Protectionism: Bad or good?

Date:              13 March 16
By:                  Frank Gue, B.Sc. MBA, P.Eng
                       Burlington, ON
For:                Gary Reid
Re:                 Protectionism:  Bad or good?

 

Bill Hughes wrote:

Protectionism of industries raises prices to 
consumers, inevitably, always.  

 

Absolutely correct!
Now, what the good Bill obviously has not thought of is that,
if he just lost his job owing to what he calls “protectionism”,
he won’t be able to afford that “cheap” product at any price
high or low.
And so, despite the disapproval implied so loudly in Bill’s
expostulation, protectionism is not “inevitably and always”
a Bad Thing; it’s just that it’s likely to be manipulated,
usually by politicians.  The operative word is “protect”.
ppp, “purchasing power parity”, which Bill apparently also disapproves
of, is an adjustment to bring the foreign “cheap” producer somewhere
close to our “costly” producers.  It’s well meant and sort of half-works.
But it also is a shell game that conceals the fact that Country “A’s”
productivity (production per manhour) is not as good as Country “B’s”.
It just spreads the inequality around and makes it less visible, which
is not a totally a bad thing except that it conceals from Country “A”
the fact that it can improve its productivity.  This is the exact way
Canada has operated since WWII.
The truth will out: one way or another, if “A” produces less per
labor hour than “B”, the citizens of “A” will have a lower standard
of living than “B”; well concealed, perhaps, but always true.
Another fact always overlooked is that the citizens of “A” may be
quite willing,  consciously or unconsciously, to accept a
standard of living that is lower than that of “B”.  Canada has
lived this way for a century or more; because, for several reasons
good and bad, we don’t want to live exactly “like the Americans”.
F.
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