Showing posts with label free trade. Show all posts
Showing posts with label free trade. Show all posts
2012-08-01
New application of comparative advantage trade theories
Comments on Christopher Findlay and Dean Parham "
Blurred borders: ‘offshoring’ Australian business", 31/07/2012 http://www.eastasiaforum.org/2012/07/31/blurred-borders/
It seems the new model is a development of the comparative advantage trade theories albeit at the production/value chain as compared to the whole production process.
It also implies that new comparative advantages may have a strong focus on fast innovation and rapid response, as compared to the past simple capital/labor type.
It is a more complex model with fine distinction of elements of sources of comparative advantage.
Economists must also be innovative and creative in theorising new practice and economic reality.
Businesses must also be highly adaptive to globalisation trends and regional and global economic integration.
2011-12-31
Morici's failure in intellectual
Comments on Peter Morici “A lifeline
for the US middle class”, 31/12/2011,
http://www.businessspectator.com.au/bs.nsf/Article/US-economy-middle-class-oil-energy-growth-pd20111230-Q25BW?OpenDocument
Peter Morici, while recognising some
roles of the trade, has failed fundamentally and miserably to grasps
some of the most important fundamental implications of trade, that
is, income/wage equalisation.
Until he properly takes that into
account, he will not be able to come up with useful and practical
policy recommendations.
He has always tended to blame the
emerging economies, their governments for Americans' problems.
Unfortunately that only shows his
failures in intellectual, even though he is a professor and was the
chief economist of US trade commission some times ago.
That is also a fundamental problem with
most US elites that has been at the root of the problems US has been
faced, even though the $US and the largest economy status have
afforded it with unparalleled advantages over other countries.
2011-10-24
Professor Peter Morici's is China bashing, again
Comments on Peter Morici “Fed a US housing fantasy”, 24/10/2011, http://www.businessspectator.com.au/bs.nsf/Article/US-Fed-economy-housing-rates-oil-bonds-Bernanke-pd20111024-MWUW4?OpenDocument&src=sph&src=rot
Prof Morici balmes China for the US trade deficits.
Even let's assume he's correct in his that particular argument,
he, however, is not consistent fundamentally in his argument by only focusing on trade and ignoring the saving investment conditions.
It is too easy for some Americans to blame others for their own problems, but how others outside the US could make the US government huge budget deficits?
The US trade deficits with the rest of the world is at least partly a reflection of over spending and insufficient savings nation wide.
Unless the Americans recognise their own problems and take effective actions to rectify them, blaming other will not solve their saving deficits problems.
When Prof Morici is saying the Fed fantasy, he is also creating his own fantasies about the US economy!
It's just as simple as that!
Instead of blaming others, the professor should be grateful for the rest of the world for providing funds available to the US!
2011-10-06
What China should do on rare earth minerals?
Comments on Nabeel A Mancheri “China’s export restrictions on rare earths”, 6/10/2011, http://www.eastasiaforum.org/2011/10/06/china-s-export-restrictions-on-rare-earths/
While there are complaints of China's export restrictions on rare earth minerals, most do not show the impact on prices of those minerals. It would be useful to include price information in such discussions.
I am not familiar with the situation of rare earth mineral deposits, production and supplies in both China and in the world. I think if China produces 97% of world supplies, a fair rule for China to play should be index the prices of rare earth minerals with other international minerals and metal prices and imposes some sort of royalties based on such indexation.
Australia is an introducing mineral resources rent tax on some minerals, following the failure of an earlier attempt by the Rudd government to introduce a mining super profit tax.
Arguably, there are some differences between China and Australia in terms of the ownership of minerals (more broadly the land). Private ownership of land is not as significant in China as in Australia. The Chinese government arguably has stronger legal authority to impose a mineral rent tax based on the ownership status.
Once the mineral rent issue is resolved, China should not impose export quotas, so both Chinese and non-Chinese customers of rare earth will face the same price.
Of course, China can take additional measures based on environmental concerns, but that should be done on the non-discriminatory basis, that is, not targeting trade.
2011-02-17
Howes is likely damage the interests of Australian consumers and achieve nothing to protect his union
Comments on Paul Howes “China's free trade cheating threatens our jobs”, 17/02/2011, http://www.theaustralian.com.au/news/opinion/chinas-free-trade-cheating-threatens-our-jobs/story-e6frg6zo-1226007170647
Howes is the national secretary of the Australian Workers Union.
He claims "The AWU represents workers in numerous sectors harmed by China's policies, including steel, aluminium extrusion, glass and timber products."
