Quote Originally Posted by Dayuhan View Post
So what do you do when the Koreans raise their subsidy? Raise yours too?
This turns into an investment calculation with great dependence on expectations. Wrong forum to do it.


At what point do you begin taxing competitive sectors (rendering them less competitive) to subsidize non-competitive sectors?
This shows you didn't understand. A country as a whole has to support its population's goods and services consumption with its economy.
A given quantity of workers - unemployed or working - has to get its goods and services from their economy (closed economy model for simplicity).
This only gets easier if they keep working (for example in the shipyard) and more troublesome to the rest of the economy (not less!) if the example shipyard closes!


I can see an argument for subsidizing industries that have potential to be competitive, but which need a temporary subsidy in order to achieve that status. Pouring money into industries that have low potential for competitiveness and which will probably require perpetually increasing subsidies makes a lot less sense.
Forget factories buildings, machinery and the illusion of companies for a while. Remember; it's really only about people.

Many workers will not get a decent job in another sector, given their age, qualifications et cetera.
What really counts is thus the middle ground between your "temporary" and your "perpetually". It makes usually perfect sense to keep even substantially uncompetitive companies/industries above water until their non-versatile workers have retired (an exception is extreme lack of competitiveness, such as higher losses than labour costs).
Again: Low productivity work is more productive than no work at all.


The Chinese cushioned the impact of recession in their export markets by subsidizing an enormous surge in construction, which along with its second and third tier support industries created an enormous amount of employment. The problem is sustaining this, as in many cases end-user demand is not sufficient to absorb the building stock coming onto the market. Prices have been artificially propped up due to speculative buying, but sustainability is also an issue there.
Playing the markets in order to sustain (or replace) this system may be tricky, but China as a nation is having surpluses in trade and has thus proved that their system works without net foreign input. It is most likely possible to stabilise it.
The biggest challenge to this is their necessarily sharp demographic change (they would be worse off if they hadn't have it).