Journalists sometimes swing for the fence and miss the ball. For instance:
After the economic and financial distress that has hit Mexico, Asia, Russia, Argentina and Brazil in the past decade, the current generation is absorbing a sobering new message about globalization and the tradeoffs and turmoil that can come with it.
The economic "distress" Russia has seen the last ten years is the continuation of the economic distress it had the previous 70 years, isn't it? They have been wringing out the mal-investments of the Soviets and establishing law necessary for a capitalist economy. Its distress is rather different than that created for Mexico as it escapes from vestiges of mercantilism and that of Argentina as it suffers from the socialist inheritance of Peronism. Similarly the various Asian economies don't have all the same challenges whether we look at their internal affairs or at their relation to world trade.
One thing they do have in common is the problem of access to the much larger and more developed economies of EU and US. This is important because the access allows them to dispose of their surpluses and to import things necessary for development.
The free trade supposedly established in the last decade or so is not free trade, it's controlled trade. Stiglitz's criticism as reported in the article:
Mr. Stiglitz even takes shots at free trade, a sacred cow for most economists, who generally believe it helps countries focus on what they do best and allows consumers to get the best products for the lowest price. Mr. Stiglitz argues that trade hasn't been opened in the right way. For instance, he says, African countries were made worse off by trade liberalization during the 1990s because trade was opened for services exported by rich countries -- such as financial services -- but remained protected in areas where poor countries could compete, such as agricultural goods, textiles or construction. In Latin America, he says, growth in the 1990s was slower, at 2.9% a year, than it was during the days of trade protectionism in the 1960s, when the region's annual growth rate was about 5.4%.
If trade is controlled, who is going to control it? And for whose benefit? This was the thrust of Adam Smith's criticism of the prevailing trade related legislation of his time and Smith was not looking at a country with as many difficulties as some South American or African countries have today.
You state, The problem is not whether the rule of law is better, nor whether its critical for development but how one gets to one or the other. Without destroying folk in the process.
An axiom good for all places and all times: Famine is not caused by nature - food shortage is. Famine is caused by war or other political activity. Tyranny encourages famine.
The combination of tariffs, subsidies and foreign aid we have now amplifies the difficulties less developed countries have. Whatever the difficulties posed by peasants' lack of capital, unremitting mordita, lack of business law, confiscatory taxes, permitting, and so forth, they are all made worse by lack of access to markets.
The micro-lending activities now developing in less dveloped places work because they leverage our natural tendencies to make and exchange things and make a market, improve our inventories, services, premises, farms. Although often competition is stressed in writing about this, cooperation is far more important - we tend to keep our promises to each other and we can't actually develop the market in which we "compete" without cooperation. How quickly these improvements happen is dependent on how much access to markets these people have.
With regard to access, as some of us have mentioned here before, if the US and EU gave up the tariffs and subsidies so damaging to third world economies, it would do far more good for developing countries than all the world's foreign aid.
Whatever the state of these countries' commercial law, employment would increase along with general small business activity - folk could buy the shoes, school books, better food that they can't buy now.
Aid could eventually be restricted to technical advisors (including financial and legal) and emergency provision.
Eliminating these tariffs and subsidies would be of great benefit to both developed and undeveloped countries.
I'm not exactly sure what you mean by "destroying people". Some things can be done which don't cause harm. If folk are absolutely near the bottom in terms of standard living as in truly undeveloped countries then any increase in economic activity in their neighbourhood is a Good Thing. So get rid of the tariffs and subsidies.
Small, abjectly poor countries can't afford much government but they need modern governments that are owned by the country, not the other way round. Long term, democratic forms lead to reasonable economic conditions and reasonable economic conditions lead to democratic forms. So encouraging democratic government is certainly contributing to a virtuous circle. Of course, this means that at any time there will be governments making what in retrospect, are clearly mistakes.
Some countries are recovering from disasters or undergoing disasters which outsiders can't can't help them with a lot. Sending money is at best only a very short term fix.
Russia is recovering from a period in which the country produced a huge amount of un-marketable goods. There is a lot of strife and uneasiness but when I get reports from folk who visit, I haven't had reports of starvation. The Russians are improving their tax system and commercial law but moving out of centuries of archaic rulers and pre-A Smith economics can't be achieved quickly. Developing an economy as complex as US or EU takes time.
Argentina is trying to deal with the problem of what to do about all the folk, including lots of imaginary ones, who are on the governments' payrolls and for which there is no money to pay. For reasons I don't understand foreign lenders actually lent money into this absurd situation and this has made the problem there worse. But this is a problem for the Argentinians to solve isn't it? We might be able to assist once they've come to a solution.... |
