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Commentary: Globalization |
The Case for Market Liberalism
by Vladamir
(No verified email address) |
Current rating: -4
21 Jan 2004 |
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Economic freedom and limited government under the rule of law are crucial for peace and prosperity in the 21st century. Globalization has helped spread market institutions and foster political reform, as in South Korea and Taiwan. Countries that have cut themselves off from the global economy, such as North Korea, have failed to develop. Critics of globalization have good intentions -- to alleviate poverty and close the gap between rich and poor countries -- but those ends are more likely to be achieved by economic freedom than by government intervention. |
January 20, 2004
The Case for Market Liberalism
by James A. Dorn
James A. Dorn is vice president for academic affairs at the Cato Institute.
Economic freedom and limited government under the rule of law are crucial for peace and prosperity in the 21st century. Globalization has helped spread market institutions and foster political reform, as in South Korea and Taiwan. Countries that have cut themselves off from the global economy, such as North Korea, have failed to develop. Critics of globalization have good intentions -- to alleviate poverty and close the gap between rich and poor countries -- but those ends are more likely to be achieved by economic freedom than by government intervention.
Interfering with free trade, dictating massive government-to-government aid programs, imposing burdensome environmental standards, fixing wage rates, and penalizing successful entrepreneurs are not in the long-run interests of poor countries. A policy of engagement is the best strategy to increase living standards, improve the environment, and reduce the risk of war.
China is the foremost example of the positive effects of opening to the outside world and establishing permanent normal trade relations. Trade liberalization has helped China grow the nonstate sector, dramatically increase per capita incomes, and invigorate civil society.
The market-liberal order is both natural and ethical. Former Czech President Václav Havel, in his Summer Meditations, noted that naturalness when he wrote that the free-market economy is "the only natural economy, the only kind that makes sense, the only one that can lead to prosperity, because it is the only one that reflects the nature of life itself."
The market-liberal order is also ethical, in the sense that it is based on freedom under the law. As Zhang Shuguang, an economist at the Unirule Institute in Beijing, stated, "In the market system, . . . the fundamental logic is free choice and equal status of individuals. The corresponding ethics . . . is mutual respect, mutual benefit, and mutual credit."
The failure of central planning has left the market economy as the only viable alternative in today's global economy. Emerging market economies, if they are to survive and prosper, must make a credible commitment to economic freedom and limited government. The problem is how to establish and maintain an institutional framework that protects private property rights and freedom of contract. The challenge is to create a constitutional order of freedom in which self-interest is in harmony with the general welfare. The market order and the political order will then be compatible.
Removing legal restrictions on exchange (both domestic and foreign) and reducing the size of government will increase economic freedom and prosperity. In a study of OECD countries and 60 other nations, published in the Cato Journal, James Gwartney, Randall Holcombe, and Robert Lawson found an inverse relation between the size of government, as a share of GDP, and economic growth -- but a "strong positive correlation between the security of property rights and economic growth."
The first step toward strengthening emerging market economies is to think clearly about ways to depoliticize economic life. Restrictions on trade, labor mobility, capital flows, and prices need to be examined with awareness of the social gains to be had by deregulation. If small cracks can be made in government controls, formal markets will emerge and corruption decline.
The next step is to embark on legal changes that reduce the costs of transactions by limiting the power of government to intervene in markets that are opening. New property-rights arrangements that correspond more closely to private than to state ownership are likely to emerge in the process of development. As people gain wealth through markets, they will have an incentive to acquire more secure property rights and demand legal reform. That process is now occurring in China, which will amend its constitution in March to give greater protection to private property.
Liberalizing foreign trade is perhaps the surest way to expand the market sector, bring about legal reform, and reduce the relative size of government. Trade also produces dynamic gains through the spread of new ideas and the development of civil society, as domestic enterprises adhere to international trade norms and learn the importance of the rule of law for economic progress and social development.
Expanding the global network of free markets will help check the power of government. The more open markets are, the more alternatives people will have to escape heavy taxation and regulation. Capital will move to where it is protected, not to where it is legally plundered.
Globalization has increased economic freedom and helped move reluctant governments in the direction of market liberalism. Policies that lower trade barriers, reduce marginal tax rates, limit government spending, and prevent inflation are positive steps toward prosperity. Trade, not aid, is the key ingredient in fostering freedom and prosperity in the 21st century.
