Friday, October 10, 2008

The Left and trade

This comment on international trade and the Left by Shuggy is absolutely spot-on: I highly recommend it.
You didn't ask but you're getting it anyway: my advice? The left - or at least some of it should a) calm down a bit b) stop conflating issues. I won't link them all because no doubt you've come across the sort of thing I'm referring to: this bank crisis is the end of "kamikaze capitalism", "the end of the neo-liberal world order", the refutation of the "unbridled free-market", it represents the nadir of the "Hayekian/Friedman axis of evil"...
...

I'm concerned about the conflation of concepts and institutions - these being collapsed into lazy cliches about "unfettered free-markets", "the neo-liberal world order" and the like. It's being done with capitalism and markets, for example. But they are two different things. The former has to do with the form of ownership under which goods and services are produced, the latter is a means of allocating these. Obviously historically these have been closely related and how the latter works is very much determined by the former. But damn it all, they are two different things. I'm very concerned that the failure to distinguish between the two, along with the apparent revival of the notion that state intervention is a Good Thing, will result in the people and the parties of the left advocating, and perhaps if they are in power, implementing ideas that would be a complete disaster.

I'm referring to trade here. I simply don't understand some people on the left and their attitude to international trade. In the 19th century, the 'liberal-left' in this country, including sections of what we would now probably describe as the 'hard-left', campaigned for free trade and against the Corn Laws on the grounds that it meant cheaper bread for hard-pressed working class families. Can someone explain to me what the hell happened? You might think, for example, that some might welcome trade with China on the grounds that this means cheap T-shirts for children in low-income families as well as recognising that the expansion of trade in this context forms part of the reason why we have seen in the East the largest rise in material welfare ever recoded in human history.

Of course, I have sampled the bits that are generally critical of the Left, but Shuggy and his degree in economic history are pretty good on the ideologues of the Right too.
Simon Heffer and his ilk may equate state intervention with socialism but anyone with even a passing acquaintance with economic history understands that capitalism has since 1945 co-existed with large scale nationalisation, credit controls, exchange rate controls, price and income controls.

It's worth noting, though, that such controls were, generally speaking, something of a fucking disaster, culminating in the near-bankruptcy of the British economy in the 1970s.

However, Shuggy is quite correct to point out this worrying conflation of markets and capitalism, and the knee-jerk reaction against international trade. Free trade makes both parties better off or they wouldn't do it.

13 comments:

the a&e charge nurse said...

An essay in semantics - people who believe in "markets" are about as rational as those who believe in............fill in favourite deity.

Gargantuan sums are shuffled around the globe, various protagonists try to exploit/maximise profits in the context of innumerable political and social events, or legislative constraints.

Commentators then write gibberish about what any of it is supposed to mean.

Is there a punch line leaving aside feeble finger wagging at the left ?

Joe said...

Sorry to throw this in here I just thought it'd there'd be more chance of it being seen :)


I've just sent a petition off to the downing st website asking that the taxpayers of GB & NI be issued with share certificates now that we own all the banks :D

http://petitions.number10.gov.uk/shareissue

dont know how long it takes to become live and i'm expecting the brown shirts now

James Higham said...

The essential problem with free trade will always be the monopoly and merger, with the concomitant state intervention [otherwise read as getting in on the gravy train].

V said...

It really does make me wonder when even the comments are full of nonsense about it that we even bother to promote free trade, because none of these idiots deserve the benefits it brings.

James - free trade doesn't create monopolies, that is government's job. Make it too difficult to get into a market place thanks to lots of regulations to protect the public and the big companies who help draft the rules, and within a few years, you will have a monopoly.

The nearest I can see to a real monopoly (77% UK market share of search), in a real free trade market, is Google. and if they don't keep offering the best deals, they will lose their monopoly to a smaller, better competitor - and there goes your argument that free trade offers only monopolies and mergers!

Free trade - as the ideological perfection that I see it, is actually very rare in today's world. The moment you start adding regulation - you lose free trade. That a company notices that you'll get more sales if they were to offer the facilities that the regulation asks for, and the market will naturally move in that direction. Anything else, and it becomes a socialist plot to manipulate the market and society to do its bidding - because it would do it by choice!

Anonymous said...

@v

It doesn't take regulation to create a high cost of entry. When Google started the Internet was a much smaller place. To re-create a viable search engine today would require a massive investment.

If you want to talk monopolies in the tech sector look at our old friend Microsoft. Convicted on both sides of the pond for anti-competitive practices and a long list of dubious business dealings. If there is an argument for regulation its where companies abuse their position or indulge in illegal practices and the list of abusers in long and inglorious.

I accept that regulation is a dead weight around the necks of those who behave honestly and ethically but I'm not sure how else you would go about "protecting the innocent".

K.

fewqwer said...

What proportion of Microsoft's revenue comes from state-sector sales? A fair chunk I suspect. Virtually every fuckwit bureaucrat on the face of the Earth has a taxpayer-funded computer chock-full of M$ software.

Take away that and the fraudulent patents and the DRM etc and Microsoft's monopoly would not be anything like as secure.

El Draque said...

Getting back to Shuggy's point about economic history (I also studied it)and learning from the past: I re-read Glabraith's book about the Great Crash recently. Plus a few other texts.
Five things happened.
A stock market crash.
A mild recession
A banking crash
Protectionism (tariffs)
A currency crisis (the UK went off the Gold Standard).
Then came Hitler.
So far:
A stock crash and banking crash together.
A certainty of recession.
Talk of protectionism - and Bush signed a 20% tax on Janapese steel last week.
A currency crisis is I believe certain - the east European countries can't stay pegged to the euro for long.
But an Austrian extreme nationalist did do well in elections last week.

