Monday, January 22, 2007

Why Can’t We Have More Economists Writing Like Prof Lingle?

The camouflaged Mercantile policies of combining mass exportation with high tariffs and other obstructions to imports is the theme song of politicians of developing countries (even of ‘non-developing’ poverty stricken economies, as Douglas North calls them). Tariffs against imports from developed economies are matched with tariffs against neighbouring poor countries.

Christopher Lingle writes a piece, “Revisiting East Asia’s Turmoil”, in The Korea Times (22 January) that correctly places the onus on these countries to learn from their own recent experience, and from Adam Smith on international trade:

Export-led economic growth was a flawed model then, it is a model now, and it has not improved since Adam Smith, the famous economic theorist, drove a stake into the heart of mercantilism in 1776.

While economic growth can come from an export-led strategy, it cannot be sustainable unless it is supported by domestic improvements. The unsustainable nature of export-led growth is worsened if exports are prompted by excessive global liquidity arising out of the permissive monetary expansions of central banker

Despite a widespread illusion that the advantages from trade come from exporting, Adam Smith pointed out that the advantages of trade come from allowing producers and consumers to buy from least-cost providers. This leads to enhanced efficiency and increased real purchasing power as the bases of sustainable economic growth.

Instead of policy makers spending so much time managing exchange rates and their reserves, they should look for ways to encourage domestic entrepreneurs. They should allow their currencies to strengthen within an open economy so that increased imports will bring more robust economic growth and lead to less poverty.”

Please let us have more like this! It’s a pleasure to read both good contemporary economics and the correct use of Adam Smith as a reference point.
And no mention of the mythical you-know-what!

[Christopher Lingle is a senior fellow at the Center for Civil Society in New Delhi and a visiting professor of economics at Universidad Francisco Marroquin in Guatemala. You can read his article at:]


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