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My Project Syndicate piece is here.
Posted at 11:43 PM | Permalink
Last night I read Dani's article. When I woke up this morning I found a redacted version on Mark Thoma's site. Here is what I objected to.
Mark Thoma deleted and important part of Dani's article. By doing so he buried an assertion and begged and argument.
Here is the assertion he deleted:
"The Doha Round was constructed on a myth, namely that a negotiating agenda focused on agriculture would constitute a “development round.” This gave key constituencies what they wanted. It provided rich-country governments and then-WTO Director General Mike Moore with an opportunity to gain the moral high ground over anti-globalization protesters."
Here is the conclusion to that assertion he left in:
"Conclude this so-called “development round” successfully, and you will lift hundreds of millions of farmers in poor countries out of poverty and ensure that globalization remains alive. Fail, and you will deal the world trading system a near-fatal blow..."
Morality doesn't just consist of lofty ideals we aspire to but the rules and regulations that govern our lives and we see as good.
Lofty ideals aren't always things we would aspire to; for instance, the Nazi ideal of the purity of the race. Nor are the rules and regulations that compel us to act in one way rather than another, always seen as good; for instance, the Fugitive Slave Law or the more recent Jim Crow Laws. Nevertheless, the two sides of morality exist.
The rules and regulations that govern our political economy are just as important as the lofty ideals that inspire a development round.
Both ideals and laws require attention. There is no moral high ground to be had by emphasizing one to the detriment of the other. There is no moral high ground to be had by using one to ride roughshod of the other.
August 06, 2008 at 07:32 AM
Fact is, static gains from trade are not that large, at least at current levels of protection. To be serious about large gains from trade lib, then, you need to buy into some dynamic theory. The idea is that, by penalising produts in which developing countries have a comparative advantage, the current trade regime is hampering their long-term growth.
Unfortunately economic theory is on more shaky ground here, but you ought to have discussed this aspect. For example, what about tariff escalation?
Also, unilateral liberalization is always there, as you mentioned, but that is not the way the world works - you are ignoring the politics of trade! Easy for an economist.
Frankly, just by the fact that there is no agreement on cotton and sugar, I think this is a tragedy - there is a human price to it... You think it is low, I say go ask the peasant farmer in Benin.
August 06, 2008 at 08:02 AM
Lastly, your argument that trading higher prices from liberalization for higher volatility may be bad is disingenuous: these two aspects are separable and there are future markets and insurance that countries can purchase on behalf of farmers.
August 06, 2008 at 08:07 AM
Despite the protest of multinational corporations, the criteria for trade isn't just a matter of removing tariffs but of maintaining values. This is not done through utility maximizing.
Martin Wolf pointed out there is disconnect between values and utility when he wrote,
"Profit-maximization is not a generalizable norm for a successful capitalist society. Indeed, it is not an ethical principle at all, for it violates Kant's categorical imperative -- that one should "act only according to that maxim whereby you can at the same time will that it should become a universal law." Profit-maximization is a situational ethic, applicable only to economic activity -- that is, activity carried out under competitive conditions. Monopoly providers of public goods -- security, justice and so forth -- must not act under profit maximization."
Maintaining such a divide becomes increasingly difficult when there is no international policeman patroling a globalized world. Economic goals increasingly interfere with core values.
In fact, one could say that in the hierarchy of values those of capitalism are being pushed to the bottom and core values are increasingly becoming important in the modern age of trade. Yahoo, Google, and Microsoft were roundly criticized for using their servers to help the Chinese to sensor free speech. When users ended up in Chinese prison with the help of these companies they were again criticized for violating peoples human rights.
Much of the flack that free trade receives here in the United States is about procedural fairness. In other words people are exercising their hierarchy of values. These values extend beyond the limited scope of profit maximization.
And it isn't just individuals that conform to a hierarchy of values but governments engaged in free trade. One sees the use of a hierarchy of values in practice not only in the EU but the British Commonwealth. Corporate efficiency is sometimes sacrificed to higher values. For instance, this increasing phenomenon can be found in the rules and regulations of the British Commonwealth.
Countries doing business under its umbrella can be expelled in the name of higher values.
"Commonwealth of Nations membership criteria are the corpus of requirements that members and prospective members must meet to be allowed to participate in the Commonwealth of Nations. The criteria have been altered by a series of documents issued over the past seventy-five years.
"The most important of these documents were the Statute of Westminster (1931), the London Declaration (1949), the Singapore Declaration (1971), the Harare Declaration (1991), the Millbrook Commonwealth Action Programme (1995), and the Edinburgh Declaration (1997). New members of the Commonwealth must abide by certain criteria that arose from these documents, the most important of which are the Harare principles and the Edinburgh criteria.