My mental note rhymed with "clucking bell".

Anonymous said...

"When Google started the Internet was a much smaller place. To re-create a viable search engine today would require a massive investment."

Sorry, but that's silly; bandwidth and hardware are vastly cheaper today than they were when Google began. And given how much Google sucks these days as they try to make their software 'smarter' and end up making the searches less and less useful, I'd say there should a huge market for competition.

The real reason why Google has a 'monopoly' is because it's free; that's hard to beat and hard to complain about as a 'customer'. If they charged money for such a lousy search engine, people would be switching to competitors overnight.

"If you want to talk monopolies in the tech sector look at our old friend Microsoft."

Eliminate copyright -- a _GOVERNMENT MANDATED MONOPOLY_, in case you hadn't noticed -- and Microsoft would vanish overnight; Bill Gates' fortune is the result of said government-mandated monopoly, and it's no surprise that he was one of the earliest advocates of software copyright.

The funny part is that the people who spend the most time whining about monopolies are the very same people who want the government to have a monopoly over everything.

Anonymous said...

@anonymous

Bandwidth and hardware many be a lot cheaper today than when Google started but >100K servers is still a non-trivial investment.

Google first appeared when search engines were still talking about all the sites returned by a search having been reviewed by a real person. That gives you some idea of how much the Web has grown in the last 10 years.

The cost of entry to a new search engine is mainly the sheer scale of the 'net.

Getting rid of copyright would have a seriously negative effect of many industries - nut just Micrsoft, and its the basis of the Open Source Software movement.
The copyright term is far too long however - should be 10 years or less.

K.

Anonymous said...

Why in gods name are you promoting this shuggy dude? Let's take a brief look at the (tediously predicable) anti-free market rhetoric :


"3) The 'neo-liberal' notion of a self-regulating, unfettered free-market has indeed been discredited by events but it was always a myth anyway - it is the last great untried utopia believed only by a handful of ideologues. You expect them to recant their views now? Why should evidence change their minds now when the copious evidence we have already hasn't had this effect before? Simon Heffer and his ilk may equate state intervention with socialism but anyone with even a passing acquaintance with economic history understands that capitalism has since 1945 co-existed with large scale nationalisation, credit controls, exchange rate controls, price and income controls. The 'part-nationalisation' of the banks does not alter in any significant way the essentially capitalist nature of our economy as David Osler remarks here - and such interventions, and much more violent ones, have often been a characteristic of the capitalist political economy as Richard Seymour, amongst others, have already pointed out."

hmm... I'm confused. How can something a) have "been discredited by events" and yet b) "but it was always a myth anyway"

likewise "capitalism has since 1945 co-existed with large scale renationalisation, credit controls, exchange rate controls, price and income controls". To me means that we haven't had anything resembling capitalism since 1945 (err, make that 1914, and even then...).

"The 'part-nationalisation' of the banks does not alter in any significant way the essentially capitalist nature of our economy " That's like arguing that your still free in banged up Jail. It's so stupid.

An earlier one:
" Keynes himself believed that the mobilisation of resources required for the war economy vindicated his theories - but Keynes was not a socialist,"

hmm... I have no idea what this Shuggy defines as a socialist but actually Keynes was a Nazi: http://www.lewrockwell.com/rockwell/centralplanning.html
which frankly will is close enough to do as condemnation for me.

It goes on. and on.

I though this was a libertarian blog. You should read some free market economics (ie, Hayek, Freidman, von Mises etc) if you mean to espouse freedom because you cant even see that his shuggy is no friend of freedom.

El Draque said...

The extreme Austrian politician - Haider - is now tragically dead. Though it wasn't just his party. Maybe the Roehm brand will dominate.

Anonymous said...

"Bandwidth and hardware many be a lot cheaper today than when Google started but >100K servers is still a non-trivial investment."

Companies make 'non-trivial investments' all the time... and 100k servers is only a few tens of millions of dollars; you'd get some pretty damn good deals on buying components in lots of 100,000.

Microsoft, for example, has pissed away billions of dollars on the Xbox; they could buy 100,000 servers tomorrow and hardly notice the cost.

"The cost of entry to a new search engine is mainly the sheer scale of the 'net."

So one second you're complaining about the cost of the servers, now you're claiming the problem is 'the sheer size of the net'? Which is it?

"Getting rid of copyright would have a seriously negative effect of many industries - nut just Micrsoft"

Fine. But don't whine that Microsoft has a monopoly on Windows sales while supporting the laws that give it that monopoly... Microsoft's 'monopoly' is created by governments and has absolutely nothing to do with free markets. Governments love monopolies, the free market hates them and does everything it can to destroy them.

"and its the basis of the Open Source Software movement."

Except the GPL wouldn't be required in a world with no software copyright.

Anonymous said...

@anonymous

My original point to v was that its not govt regulation keeping out Google competitors but the size of the challenge of competing with them (the cost of the kit, the costs involved in setting up that kit and the scale of the net).

I'm not whining about MS - merely pointing out that if one wants an example of a tech monopoly then MS is probably a better example that Google. Their dominance is in no small part due to the dodgy practices.

I do believe sane (i.e. short term) copyrights and patents are valuable as they are likely to encourage innovation. The ones we have now are just bonkers (and I'm conflating the UK/EU/US here)- encouraging the holders to be fat, lazy and more reliant on the legal process than innovation for their profits.

K.