He said "That's why the union's national conference voted yesterday to back a campaign to promote Australian companies, capabilities and jobs. We worry about the future of work opportunities for our 135,000 members."
He claims that "Unfortunately, China continues to adopt many dumping and subsidy practices that are in direct violation of the obligations it signed up to when it joined the WTO."
If that is the case, then it should have been very easy to use anti-dumping provision to deal with them.
But then he also alleges that "Unfortunately, the evidence is clear that our anti-dumping system is simply weak - and other nations take advantage of our weakness."
He appears to find problems with all others including out customs services and anti-dumping agencies. But could it be he is the source of those problems?
It raises a question whether any of those is true or not, or whether he is creating new 'WTO rules' in terms of anti-dumping.
Howes is the national secretary of the Australian Workers Union.
He claims "The AWU represents workers in numerous sectors harmed by China's policies, including steel, aluminium extrusion, glass and timber products."
He said "That's why the union's national conference voted yesterday to back a campaign to promote Australian companies, capabilities and jobs. We worry about the future of work opportunities for our 135,000 members."
He claims that "Unfortunately, China continues to adopt many dumping and subsidy practices that are in direct violation of the obligations it signed up to when it joined the WTO."
If that is the case, then it should have been very easy to use anti-dumping provision to deal with them.
But then he also alleges that "Unfortunately, the evidence is clear that our anti-dumping system is simply weak - and other nations take advantage of our weakness."
He appears to find problems with all others including out customs services and anti-dumping agencies. But could it be he is the source of those problems?
It raises a question whether any of those is true or not, or whether he is creating new 'WTO rules' in terms of anti-dumping.
2011-01-30
Wage increases in China
Comments on Cai Fang and Wang Meiyan “Chinese wages and the turning point in the Chinese economy”, 29/01/2011, http://www.eastasiaforum.org/2011/01/29/chinese-wages-and-the-turning-point-in-the-chinese-economy/
There are a few points needing some clarification.
The second reason given for worrying less about wage increases is moving westward of labour intensive industries inside China, because labour costs are lower there presumably. But earlier on in the post it was said that wages rises in the western regions are faster. It requires a bit reconciliation between the two arguments.
The third reason is that wage rises will create more domestic demand that would sustain production. That obviously has some truth, but also may confuse the change in the comparative advantages between China and other countries. The newly created demand may choose to buy cheaper imports as opposed domestic products.
Further, the figures in the post suggest that the wages for the bottom income class of migrant workers increased very rapidly over a period that may indicate a reduction in income inequality. This seems to be inconsistent with what many people are saying that income inequality has been rising in China. Which is correct?
There are a few points needing some clarification.
The second reason given for worrying less about wage increases is moving westward of labour intensive industries inside China, because labour costs are lower there presumably. But earlier on in the post it was said that wages rises in the western regions are faster. It requires a bit reconciliation between the two arguments.
The third reason is that wage rises will create more domestic demand that would sustain production. That obviously has some truth, but also may confuse the change in the comparative advantages between China and other countries. The newly created demand may choose to buy cheaper imports as opposed domestic products.
Further, the figures in the post suggest that the wages for the bottom income class of migrant workers increased very rapidly over a period that may indicate a reduction in income inequality. This seems to be inconsistent with what many people are saying that income inequality has been rising in China. Which is correct?
2011-01-27
Freer trade - why so difficult to reach international agreements?
Comments on Craig Emerson “Doha round key to continuing global prosperity”, 27/01/2011, http://www.theaustralian.com.au/news/opinion/doha-round-key-to-continuing-global-prosperity/story-e6frg6zo-1225995061033
While it is a matter of faith for free trade and free market, there is always a puzzle for the fact that if free trade is such panacea to economic growth and welfare why it has always been so difficult to reach an international agreement on more-free trade?
Dr Emerson mentioned that it has been 10 years for the Doha round negotiations already!
Why have people been so stupid so that they could not see the benefits of freer trade and reach agreements in much shorter times?
Can Dr Emerson explain this simple dilemma to us in plain language please?
Can Dr Emerson explain why China was imposed many unfair conditions when it was allowed to join the WTO as a member? And why EU and the US resort to trade restriction measures to punish China’s exports?
It is probably high time to be more frank about free trade, especially for developed countries to preach free trade on the one hand and protect its own industries and firms on the other.
The effects of free trade are more complex and politicians should be frank about that and tell the truth and nothing but the truth, no matter how inconvenient they are!
