Fraser Forum

William Watson: The Crown to wear Prada? Let’s not subsidize the fashion industry, too

Printer-friendly version

According to the arts reporter for CBC’s The National (yes, arts reporter), the Ontario government is considering subsidies for the province’s fashion industry. A designer the reporter interviewed emphasized that things like line, style, form and colour, which are great concerns in the visual arts, are also key in fashion. The visual arts get subsidies, so fashion should, too.
(You know, in writing these columns I try to pay attention to the order of words, what exactly constitutes a paragraph, and where the punctuation should go. I realize some writers who get Canada Council grants eschew punctuation, paragraphs and ordered words as insufficiently post-modern. But for most grant recipients, these are genuinely writerly concerns and if writers who think about them do get subsidies, why not us columnists and bloggers, too?)

The relevant Ontario minister basically dodged the question but did note that, regarding the sector, the province was in the process of coming up with a strategic, er, strategy—which we can all agree is the best kind of strategy.

The stylishly-garbed lawyer representing the industry in its quest for largesse was more polished—though someone should tell her being interviewed in an office with a million-dollar view isn’t the best optics for feigning neediness. She ticked off the telling talking points, which are always the telling talking points when industries come-a-courting governments.

One, this is an important industry that employs tens of thousands of Ontarians.

Two, many other industries get a share of the hundreds of millions in business subsidies Ontario pays out every year. Why shouldn’t we?

Three, Quebec subsidizes its fashion industry so Ontario should, too.

Of these arguments, the first is worst, though it’s usually the one non-economists find most persuasive. If an industry’s important and employs people, that’s a sign it’s already doing exactly what we want it to do—namely, providing goods or services that people are willing to pay more for than they cost to produce. It’s a complete non sequitur to conclude that just because an industry is important and employs people it needs subsidies.

Moreover, as soon as we start giving it subsidies it will start doing exactly what we don’t want it to do, which is provide goods or services people aren’t willing to pay more for than they cost to produce. If you’re subsidized then, almost by definition, your costs are greater than your revenues, which is a bad thing unless you’re emitting large amounts of good pollution.

Medical research may be doing that. But fashion?

In general, then, your size and success are the best evidence you don’t need subsidies. If you’d like a gold star or a medal, we can give you that. But subsidies, no.  

Though the second argument has zero economics behind it, its basic logic can be hard to resist. If governments have no underlying principles about who should or shouldn’t get subsidies, but provide help to any industry that can raise enough political pressure, then, sure, why not fashion, too? But let’s not pretend there’s anything more to this than schoolyard fairness: Me, too! Me, too!

The third argument can also seem compelling. Quebec is subsidizing its fashion industry so Ontario has to subsidize its fashion industry, too. By this logic, however, if any jurisdiction anywhere in this very open trading world subsidizes fashion, every other jurisdiction must subsidize fashion, too. Very big dogs can thus be wagged by very little tails.

We economists usually argue that if other jurisdictions want to give us their fashion below cost, we should take it. On its merits, that’s certainly true. But the argument strikes me as never working very well. People feel sympathy for “our” fashion industry facing unfair competition from “their” fashion industry—even though, in this instance, both fashion industries are Canadian.

Maybe a more persuasive argument is to ask where this all ends up. If just about every industry in just about every jurisdiction ends up being subsidized in some way or other, what’s the point? When everybody’s subsidized, nobody’s subsidized. Wouldn’t it be a lot easier to eliminate all subsidies except those where there’s a starkly clear market failure and instead cut business taxes? At the very least, we could save ourselves the time and money of tens of thousands of strategic strategizers.

No doubt many people who support subsidies to different business sectors would oppose across-the-board cuts in corporate taxes on the grounds that the rich people who run businesses need to pay their fair share of taxes. Well, just who do they think ultimately benefits from subsidies to these self-same businesses?

Pay me in tax cuts or pay me in cash, it all looks the same in my bank account.


Subscribe to the Fraser Institute

Get the latest news from the Fraser Institute on the latest research studies, news and events.