This article was published in Investor's Business Daily, Jan. 14, 2003. |
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Commentary: Globalization |
Re: The Case for Market Liberalism
by Roberto
(No verified email address) |
Current rating: -1
21 Jan 2004 |
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Are we seriously posting things from the Cato institute? As in the Libertarian party's thinktank? Wrong website. |
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Commentary: Globalization |
Re: The Case for Market Liberalism
by Vladamir
(No verified email address) |
Current rating: 0
21 Jan 2004 |
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Not even a rebuttle huh? Wouldn't want to post anything that wasn't preaching to the choir. THIS message board is only for left leaning authortarians. Right leaning authortarians needn't promote their liberal market stuff here. We here are for structured hierarcical, authortarian government regulation while those libertarians are for hierarcical, authortarian, corporate....regula...hmmm... What is the essential difference between the participants of this board that would preclude one from posting a piece for debate or information? Especially when most of the views are so much in line as far as substance is concerned. Of course folks predisposed to act in an authortarian manner tend to be elitist, pompus, snide people anyway. |
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Commentary: Globalization |
Re: The Case for Market Liberalism
by Roberto
(No verified email address) |
Current rating: 0
21 Jan 2004 |
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Yeah, it's because we're authoritarians and not because the Cato Institute is designed to foster free market ideology in the United States. The message above is a copout, not a question regarding why this was posted.
In what way are the views in line with the content of this page? Because not every person who posts here is an anarchist? That is a bullshit dichotomy.
The priorities are clearly stated: "The problem is how to establish and maintain an institutional framework that protects private property rights and freedom of contract." Rather than a purpose of meeting human needs, the desire here is to pursue individual pursuit of wealth and "freedom of contract" (read: "hands off the market").
"Critics of globalization have good intentions -- to alleviate poverty and close the gap between rich and poor countries -- but those ends are more likely to be achieved by economic freedom than by government intervention." Yeah, it certainly worked in the 19th century when the courts took a "hands off" approach to the economy. Or in Chile under Pinochet, the darling of the Cato Institute/free-marketers' ideology, seen by them as a model of privatization in action. Never mind that it was a fascist society.
"Policies that lower trade barriers, reduce marginal tax rates, limit government spending, and prevent inflation are positive steps toward prosperity. Trade, not aid, is the key ingredient in fostering freedom and prosperity in the 21st century." Yeah, that's the way to solve our problems. Trade. |
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Commentary: Globalization |
Re: The Case for Market Liberalism
by Vlad
(No verified email address) |
Current rating: 0
22 Jan 2004 |
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What makes you think I am in agreement with or support the view given in this article? |
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Commentary: Globalization |
Re: The Case for Market Liberalism
by Lazlo
(No verified email address) |
Current rating: 0
29 Jan 2004 |
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Well I don't agree with either the article or Roberto. Both suffer from some misconceptions.
The priorities are clearly stated: "The problem is how to establish and maintain an institutional framework that protects private property rights and freedom of contract." Rather than a purpose of meeting human needs, the desire here is to pursue individual pursuit of wealth and "freedom of contract" (read: "hands off the market").
Here's a start:
The article is a dumbed-down libertarian perspective, and therefore contains some seeds of truth that are buried under the weight of the author coming from a wannabe-establishment group that panders to conservatives and other statists for fundraising purposes.
As a matter of fact, Roberto, voluntary, self-organizing productive activity is the only thing that is even capable of meeting human material needs. That's "The Market" and when you assume the Market is something we get stats on from Wall Street you're buying into the very obfuscation most essential to enslaving you.
Private property rights properly defined are protection of the property of the ordinary person. The elite will always have the property they have stolen protected as long as the state exists. That's what the State does -- it is a charade designed to protect banditry against the disadvantaged.
The protection of the "property" of the elite parallels the sham "right of free speech" granted in some authoritarian societies that consists of a right to praise the State as loudly as one wishes.
It's a matter of definitions and the root of the deception in Western society goes back to royal monopolization of courts in the latter part of the Middle Ages. They were originally more or less private/community/tribal arrangements for the arbitration of disputes.
