Sunday, February 26, 2006

Remedies Worse than the Problem

I read small pieces almost everyday on Adam Smith’s alleged views in relation to modern issues, most of which I would find problematical in their assertions. Many of these pieces appear in local newspapers or relatively minor national publications from around the world.

An example of the type of articles in this genre from the last few days:

Daytona-Beach (‘the independent voice of Volusia and Flagler counties’) has a piece by Glen Hameroff, a retired high school history teacher, living in Palm Coast, Florida, USA, in which he makes a case, as a life-long free-trade supporter of Adam Smith and David Ricardo, for modifying his stance in view of the current account deficit between the USA and China into something worse than protectionism; it could engulf the world in a bitter, hopefully not hot, war.

His concerns include: “[Chinese] Government interference includes intellectual piracy, currency manipulation, use of prison labor and a complete disregard for environmental safety.” His remedy?

However, if we are going to compete with the Chinese, let us level the playing field. Demand that China cease the use of prison labor. Do not allow China to manipulate the relative value of its currency to create a trade advantage. Insist that China pay royalties for all patent and copyright protected materials. Plead with China to consider the health of its people and start considering the environmental impact of its actions. Finally, provide the American worker with the tools necessary to compete with inexpensive Chinese labor.”

Without being too difficult about it, none of his ‘remedies’ are likely to be attempted. That would require that the USA could tell China what to do in the non-trivial areas of penal management, exchange rates, law reform, social and welfare policy. A pretty tough agenda, involving outside interference on scale that no US government would contemplate if it was ordered by another country’s government to do similarly in the USA.

Neither is it clear what he means by (who?) provides the ‘tools necessary to compete’ with China’s (or anybody else’s) labour. Now that is an interesting proposition, especially from the USA, supposedly a land of free enterprise, which would also be out of kilter with any other country, even in Europe, though perhaps not North Korea. If US enterprises need re-investment in modern (relatively) expensive labour-saving machinery, they should get on with it, without government telling them to do so, or, worse, funding it.

Economies do not change at infinite velocity. They change slowly and by small amounts. Glen Hameroff, like so many contributing to the genre, draw panic-stricken conclusions, adopt unrealistic remedies, most of them worse than the problem in their unintended consequences, and seems to be cocooned from the reality that even the USA, or Europe, or China for that matter, do not control the world, never have, and never will.

Read the article: Opinion/Editorials/opnOPN81022506.htm


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