Wednesday, February 11, 2009

Economic Nationalism

In a recent editorial, the editors of the Economist say, ''Hey, knock it off with all the economic nationalism, will ya?''

I'm guessing they know more about economics than I do, so I'll bow to their superior knowledge here. It doesn't hurt that I also live in a town that makes steel to sell to the US. What the Economists are refering to are the provisions in the stimulus cash-bomb that say, ''Hey, don't use any of this money to buy stuff from foreigners, you hear!''

Such provisions have been unsurprisingly popular with the AFL-CIO, and it's easy to understand why people don't want their tax money going to Canadian companies. We'd just spend them money on poutine and hockey tickets. However, it's damn near impossible to get out of a recession by starting a trade war. Adam Smith used to argue against this sort of protectionism [or mercantilism, as it was once called] because, if you make your money by trading stuff, you want to keep trading, and make trade as easy as possible for everyone. Duh.

Incidentally, he also argued that the government should keep a close eye on capitalists to prevent them from running amok, but nobody ever seems to rememeber that part!


The Pagan Temple said...

That's just the problem with this international free trade scheme, it's next to impossible to keep an eye on them, so you have to create a regime which is accountable really to no one who is truly interested in reining in excesses.

Otherwise, I have no problem with free trade. I just want to keep it a one-on-one basis, bi-lateral. This multi-lateral stuff is impossible to control. Who really knows what's going on?

Under the right circumstances, trade encourages quality production among competing companies. How much better did Ford and GM get once Toyota became a viable competitor-ergo, a real threat?

That's no reason though to bundle it all under a one-size fits all umbrella that is next to impossible to monitor until things turn to crap.

Admittedly, I'm no expert either, but that's just pretty much the way it seems to me. On a bi-lateral basis, Toyota for example has done far more good than the very little harm (if any) to the US economy.

Rufus said...

I think the size of the US economy already gives the country a good amount of control. And I'm generally more accepting of chaos than other people are. But I see what you're saying.