Proudhon was entirely aware of this problem of conflicting definitions. He was not contradicting himself when he claimed that both "property is liberty" and that also "property is theft". Rather, he was referring to two entirely different phenomena that have had the same name applied to them.
Yeah, it certainly worked in the 19th century when the courts took a "hands off" approach to the economy.
Government dominated courts and the government they serve never take a truly "hands free" approach to the economy -- and in actuality closer examination of the facts reveal that government itself is responsible for the things Roberto probably likes least about the 19th century.
It was in the 19th century that government courts paved the way for environmental crises by dismissing the common law liability claims of common property owners for property damages from early elite polluters.
It was in the 19th century that government intervention in the banking industry to serve the interests of the elite monopolized access to capital and paved the way for the rise of the corporate-socialist (fascist) state.
Government subsidization of the railroad industry in the 19th century brought the sort of factory slaughterhouses that led to a corporate-dominated meat industry. Of course, those subsidies came from "taxing" the property of the common man -- by violating the property rights of the people systematically for the benfit of the elite.
Those are only a few examples. |
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Commentary: Globalization |
Re: The Case for Market Liberalism
by Lazlo
(No verified email address) |
Current rating: 0
29 Jan 2004 |
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Addendum: should have written "further monopolized capital" above for purposes of clarity. |
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Commentary: Globalization |
Re: The Case for Market Liberalism
by Andy Barenberg
Email: andybarenberg (at) hotmail.com (unverified!) |
Current rating: 3
03 Feb 2004 |
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Rebuttal:
"Globalization has helped spread market institutions and foster political reform, as in South Korea and Taiwan. Countries that have cut themselves off from the global economy, such as North Korea, have failed to develop."
South Korea and Taiwan followed the Japanese model of a government determined growth plan carried out through public control of investment - 60 70% of investment via the government with capitol flight punished by death penalty. Each year business leaders would meet to determine what needed and could be changed to make development goals and set out with the government in order to carry out the plan. (See "Economic Liberalization: no Panacea" edited by Lance Taylor, Under the Sun or any other host of books on the Asian tigers). Contrary to the necessity of private property another required prerequisite for their stunning growth was radical land redistribution post WWII to preempt the socialist threat. Such redistribution provided a market for the industrial goods from the agriculture sector while the availability of agriculture jobs forced the capitalist to pay decent wages. Hence the destruction of property lead to the equality needed for real growth in living standards (See Jeffery Sachs essay in Growth Oriented structural adjustment).
“Countries that have cut themselves off from the global economy, such as North Korea, have failed to develop.”
Asia and Taiwan cut themselves out for import-substitution development until they were ready to compete – otherwise they would still be selling knick knacks.
The article drops into rhetoric for awhile to then continue its fascinating choice of those to praise economic liberalism by choosing China – whose currency is not even convertible without government approval – as a role model.
The “market is natural” argument shouldn’t even require a rebuttal. Every fool thinks his own society is natural (C. Wright Mills I believe.) to think of its natural is to take as assumed an intrusive state that deposes the worker from the means of production by creating private property. It then follows (“Naturally”!) that those left behind will generally trade these goods for their own welfare. Such a situation is the state of just small bit of human history.
How this trade takes place is not inherently as in a market as authors such as this assume. Even Neo-classical economics has their “New Household Economics” that assumes that all greedy individual suddenly breaks down to generously give out to his (and they do think of it as a he) family. “Blood is thicker than water” is the simple excuse given for violating their central precept. But of course how we determine who is our family is socially constructed. In many societies it extends to virtually everyone that a person knows.
The essay returns to free trade – but no real additional arguments are given. I assume however he is aiming for all gain via comparative advantage specialization. Such arguments have much real content should be studied and understood but are not nearly as absolute as told. Such benefits fade away when you do away with the assumption of for employment. In a situation such as the massive unemployment that plagues the third world increased labor efficiency gain nothing as the opportunity cost of labor is zero while causing much harm as it increases unemployment. More efficient US farming methods can devastate the livelihoods of the poorest of the poor without some trade barriers. This raises more important questions: even if you believe in the dogmatisms of the article there are still questions to be answered as to how: do you for example get rid of US farm subsidies first or force third world liberalization of trade first?
Enough on this trite article
andy |
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