Over a century and a half ago the great French political economist Frederic Bastiat penned a terrific little essay entitled “The Petition of the Candlemakers”. The 1845 piece was a brilliant demolition job of the illogic of protectionism. It was a fiendishly satirical look at the folly of governments propping up failing or inefficient industries.
He sought to make the case for candle makers and related workers, saying that they were facing unfair competition from the sun. If the government would only snuff out the sun or block its effects, he wrote, just think of all the jobs that could be saved, and all the new jobs that could be created in this industry. In the essay he said in part:
“We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us.
“We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.”
The idea that governments must protect struggling industries and businesses, regardless of the costs or the negative effects to others, is known as protectionism. I recently wrote a piece on the protectionist policies in the Australian book industry, and how Australian consumers are forced to pay much higher prices because of it.
Some wrote in comments seeking to defend the policy, claiming it is the Christian thing to do. Some were concerned about any job losses, and felt that we all should worry about any industry in decline. This is not the place to offer a full-fledged economic treatise on the merits or otherwise of protectionist policies, but let me offer a few thoughts about such concerns.
The truth is, there will always be industries in decline as life moves along. Some industries are no longer needed, or are superseded by newer industries, technologies, or consumer demands. Thus all industries need to adjust to changing realities.
Some businesses and industries can successfully make adjustments and continue to thrive, while others of necessity will have to be put out to pasture. As much as we may have liked the old horse and carriage mode of transport, newer transportation options simply rendered this obsolete.
Many would have complained at the time about job losses and so on, but progress needs to occur, especially if it results in things becoming much more efficient and cost effective. In the same way there would have been many disgruntled slide rule workers who felt a great injustice at seeing their livelihood undermined by the development of hand-held calculators.
The question is, should all of these obsolete or superseded industries receive government subsidies and protection, simply to keep some of these people in work, or should we teach them to adjust to the new realities, and offer them training in how to get another job in another area?
Some years ago I had a discussion with someone whose dad was an independent cabinet maker. He complained about how cheaper units were being produced and sold at places like K-Mart. That obviously put pressure on his dad, and affected his opportunities. In many ways he just could not compete with these bigger suppliers.
My reply to him went something like this: While no one wants to see anyone put out of a job, in the world we live in this will happen. There will always be trade-offs as new developments take place. The economy, like ideas, technologies and general knowhow, are always changing and morphing into different forms.
No one can expect to live in a stagnant, isolated bubble, unaffected by change which takes place all around them. Learning to adapt to new situations such as changing customer expectations and wants is part of how any business stays successful and stays afloat.
While it might be nice to get one of these hand-crafted cabinets, and keep this guy in business, most people – including me – simply can’t afford such items, and are very grateful for mass-produced units which may not be as nice but are a whole lot cheaper. I for one am grateful for places like K-Mart, where all kinds of goods and service are affordable for a relatively poor guy like me.
If you are wealthier or fussier you can go for the hand-crafted items. And there will always be a market for such goods. But most poorer folk like me really appreciate the fact that the mass-production of goods means that most things which were only for the rich just a century ago are now affordable to everyone.
So some trade-offs must take place here. Some people – including concerned Christians – might think it is the role of governments (that is, you and me, the taxpayer) to subsidise the cabinet maker so that he can keep his job. But should we taxpayers have to prop up everyone and everything in a changing world?
Or should people learn to adjust to the times, and meet the needs of consumers? If this cabinet maker can make a living by serving the fewer people who prefer his stuff, fine, but if he can’t, why should he expect me to subsidise his lifestyle? Maybe he needs to find a new job, or find a way to increase demand for his more expensive products.
It is the same in the book industry. All this protectionism seems to be doing is driving people to the cheaper overseas online outlets. I for one very much appreciate these places. I would be broke if I had to pay the exorbitant prices most Australian booksellers are charging. They need to become more competitive in their pricing, and make other changes (such as offering online services) if they expect to keep their customers and stay afloat. But if they refuse to make these adjustments, why should I worry about them, or be forced to subsidise their inefficiencies?
I would suspect that on most occasions, most people when they are buying will shop around and look for the cheapest prices. There is nothing wrong with that, and nothing un-Christian about it. I don’t know of very many people who deliberately pay much more expensive prices to show their ‘solidarity’ to someone who is less competitive and/or unwilling to make some of the required changes to go with the times.
If a person wants to in effect subsidise such workers or businesses that is up to them. But I – and most other people who seek to be sensible with their limited means – prefer to go where the best value for money is found. If others wish to offer charitable donations on the side to their favourite at-risk industry, they can feel free to do so.
But we should not expect governments (that is, our tax dollars) to bail out every failing industry, every inefficient business, and every unsuccessful organisation. That simply rewards mediocrity and inefficiency, and it is the consumer who suffers as a result. No business venture is guaranteed success – nor should it be. Life is always a risky enterprise, so why should any of us expect to be protected from failure?
One commentator on my earlier article about the book industry wrote this: “We are living in a different world now and those who try to keep living yesterday will go under. Remember Polaroid Cameras? That company in 2001 filed for bankruptcy protection with a share value of 28c. In 1997 it’s share value was worth $61.31. What went wrong in such a short time? Answer: Digital cameras. Polaroid refused to change to digital camera technology saying their unique technology would not fade away.
“The core product of any camera company is not their particular camera, (as Polaroid seemed to think), but rather an acceptable photo that the consumer can produce himself. Digital cameras are doing this now and cheaper and easier to.” This would be true of any number of areas.
It seems the foolish answer to all this is to expect governments to protect and subsidise such industries. But in a free market adjustments always have to be made, and there needs to be as much room for failure as for success. The consumer really should be king. I see no moral or biblical reason to argue for protectionism or government subsidies for failing industries.
Sure, help of various kinds can be offered. As I mentioned, retraining programs would be part of the assistance on offer. But it is illogical and not particularly moral to expect that every failing enterprise should be thrown a tax-payer funded lifeline.
http://bastiat.org/en/petition.html
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