Full text: The Economics of Transition.

imports of higher quality are available the preference of 
consumers for them may be so strong that the wage required to keep 
the old sector competitive would be unacceptably low. It will 
therefore be imperative to protect the old sector from foreign 
competition in some form or other, perhaps by quotas, for as long 
as the new sector is not ready to replace it as an employer of 
labour and provider of goods. This may be necessary also for 
considerations of balance of payments, especially in view of the 
strong need for imports of new technology. 
The protection of the old sector implies also that subsidies 
hitherto given to it to keep it viable should not be quickly 
removed. The policy of protection must of course be selective, for 
example, subsidies for fuel and power should generally be 
withdrawn fairly soon in view of the great importance of saving 
An essential requirement for the protection of the old sector is 
that it should be limited in scope and in time. One has to find a 
middle way between the policy of closing down a whole industry 
practically overnight and the perpetuation of obsolete structures 
without end. An old industry should never be protected against the 
competition of newly emerging facilities within the country. The 
time limit for the protection should not only be roughly defined 
but it should also be perfectly clearly known to the people 
concerned - the managers and workers of the old industry. 
One method - although a rather rigid one - is to set up a definite 
time schedule for the termination of the protection which would be 
individualised according to industries. This requires, of course, 
- horribile dictu - an industrial policy. In other words, it is

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