This is an archived blog post from The Acorn.
Atanu Dey points to an excellent article by Tim Worstall.
It is rare to find a single story that illustrates, in exquisite detail, all of the varied pro- and counter- arguments for free trade as opposed to managed or protected trade. In a nutshell, the Indian Railways Minister, a Mr Prasad, has refused permission to import railroad wheels into India, preferring to establish a factory in his home state of Bihar to make India self-sufficient in their production.
We may not be able to use either pork-barrel or parish-pump politics to describe that sort of behavior in a predominantly Hindu country but whatever the appropriate description we are not surprised at such actions when politicians are present. The real cost is here:
“Analysts predict that it will be many years before India can produce enough wheels to meet demand. The shortage has left 20,000 carriages awaiting wheels, and a similar number of old ones requiring replacements.”
What do you think will make the people of India richer? An indigenous railroad wheel manufacturing industry? Or a train system with 20,000 extra carriages on it and a further similar number running on new not old wheels? Please note that the industry will arrive after a decade of not having the new and repaired carriages. It isn’t really that tough a question is it? Simply another nail in the coffin for the idea that tariff barriers (whether you call them quotas, tariffs, permissions or licenses makes little difference) will make a country rich. [TechCentralStation]Politicians like Lalu Prasad Yadav neither stupid nor mad, on the contrary they are extremely devious and clever, and know that plugging the most populist line will keep them in power. For what is the ‘reforms with a human face’ policy of decidedly intelligent and sober economists like Manmohan Singh if not Lalunomics with an English label?
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