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Wednesday, September 05, 2012


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Great post. One could even argue that no functioning capitalist economy has ever practiced orthodox free trade or operated along the lines of an orthodox free market.

Richard, I'd take some issue with your description of economics, as I don't think the discipline exists to serve society any more than any other discipline. I think it exists to describe how things happen in a systematic way; it is not necessarily "economics" to set national policy based on ground truths. It's politics.
The "science" part is describing with some precision how things work, based upon observation and measurement. The field is reasonably good at that. Someone trained in the discipline is unsurprised that corporations seek to lower their costs of production by relocating labor-intensive production to places where it's cheaper...as long as other costs (quality, inventory, risk to capital) don't rise to eat up the savings.
"Globalization" might properly be described as including the set of changes you describe: trade liberalization, increased flow of information, rising demand in developing countries, reasonably safe and stable capital and debt markets, and an overall lower risk of doing business internationally. All of those factors reduce the constraints on moving production to other countries. These are objective, measurable, know-able things.
This does not mean that "orthodox economists" are ignorant of the human costs of change. However, I think the best way to ameliorate the human costs is by using "national priority" block-grant funding, locally applied.
Let's stipulate that broad national-policy federal- program solutions often have had "massive unintended consequences". (See Medicaid, Medicare, Social Security, AFDC, Fannie Mae/Freddie Mac.) My preference boils down to "socialize the problem but localize the solution".
What is wrong (in a practical or moral sense) with a free(r) national/world market and a close-to-the-people social safety net coexisting? Presumably, a growing and still-rich economy can afford to take care of the left-behind and left-out and help them gain new productive skills.

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