LCH says he was shocked to read of Prime Minister Dr Mahathir Mohamad's plans to return to economic protectionism.

He claims Mahathir doesn't understand economics and that protectionism isn't only a bad policy but that it would also lead to breeding uncompetitive industries and long-term structural unemployment in Malaysia.

LCH is right, but only half right. It is true that early phases of industrialisation usually harbour state protectionism against international competition. It's also true protectionism does not produce scale economies.

And over time such industries, if poorly managed, run into serious problems and become huge drain on national wealth. China is an excellent case in point.

But LCH sounds like a zealot from the Chicago economics school, most of whom, like Milton Friedman, are apolitical and ahistorical.

In the first place, protectionism isn't made by an economic calculus but is politically driven, and it's often applied to nationalised industries that cannot withstand competition.

Secondly, protected industries lend to higher employment, and in the early phases of industrialisation, being seen to be achieving full employment, as Malaysia did throughout the 1960s and 1970s, is what governments do to survive politically.

Third, however, quite a number of national `protected' industries around the world remain viable, even today. In fact, if LCH had done his homework, he would have found a few examples in his own backyard, such as Petronas which, like Indonesia's Pertamina and Iraq's National Oil Company, has become the Mahathir government's cash-cow. There are many other industries in different sectors, and it would have been prudent for LCH to have factored sectoral analysis into his criticisms.

Fourth, LCH misleads by suggesting that economic liberalisation through global competition is the `holy grail' by which modern economies should live. This is a myth. He cites Perwaja as a problem of protectionism. He is half right, but most of Perwaja's problems relate to incompetent management, including the Malaysian government, low skills and technology, poor marketing and planning, and corruption. Just like China's.

LCH also cites the US steel industry. If LCH had done his research, he would have found the global steel industry in the 1980s was in a mess from the shakeout borne by that sector's liberalisation or privatisation and exposure to international competition.

That was certainly the case in Britain under Margaret Thatcher, in the US under Ronald Reagan, in Germany under former chancellor Helmut Kohl, and even in Australia under the previous Labor and now the Howard conservative government. And in Japan and Taiwan and South Korea and so on.

Privitisation became the craze and Mahathir jumped on the same bandwagon. Remember? Instead, LCH should have focused on why Mahathir, in his final months in power, is again focussing on protectionism (for sectors) of the economy.

That is the more interesting and, I suggest, pressing issue. LCH touched on one - the link between Mahathir's son and his vested interest in the Malaysian steel industry. Which, contextually, isn't so surprising given Rafidah Aziz's son-in-law's vested interest in the motor import industry.

But there are bigger issues that have been rocking the Malaysian government since the late 1990s economic crisis. These are coming back to bite the Mahathir government not just for its policy incompetence but also an economy lurching towards serious trouble. Part of Mahathir's policy response that so concerns LCH is precisely against that which he champions.