Who benefits from protection?

Subsidies are just a transfer of funds from taxpayers to producers and as taxpayers are also consumers they end up paying more twice  – first through their taxes and then through higher prices.

The subsidies also blind producers to market signals so they produce more than the market requires.

The other weapon in the protectionists armour is tariffs. They are also a tax which costs both producers and consumers because goods subject to tariffs cost more.

So who benefits from protection?

In the short term inefficient producers and politicians. In the long term no-one because protection stunts economic growth.

The global recession could provide an opportunity to reduce protectionist policies because it costs too much, but the signs aren’t promising as the Inquiring Mind notes in a post on the rising tide of protectionism.

Anti-Dismal   illustrates the problem of protection with this:

One Response to Who benefits from protection?

  1. adamsmith1922 says:

    HP

    Protectionism is one of the great evils. All too often it is cloaked in self righteous rhetoric about looking after our people. Increasingly and perhaps even more dangerous is the tendency to use green issues or concerns to erect barriers to trade. The French and the Germans are pretty good at that. The Aussies are no slouches in that regard NZ apples anyone.

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