacturing industry would then be discarded; the industry could not keep up with the rapid advancement of the finance and was unable to grow faster. Eventually, the cost went up, but the income and profit returns did not. This would spell economic crisis, along with financial crisis.

There is no easier way to create an economic crisis than the wave of infrastructure construction, because it can easily condense large amounts of capital and generate huge capital demand. For this reason, the economic crisis after the wave of infrastructure construction would not occur by chance, but rather every wave of infrastructure construction in countries around the world would be accompanied by economic crisis and such wave would halt after the crisis. In the book Urbanization by Chan Kung, such relevant historical conclusions are mentioned, and what is described in the book is indeed the reality. Our world is in this cycle yet no one has ever learned any lesson from it, and history often repeats itself; the final result is then the economic crisis. Take the United States as an example. After 1860, all economic crises broke out once in almost every 10 years.

When it is clear that the economic and financial crises are prone to happen after the climax of infrastructure construction, we can know that the ups and downs of the world economy are cyclical. We understand this truth, so does the financial capital industry. Once the financial capital detects that the wave has faded, shrinkage becomes inevitable. At this time, the economy has turned sharply from a positive feedback on economic growth to a negative one on capital contraction. This is a process that has its ups and downs in between; it is also the performance of the general trend as well. It is worth noting that once it comes to the negative feedback cycle of capital contraction, raising interest rates, tightening monetary policy, and the increase of bond price, the economic competition at this time would not be about profits but about survival. In the end, it is inevitable for all countries in the world to adopt the protectionist policies.

To be frank, the protectionist policy adopted by President Trump of the United States is understandable, but it is incomprehensible that there are so many people in the world ignoring the changes in the economic cycle and hope the past could persist. It should be known that in the cycle of negative feedback, there are also competitions to see who withdraws first, and not everyone could withstand it, mass retreat would begin. This is like when an avalanche has just happened; those who were at the front and could run faster would have more chances to survive while those who were at the back would be swallowed by the avalanche. This is not a question of retaliation, nor is it about profits and losses in trade, but it is the issue of the competitions in a crash.

Final Analysis Conclusion:

It appears that the United States is at the forefront and it is the first country that understands the actual situation.