Sunday, March 14, 2010

Debating Free Market Evangelists

I have several libertarian leaning friends and relatives. Debates about politics and economic policy often occur. I sense a great many arguments for the curative power of unfettered capitalism are based more on dogma that fact. But, without any formal education in economics, I'm at a bit of a disadvantage.

I liken myself to be a rationalist and willing to change my opinion if I have sufficient evidence. I've generally been a left-leaning moderate (less and less moderate every day, btw) so, I did not support Ronald Reagan in 1980 or 1984. But over time I came to see his administration's tax policy combined with Paul Volcker's fed policy were conducive to the economic recovery in the 80's and beyond.

While government policies supporting private enterprise have been a significant factor in the economic prosperity of Western nations, the notion that support for democratic institutions and social justice are also important foundations is widely shared. Most of my libertarian opponents subscribe to the economic theories of Milton Friedman and argue that unfettered free markets are the only way to achieve a just society. When pressed, most will concede such an economic system is not compatible with representative democracy. Exactly how one could judge whether a society was just, when its members lack the power to chose its leaders, remains a sticky question.

Over the past few years, my arguments in favor of government involvement to mitigate or reverse trends such as de-industrialization, dependency on foreign imports, job losses to low wage labor in developing countries, and a consumer driven economy financed with foreign debt were met with derision and expositions on economic theories that I was hopeless to counter.

Recently our country seems be lagging behind several other nations economically. Nations sporting highly "fettered" economies. Nations with government involvement in industrial policy. Nations with government controls absolutely antithetical to the prescripts for economic growth and widespread prosperity espoused by free market evangelists. Why would that be? How could that be? Could our laissez-faire approach to national economic policy be a factor? Even if true, where would I find someone who would concur? Someone acquainted with economics and economic policy, someone who spoke presciently about the dangers?

There is a great line near the end of the movie, "Ocean's 11". Danny Ocean has been caught robbing the MGM Grand and is confronted by the owner, Terry Benedict. Benedict asks, "Where's my money".

Danny says,

"I know a guy."

Well, there's a guy who is the President of the Economic Strategy Institute, which he founded. A guy who served as counselor to the Secretary of Commerce in the Reagan Administration. A guy who has led many U.S. trade and investment negotiations. A guy who has served as vice chairman of the President's Committee on Trade and Investment in the Pacific and sits on the Intel Policy Advisory Board and the U.S. Export-Import Bank Advisory Board.

Clyde V. Prestowitz, Jr. has a B.A. with honors from Swarthmore College; an M.A. in East-West Policies and Economics from the East-West Center of the University of Hawaii; and an M.B.A. from the Wharton Graduate School of Business. He also studied at Keio University in Tokyo. He is fluent in Japanese, Dutch, German, and French.

Mr. Prestowitz wrote this back in 2005:

"America needs to recognize that many of the assumptions guiding its economic policy are at odds with the realities of today's global economy. Its performance in a broad range of areas--including saving, education, energy and water conservation, critical infrastructure and workforce upskilling--is far below the standard of many other nations. America needs to understand that its refusal to have a broad competitiveness policy is, in fact, a policy. And it gives leading U.S. CEOs no choice but to play into the strategies of other countries. This policy, according to its proponents, leaves decisions to the unseen hand of the market. Actually, however, it leaves them to the highly visible hands of lobbyists and foreign policymakers. It is a policy that ultimately leads to impoverishment."

It's great when you know a guy.

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