"The Harare principles require all members of the Commonwealth, old and new, to abide by certain political principles, including democracy and respect for human rights. These can be enforced upon current members, who may be suspended or expelled for failure to abide by them. To date, Fiji, Nigeria, Pakistan, and Zimbabwe have been suspended on these grounds; Zimbabwe later withdrew over its consistent non-compliance."
Even though values are a growing influence in economics Paul Krugman believes that most of "us" are in denial. In his article "Great Illusions" he writes this:
"So are the foundations of the second global economy any more solid than those of the first? In some ways, yes. For example, war among the nations of Western Europe really does seem inconceivable now, not so much because of economic ties as because of shared democratic values.
"Much of the world, however, including nations that play a key role in the global economy, doesn’t share those values. Most of us have proceeded on the belief that, at least as far as economics goes, this doesn’t matter — that
we can count on world trade continuing to flow freely simply because it’s so profitable. But that’s not a safe assumption."
Who is the "us" that Krugman is referring to? Most Americans believe that they are hurt by free trade. The EU and the British Commonwealth will refuse membership to countries that can't coordinate their values. So the "us" are those who believe that free trade can bridge the divide and bring countries closer to a common hierarchy of values.
Those who want to bridge the divide believe that a necessary ingredient in doing so is a change in material wealth. I agree. But not if it is at the expense of our core values. All too often that is what happens when corporations start maximizing profits.
So is time running out for governments that believe in change--a coordination of values--through trade? Yes, because as trade increases the likelihood that capitalistic values will conflict with core values increases.
Most economist who want to see greater growth and increased wealth are uncomfortable with this conflict. They would rather ignore it.
A recent example would be Mark Thoma's editing of Paul Krugman's article "Grand Illusion" where he deleted the above paragraphs and we get this in their place:
"Most of us have proceeded on the belief that ... we can count on world trade continuing to flow freely simply because it’s so profitable. But that’s not a safe assumption."
Why are economist so reluctant to examine this conflict? I can only speculate. Superstition comes to mind. They think that an emphasis on values will weaken their profession. In other words if you mention the devils name he will come. If they don't mention values they can keep the devil behind them.
As Flip Wilson used to say, "Devil, get behind me."
August 20, 2008 at 02:49 AM
Dani Rodrik says. "The big winners from farm reform in the US, the EU, and other rich countries would be their taxpayers and consumers, who have long paid for the subsidies and protections received by their farming compatriots. But make no mistake: what we are talking about here is domestic policy reform and an internal redistribution of income. This may be good on efficiency and even equity grounds. But should it have become the primary preoccupation of the World Trade Organization?"
Agree, buy if you are not allowed to use venues like WTO to put a damper on farm subsidies and protection what other routes are there?
Per Kurowski |
August 20, 2008 at 07:16 AM
Where are you Dani? We miss you.
August 21, 2008 at 01:52 PM
It's my final year at uni, how am I supposed to do it without my rodrik fix? Write again soon!
September 05, 2008 at 07:46 AM
R U OK?
September 05, 2008 at 09:10 AM
Die amerikanische Regierung wird in dieser Woche ihren Plan vorlegen, wie Banken und andere Marktakteure von jenen giftigen Wertpapieren und faulen Krediten befreit werden sollen, die seit Monaten den Kreditkanal an Haushalte und Unternehmen verstopfen. Womöglich schon an diesem Montag werde Finanzminister Tim Geithner Einzelheiten zum Kauf fauler Hypothekendarlehen und damit verbundener Wertpapiere für bis zu eine Billion Dollar bekanntgeben, hieß es am Wochenende in Washington.
Berichten zufolge wird die Regierung eine neue Investmentgesellschaft mit dem Namen „Public Investment Corporation“ gründen. Sie soll mit einem Startkapital von 75 bis 100 Milliarden Dollar ausgestattet werden, die aus dem im vergangenen Oktober beschlossenen Rettungspaket für das Finanzsystem kommen sollen. Die Gesellschaft, die eine Reihe von Investmentfonds auflegen wird, soll eng an das Finanzministerium und an die staatliche Einlagensicherungsgesellschaft, die Federal Deposit Insurance Corporation (FDIC), angebunden sein. Ziel des Plans ist es, nach Möglichkeit auch privates Kapital zum Kauf der problematischen Wertpapiere und Kredite zu mobilisieren. Um privaten Investoren Anreize hierfür zu geben, will die Regierung nicht nur finanzielle Zuschüsse, sondern auch Ausfallgarantien geben. Die FDIC würde dann einen Teil der möglichen Verluste übernehmen. Die Schaffung dieser öffentlich-privaten Partnerschaft, die Geithner vor einigen Wochen in Aussicht gestellt hatte, ist aber nur ein Element des Vorhabens.
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