Sunday, November 16, 2008

Illogical Protectionism

Today's Sunday Times economist's column is well worth a read. Here's an important observation,
The President when introducing the Budget said the cesses and increases in several import duties were to encourage local production of these commodities or substitutes for them, as is the case of milk, sugar, wheat and maize imports. The economic logic is that higher prices for these goods would raise domestic prices for them or substitutes and be an incentive for domestic production. Therefore the increase in prices is needed for this incentive effect. However the Minister of Consumer Affairs and other government parliamentarians are saying these increases in duties would not raise prices.The Minister of Consumer Affairs, an Economics teacher is on the contrary taking steps to control prices of these commodities. If prices do not rise then there is no way in which the measures taken by the budget are incentives for domestic production.
The whole thing here.

Logic was never a strong point of the present administration. Import substitution, which the administration's economic strategy is based on, will give the results it has always given -- higher prices, fewer choices, less quality of life and eventually, a resounding victory for the opposition.

1 comment:

AMIT said...

Very good article written by you.

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