First let's see what protectionism is. According to Mr. Webster it is the advocacy, system, or theory of protecting domestic producers by impeding or limiting, as by tariffs or quotas, the importation of foreign goods and services.
That sounds pretty good. It is something that will protect the jobs of our workers from goods that can be produced elsewhere and undercut the prices of our local goods. How? There are a couple of ways. The merchandise or commodity itself is in very large supply in another country and is mined or grown there very cheaply. Not much you can do about that. Or the labor costs of production are vastly less than our own workers and the product can be manufactured for less.
The average worker in the U.S. makes about $12.00 per hour while the workers in Mexico get $2.00 and the people in China average 60 cents per hour. How do you compete with them? Answer - you can't. So what do you do? If you are a shoe manufacturer in the U.S. you ask the federal government to levy a tariff (tax) on all imported shoes (or maybe just the kind you make). This sure helps that particular shoemaker who might have 300 employees making sneakers. Now the sneaker maker can keep his prices up and his workers working. That's good.
But wait a minute. There are millions of feet that need sneakers and that means millions of consumers are paying more for comparable quality sneakers. Is it fair to give special consideration to a very small group that automatically penalizes the mass of consumers?
Examine the definition of tariff again and think it through to the end. A tariff is a tax on consumers.
You are paying more for certain goods (and there are about 13,000 separate tariffs) than you should just for the benefit of a few manufacturers who cannot compete in the world market. Every country is not just a unit unto itself any more. We now have a global economy that allows specialization of products. If a company cannot compete it should not be in business and should not penalize the majority of its citizens for the benefit of a few. You, the consumer, should not have to pay more for tomatoes, brassieres and steel just so our politicians can get reelected. That is what is boils down to. Unions will promise to back certain candidates if they will vote for tariffs (tax increases) that protect incompetent manufacturers. The steel tariff is an excellent example. Bush put on a tariff when he could have given a tax break to help modernize that industry. In the long run our steel production will disappear because of continuing inefficiency. If we get into a trade war where one country trumps another with more and more tariffs it is a guaranteed loser for everyone. Visualize this as building a house of cards. You end up with a game of 52-pickup. It could go to the ultimate of deflation and depressions for all the countries of the world.
Protectionism in all of history has never worked.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
shuttle from Midway Glen Ellyn ..The stock market is very unstable at this time going... Read More
It has fallen upon the consumer to make our economy... Read More
Wouldn't it be nice if you were only in the... Read More
This is an extract of an article which was first... Read More
When most analysts, financial planners, fund specialists and investors try... Read More
I am sure that if you have a brokerage account... Read More
Carefully thinking through your goal as a trader is of... Read More
The Bollinger Band theory is designed to depict the volatility... Read More
Hello Inflation, it has been awhile, I see you on... Read More
Economists know more about how the fragments of society work... Read More
With an insecure job market, overworked employees, insufficient retirement savings... Read More
Stock trading can be a very profitable activity. You can... Read More
Ever wondered what is a mutual fund? A mutual fund... Read More
Even if you don't own any of their stock or... Read More
Last time we looked at the real performance of the... Read More
Buy high and sell low -- It's not a typo.Millions... Read More
I continually hear from economists, talking heads, other market letter... Read More
There are many good penny stock investments available, which could... Read More
It is commonly reported that the stock market averages about... Read More
We are already in it, but you can't see it.... Read More
No, this is not a symbol for some Latin number.... Read More
What the heck am I talking about?It is often said... Read More
Right now there doesn't seem to be any "gold fever".... Read More
The bulls and bears of the stock market are both... Read More
You probably have been told that options are risky. Even... Read More
shuttle from O'Hare North Chicago .."Buy and hold" is one of the most heralded investment... Read More
The stock market is very unstable at this time going... Read More
You remember the story about the frog that was put... Read More
One of the basic laws of physics is that a... Read More
People are constantly asking me why is the stock market... Read More
Where is the beef? Or maybe it should be where... Read More
The Macedonian Stock Exchange (MSE) is not operating successfully. True,... Read More
We've all heard of the stock market and probably have... Read More
Let's say you are interested in this one company. You... Read More
Mutual funds were created with the idea that one person... Read More
Do you have a financial planner? Does one of your... Read More
I don't know what kind it is, but I saw... Read More
Is really not as important as to how you invest... Read More
It seems that every day I turn on the TV... Read More
I receive emails from Morningstar. This company provides statistics and... Read More
Ever notice how behavior in one area of life can... Read More
When you stand on the ocean shore and watch the... Read More
In today's volatile and confusing stock markets everyone is searching... Read More
If you have talked to a stock broker or financial... Read More
The debate rages all over Eastern and Central Europe, in... Read More
When you become interested in a stock or mutual fund... Read More
Time to look back2004 is over, now we are in... Read More
When is a dividend not a dividend?The latest thing "conservative"... Read More
How can you dispel an illusion unless you look directly... Read More
Mutual funds were moderately successful in creating a presence in... Read More
Stocks & Mutual Fund |