While it is a matter of faith for free trade and free market, there is always a puzzle for the fact that if free trade is such panacea to economic growth and welfare why it has always been so difficult to reach an international agreement on more-free trade?
Dr Emerson mentioned that it has been 10 years for the Doha round negotiations already!
Why have people been so stupid so that they could not see the benefits of freer trade and reach agreements in much shorter times?
Can Dr Emerson explain this simple dilemma to us in plain language please?
Can Dr Emerson explain why China was imposed many unfair conditions when it was allowed to join the WTO as a member? And why EU and the US resort to trade restriction measures to punish China’s exports?
It is probably high time to be more frank about free trade, especially for developed countries to preach free trade on the one hand and protect its own industries and firms on the other.
The effects of free trade are more complex and politicians should be frank about that and tell the truth and nothing but the truth, no matter how inconvenient they are!
2009-09-16
Rethink international imbalances and the East Asian model
Comments on Mohamed Ariff “US-East Asia trade: Is East Asia ready for a rebalance?” 16/09/2009, http://www.eastasiaforum.org/2009/09/16/us-east-asia-trade-is-east-asia-ready-for-a-rebalance/
I had also thought the existing model would not be able to continue until a short while ago after I had read this article and had another thought about this.
It does not appear to me that the existing model needs to change.
When thinking and talking about the existing model in the wake of the financial and economic crises, most thought and argued that the international imbalance is unsustainable. While that is obviously true for the long run. But what is the "long run"? Until that is well defined, then one can get easily confused by "short term" inequilibrium and the needs for long run balancing.
Further, the existing model can continue when assets and trade in them are taken into account, e.g. the US households trade some of their assets for consumption. In that way, current account imbalance can last for a very very long time. That should and need not be a problem.
It is all too easy for one to blame international trade imbalance for any problems, whether it is the cause or not, or the real cause or not.
Comprehensive and solid analyses are needed to understand the implications of the "international imbalances". Partial analysis does not help to address the perceived problems and are very likely to be highly misleading to wrong policies with huge economic costs.
Economists should not just simply follow what a layman or some politicians say. They need to apply serious and rigorous economic thinking.
I had also thought the existing model would not be able to continue until a short while ago after I had read this article and had another thought about this.
It does not appear to me that the existing model needs to change.
When thinking and talking about the existing model in the wake of the financial and economic crises, most thought and argued that the international imbalance is unsustainable. While that is obviously true for the long run. But what is the "long run"? Until that is well defined, then one can get easily confused by "short term" inequilibrium and the needs for long run balancing.
Further, the existing model can continue when assets and trade in them are taken into account, e.g. the US households trade some of their assets for consumption. In that way, current account imbalance can last for a very very long time. That should and need not be a problem.
It is all too easy for one to blame international trade imbalance for any problems, whether it is the cause or not, or the real cause or not.
Comprehensive and solid analyses are needed to understand the implications of the "international imbalances". Partial analysis does not help to address the perceived problems and are very likely to be highly misleading to wrong policies with huge economic costs.
Economists should not just simply follow what a layman or some politicians say. They need to apply serious and rigorous economic thinking.
2009-09-15
Does WTO have any tooth?
Comments on Alan Kohler “Obama's perilous protectionism”, 15/09/2009, http://www.businessspectator.com.au/bs.nsf/Article/China-America-marraige-hits-the-rocks-pd20090915-VVSFV?OpenDocument&src=sph
It would be interesting to see what the WTO should say on the US new tariff on Chinese Tyers.
Does the WTO have any tooth to enforce its own rules, especially when it deals with world most powerful economies like the US?
It would be interesting to see what the WTO should say on the US new tariff on Chinese Tyers.
Does the WTO have any tooth to enforce its own rules, especially when it deals with world most powerful economies like the US?
2009-08-06
Sinodinos' extraordinary vision
Comments on Arthur Sinodinos “Why not trade our way out of the climate crisis?” 6/08/2009, http://www.theaustralian.news.com.au/story/0,25197,25888591-5013480,00.html
This is an excellent article with an extraordinary vision to link the three most important and urgent world economic issues, namely, climate change the global warming, the Doha round trade negotiation and the current great economic recession. Trade liberalisation is the common thread to all these issues.
All members of the international community should realise that by further liberalising international trade and investment, every nation will benefit. Undoubtedly, it will assist the world to recover from the recession. With true world leaderships by important and influential world leaders, it will accelerate the international efforts on climate change and reach a meaningful international agreement. Both developed and developing nations should participate in and contribute to the course of limiting human induced adverse climate change in a practical and equitable way.
