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Rewarding Mediocrity
Forbes ^ | 01.29.08 | Tim Harford

Posted on 02/06/2008 4:57:29 AM PST by forkinsocket

If you want to dismay an economist, just mention the phrase "national champion." The phrase won't call to mind great sporting heroes, but wheezing corporate behemoths protected from domestic competition, propped up with generous government subsidies and shielded behind trade barriers.

Why would the government ever choose to provide such handouts? The justification is that a "national champion," strengthened with subsidies and protected from pesky irritations like local competitors and creditors, should be well equipped to beat rivals on the global stage. Unfortunately, it doesn't work that way.

"No industrial policy has been more comprehensively discredited than the notion that the best way to achieve competitiveness abroad is to suppress it at home," says John Kay, author of Culture and Prosperity. As a British economist, he has plenty of experience with national champions. European governments, in charge of relatively small economies, have been particularly tempted to promote national champions. That enthusiasm has produced few success stories: Who now buys cars from national champion British Leyland, in the U.K. or anywhere else?

As much as economists tend to be fans of laissez-faire, they have always recognized that there is a respectable argument in favor of backing infant industries, giving young, innovative companies a chance to find their feet, their funding and their customers before exposing them to unfettered global competition. The real problem with "national champions" is that they are almost invariably from aging industries. Think about government support for Detroit's car industry, or American steel producers. Say what you like about the corporations involved, but "infant" they are not.

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TOPICS: Business/Economy; Government
KEYWORDS: business; champions; economy; subsidies
1 posted on 02/06/2008 4:57:30 AM PST by forkinsocket
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To: forkinsocket

“Rewarding Mediocrity”

Darn it, I thought it was about McPain and the rest of our candidates.

2 posted on 02/06/2008 6:32:22 AM PST by A Strict Constructionist (We have become an oligarchy not a Republic.)
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