Meditations and Learnings

Meditations and Learnings

The Harms of Protectionism

A South African manufacturer might rationally choose to open a plant in Poland where the average output per hour is lower. They would do this despite the many workers available in South Africa and the unemployment rate of 26%.
The South African workers likely only have a higher output per hour due to the abundant capital. If similarly resourced, Polish workers would achieve as much. In South Africa, the labour unions have negotiated various protections and benefits. One particularly harmful “protection” was the minimum wage, set above the level that a company seeking to be profitable would pay a low-skilled worker. Artificially inflating the value of workers means that companies will look elsewhere.