I think Australian government needs to take Sinodinos’ idea very seriously and lead the international community in this direction. Sinodinos should be invited to be an advisor on these issues.
If the international community can achieve Sinodinos’s vision, he should be nominated for a Nobel prize.
This is an excellent article with an extraordinary vision to link the three most important and urgent world economic issues, namely, climate change the global warming, the Doha round trade negotiation and the current great economic recession. Trade liberalisation is the common thread to all these issues.
All members of the international community should realise that by further liberalising international trade and investment, every nation will benefit. Undoubtedly, it will assist the world to recover from the recession. With true world leaderships by important and influential world leaders, it will accelerate the international efforts on climate change and reach a meaningful international agreement. Both developed and developing nations should participate in and contribute to the course of limiting human induced adverse climate change in a practical and equitable way.
I think Australian government needs to take Sinodinos’ idea very seriously and lead the international community in this direction. Sinodinos should be invited to be an advisor on these issues.
If the international community can achieve Sinodinos’s vision, he should be nominated for a Nobel prize.
2009-07-25
Trade and politics
Comments on Philippa Dee “Can the global financial crisis actually deliver Doha?” 23/07/2009, http://www.eastasiaforum.org/2009/07/23/can-the-global-financial-crisis-actually-deliver-doha/
It is true that trade improves the well beings of all trading nations. It is also true that when an economic hard time or crisis hits, the pressure becomes higher to sacrifice trade for domestic political purposes. So Jagdish Bhagwati has a point to make.
It, however, does not mean that it is less important for world leaders to make greater efforts to bring the Doha round to a successful conclusion. They need to show true and greater and stronger leadership, especially in this harder economic environment. Although politically less popular, improved international trade is good for more speedy recovery from the crisis.
What puzzles me is why trade has been affected much more severely by the financial and economic crisis. Trade in some quarters in some countries declined by 40 or even 50 per cent. Surely their economies would not have fallen by that much in those quarters.
Dee has argued the role of finance. Maybe that is the case that finance plays a greater role in international trade than in domestic trade, so when finance becomes difficult, international trade is hit harder.
I would appreciate that someone can explain the relationships between finance and trade, both external and internal.
It is true that trade improves the well beings of all trading nations. It is also true that when an economic hard time or crisis hits, the pressure becomes higher to sacrifice trade for domestic political purposes. So Jagdish Bhagwati has a point to make.
It, however, does not mean that it is less important for world leaders to make greater efforts to bring the Doha round to a successful conclusion. They need to show true and greater and stronger leadership, especially in this harder economic environment. Although politically less popular, improved international trade is good for more speedy recovery from the crisis.
What puzzles me is why trade has been affected much more severely by the financial and economic crisis. Trade in some quarters in some countries declined by 40 or even 50 per cent. Surely their economies would not have fallen by that much in those quarters.
Dee has argued the role of finance. Maybe that is the case that finance plays a greater role in international trade than in domestic trade, so when finance becomes difficult, international trade is hit harder.
I would appreciate that someone can explain the relationships between finance and trade, both external and internal.
2009-07-24
The unions should be smarter to survive
Comments on ABC report “Unions bury hatchet for 'Buy Australian' push” by Alexandra Kirk, 24/07/2009, http://www.abc.net.au/news/stories/2009/07/24/2634983.htm?section=justin
It is reported that “The nation's two biggest blue collar unions have not always got along, but they are burying the hatchet in a bid to save jobs in Australia's manufacturing industry, which has lost more than 70,000 positions in the past year.”
“The unions - one from the right, the other from the left - have bridged their ideological divide and will appear as a united front at next week's ALP national conference to maximise pressure on the Government to back their manufacturing strategy and to give priority to locally produced goods.”
The unions have done good and bad things over its history to date. But they should learn or evolve fast in the 21st century. They should embrace globalisation and improve and maximise the well beings of Australians through specialisation and trade according to Australian's comparative advantages. They should not live in the past and ignore the modern reality.
They say 76,000 jobs have lost out of industry over the past 12 months. But why don't they say how many have been saved due to higher than expected demand from China? Why Australia is having a much lower unemployment rate than most other OECD countries?
If Australian governments do what the unions ask, then other countries will retaliate. What will be the consequences of those actions and interactions? Did they say anything count that?
They should reasonable and rational.
If they want to last, they'd better be strategic and truly smarter than they are.
