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Tuesday, September 23, 2008

Free Trade, Blogging, and the US Economy in 2008

Today's Buggy Commentary

Not surprisingly, what with the continued headline news about the current financial crisis --- not yet a meltdown, but threatening to be one --- the bugged out comments continue to look at the US economy's fortunes: recently, at present, and into the murky near-future.

Topic One

The comments actually encompass two topics: The first: how has increasingly open trade --- and flows not just of goods, but services, technology, multinational activity, and other investments --- influenced the US economy, for good or bad? 

Note here right off: if there is one subject on which virtually all economists outside Marxist circles agree on --- whether liberal or conservative or libertarian --- it is on trade, and in particular on the overall benefits of ever freer trade in goods and services to a country's mid-term and long-term economic growth and prosperity.  And this much is true: no country these days, other than a few wretchedly corrupt, rentier gangster-regimes in the Middle East --- all small in population: under 22 million, and usually much less than that.  (Even oil-rich Iran, with 66 million, is a very poor country for 90% of its people, with a per capita income of $10,800, high unemployment, and high levels of poverty).  All other countries with a per capita income of at least $20,000 are all solidly democratic, have a large scope for market activity (with regulatory controls varying), and engage in extensive trade with the rest of the world.  Found in West Europe --- with the newer East European countries generally prospering and growing steadily from very low levels at the end of Communist control in roughly 1990 --- and the English-speaking world, plus Israel in the Middle East, and Japan, Taiwan, and South Korea (Singapore, a tiny Chinese city-state ruled by a dictatorship, is the exception to democracy)(.

But Note:

None of these countries industrialized or became democratic by practicing free-trade with the exception of Britain in the 19th century.  Most of West Europe practiced free-trade in the middle of that century, but they soon deserted the practice, erected trade barriers and various kinds of state-subsidies, and prospered under such protection.  The same was true of the United States: we had various kinds of trade barriers protecting industry throughout most of the 19th century.  And all the rich East Asian countries, starting with Japan in the late 19th century, practiced various forms of neo-mercantilist export-oriented trade as an engine of long-term growth.

And so --- the real question for economic development is this: when, in its development --- to judge by the history of the last two centuries --- is it desirable for a country to open up ever more?  And, by extension, will China's half-statist, half market-oriented economy --- dominated by a large and corrupt state-bureaucracy and headed by a self-aggrandizing Communist Party leadership --- open up to far more open trade in the form of industrial imports from abroad . . . which really means a shift away from export-led growth toward domestic consumption, infra-structure development, and a sustained campaign to deal with its horrific levels of environmental destruction.

Then, too --- as always --- there is the politically charged issue that emerges: will ever more capitalist development in China of a more balanced sort --- including far more openness to imported goods and services from abroad --- lead first to ever more international cooperation in economics that, in turn, will increase mutual interdependence with the democratic rich countries and promote over the long run peaceful relations with them?  It's a pivotal issue in international relations theory, and prof bug promises to look at it in detail later on.

For today, it's enough to say that his comments ---- left at a lengthy post at Carpe Diem, a good libertarian economic site run by Professor Mark Perry of the University of Michigan --- deal with the benefits of ever greater globalization of the US economy, but the political and economic problems of how the benefits of such openness have not been used to compensate the ever larger numbers of those who have been hurt by such openness as well as by the related introduction of revolutionary information and communication technologies that have, among other things, accentuated the rapid growth of globalizing forces world-wide.

Click here for these ranging buggy views.

Topic Two, As It Happens, Is Found in the Same Carpe Diem Thread

It was induced by the thoughtful comments of a poster who agreed with prof bug that the benefits of ever greater globalization and hence ever freer trade with dynamic industrializing countries in Asia have not been used to at least partially help the losers within the US economy . . . one upshot of which is the new surging populist reaction in public opinion.  When 80% of Americans agree in public opinion polls --- as they have for over a year now, even before the current financial crisis --- that the economy has been performing "very poorly" or "fairly poorly", you know that you are facing the recurring backlash in much of the US population to the dominant economic changes going on . . . largely or wholly seen as "unfair", advantaged only for the rich, special interests serving them, and politicians indifferent, so it's charged, to the rest of the public.  So what's to be done?

The thoughtful poster in question was among the "losers", his well-paid professional job sent abroad.  Needless to add, the libertarian enthusiasts in the Carpe Diem thread weren't sympathetic.  Some ridiculed him; others offered simple-minded advice; hardly anyone engaged his arguments head-on.  So he protested, noting the failures to take on his views fairly in an open-minded way, backed by evidence.  It's here, at the end of the thread --- which began two or three days ago --- that prof bug intervened again, supporting that poster's criticisms and adding some buggy stuff of his own.

And so click on the above link, set out in red.