It is reported that “The nation's two biggest blue collar unions have not always got along, but they are burying the hatchet in a bid to save jobs in Australia's manufacturing industry, which has lost more than 70,000 positions in the past year.”
“The unions - one from the right, the other from the left - have bridged their ideological divide and will appear as a united front at next week's ALP national conference to maximise pressure on the Government to back their manufacturing strategy and to give priority to locally produced goods.”
The unions have done good and bad things over its history to date. But they should learn or evolve fast in the 21st century. They should embrace globalisation and improve and maximise the well beings of Australians through specialisation and trade according to Australian's comparative advantages. They should not live in the past and ignore the modern reality.
They say 76,000 jobs have lost out of industry over the past 12 months. But why don't they say how many have been saved due to higher than expected demand from China? Why Australia is having a much lower unemployment rate than most other OECD countries?
If Australian governments do what the unions ask, then other countries will retaliate. What will be the consequences of those actions and interactions? Did they say anything count that?
They should reasonable and rational.
If they want to last, they'd better be strategic and truly smarter than they are.
2009-07-22
Free trade in books and promotion of local culture
Comments on Bob Carr “Low prices open fresh chapter for readers”, 15/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25784280-5013480,00.html
The Productivity Commission has done the right thing in its recommendations. Free trade in books will be good for readers in Australia for two things. The first is it will result in lower book prices and more readers will read more books. The other is that with more people reading more what is going on worldwide, the knowledge of Australians as a whole will be enhanced and will bring benefits with them.
However, there is also a point of promoting local culture. Free trade and the promotion of local culture are not necessarily conflicting with each other. Promotion could be done in terms of subsidies to local writers on local cultures.
So there are policies that can achieve both objectives. Australian government should pursue those best policies to achieve the best outcomes for Australians.
The Productivity Commission has done the right thing in its recommendations. Free trade in books will be good for readers in Australia for two things. The first is it will result in lower book prices and more readers will read more books. The other is that with more people reading more what is going on worldwide, the knowledge of Australians as a whole will be enhanced and will bring benefits with them.
However, there is also a point of promoting local culture. Free trade and the promotion of local culture are not necessarily conflicting with each other. Promotion could be done in terms of subsidies to local writers on local cultures.
So there are policies that can achieve both objectives. Australian government should pursue those best policies to achieve the best outcomes for Australians.
Trade and growth - an interesting twist
Comments on Ron “PNG: Trade Policy and Trade Agreements”, 21/07/2009, http://www.eastasiaforum.org/2009/07/21/png-trade-policy-and-trade-agreements/
It is discouraging to hear that "there is no convincing evidence of a positive relationship between trade openness and increased growth". The comparative advantage theories of trade are one of the most agreed areas in economics by economists, but now it is in question.
But on the other hand, "other factors, particularly so-called ‘institutional’ factors, are important in whether removing trade restrictions leads to faster growth", we are hearing. Is this another area of the conflicts between micro and macro economics? Does that mean we need a macro intervention of the type of traditional macro economics on trade issues by government, as opposed to free trade?
Economics is complex and increasingly becomes more so, it seems. Education and re-education of economics.
It is discouraging to hear that "there is no convincing evidence of a positive relationship between trade openness and increased growth". The comparative advantage theories of trade are one of the most agreed areas in economics by economists, but now it is in question.
But on the other hand, "other factors, particularly so-called ‘institutional’ factors, are important in whether removing trade restrictions leads to faster growth", we are hearing. Is this another area of the conflicts between micro and macro economics? Does that mean we need a macro intervention of the type of traditional macro economics on trade issues by government, as opposed to free trade?
Economics is complex and increasingly becomes more so, it seems. Education and re-education of economics.
2009-06-09
Is free trade always best?
Comments on Andrew Leigh’s little blog “Free Trade Helps Families and Kids” and Russell’s comments, http://andrewleigh.com/?p=2101#comments
Three points about this. First, there is an alternative to free trade that can help families and kids, as well as local writers and publishers if and assuming there is value in fostering local writers and publishers. Have a low tariff on imported books and use the income to subsidise those locals. As long as the tariff and subsidies can be right tuned, there should be a point where the national welfare is optimal.
My second point is about partial or general equilibrium. Though partial is interesting in some areas and for some purposes, it is incomplete and misses the important links that general equilibrium is and has. So there may be case to have both general and partial equilibrium studies.
Lastly, about Russell's point. Russell seems to have made two points, the first one is the quality of that study is not good. For that I can't comments, because I have not read that report. Russell's second point is a more general one that I like to make a comment on. What Russell seems to suggest is that the report is not general enough and missed some important issues that should be included in that study. This may or may not correct.
Any study has a focus and has its limitations, otherwise you can't finish any study since there are always issues that could be related and not included. One has to define the most appropriate scope of a study, and include the most important and relevant issues and leaves some out. Russell would make a stronger and more pertinent point if he uses specific examples from the report. That would be more helpful.
Three points about this. First, there is an alternative to free trade that can help families and kids, as well as local writers and publishers if and assuming there is value in fostering local writers and publishers. Have a low tariff on imported books and use the income to subsidise those locals. As long as the tariff and subsidies can be right tuned, there should be a point where the national welfare is optimal.
My second point is about partial or general equilibrium. Though partial is interesting in some areas and for some purposes, it is incomplete and misses the important links that general equilibrium is and has. So there may be case to have both general and partial equilibrium studies.
Lastly, about Russell's point. Russell seems to have made two points, the first one is the quality of that study is not good. For that I can't comments, because I have not read that report. Russell's second point is a more general one that I like to make a comment on. What Russell seems to suggest is that the report is not general enough and missed some important issues that should be included in that study. This may or may not correct.
Any study has a focus and has its limitations, otherwise you can't finish any study since there are always issues that could be related and not included. One has to define the most appropriate scope of a study, and include the most important and relevant issues and leaves some out. Russell would make a stronger and more pertinent point if he uses specific examples from the report. That would be more helpful.
2009-06-02
Don't knee-jerk when facing great recession!
Comments on Mario Lamberte “Some positive consequences of the Global Economic Crisis”, 1/06/2009, http://www.eastasiaforum.org/2009/06/01/some-positive-consequences-of-the-global-economic-crisis/
I agree with most of Mario Lamberte's arguments in the following paragraph, to quote:
"The Great Depression challenged mainstream economic thinking in the 1930s and produced revolutionary economic theories and paradigms. If the severity of the current GEC has so far been unmatched since the Great Depression, it is likely to have similar effects on economic thinking and policy making. If there is a fundamental change in the way of economic thinking, global and national institutions, such as the central bank and macroeconomic policies, could change too."
But I think it is likely to be premature to infer too much from these arguments, no matter how useful they are. I think some of Mario Lamberte's prescriptions need careful analysis. They include, especially things how to rebalance composition of GDP, the role of exports and the argument that to avoid future external shocks, Asian countries need to boost domestic demand and rely less on export, export incentives, how fiscal resources should be readdressed, changes in the production structure in favor of non-tradable goods and services, reducing precautionary motive for saving.
What I am concerned is that many people, including policy makers and advisers, have a tendency to overshoot in their responses to the great recession. My view is that an open and free trade international system will still be much more superior than self reliance and autarky. Benefits of trade and economic integration will outweigh the cyclic shocks that can be transmitted through an integrated international system, even though there are short term negative consequences if there are downward external demand pressures from time to time. Knee-jerking in the face of economic difficulties by throwing the baby out with bathwater is hardly ever a prudent strategy.
More specific comments are likely to follow.
I agree with most of Mario Lamberte's arguments in the following paragraph, to quote:
"The Great Depression challenged mainstream economic thinking in the 1930s and produced revolutionary economic theories and paradigms. If the severity of the current GEC has so far been unmatched since the Great Depression, it is likely to have similar effects on economic thinking and policy making. If there is a fundamental change in the way of economic thinking, global and national institutions, such as the central bank and macroeconomic policies, could change too."
But I think it is likely to be premature to infer too much from these arguments, no matter how useful they are. I think some of Mario Lamberte's prescriptions need careful analysis. They include, especially things how to rebalance composition of GDP, the role of exports and the argument that to avoid future external shocks, Asian countries need to boost domestic demand and rely less on export, export incentives, how fiscal resources should be readdressed, changes in the production structure in favor of non-tradable goods and services, reducing precautionary motive for saving.
What I am concerned is that many people, including policy makers and advisers, have a tendency to overshoot in their responses to the great recession. My view is that an open and free trade international system will still be much more superior than self reliance and autarky. Benefits of trade and economic integration will outweigh the cyclic shocks that can be transmitted through an integrated international system, even though there are short term negative consequences if there are downward external demand pressures from time to time. Knee-jerking in the face of economic difficulties by throwing the baby out with bathwater is hardly ever a prudent strategy.
More specific comments are likely to follow.
Subscribe to:
Posts (Atom)
Posts
