quote:

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Harvard economist Dani Rodrik is one trade sceptic. Take Mexico and Vietnam, he says. One has a long border with the richest country in the world and has had a free-trade agreement with its neighbour across the Rio Grande. It receives oodles of inward investment and sends its workers across the border in droves. It is fully plugged in to the global economy. The other was the subject of a US trade embargo until 1994 and suffered from trade restrictions for years after that. Unlike Mexico, Vietnam is not even a member of the WTO.

So which of the two has the better recent economic record?

---

[edited to add:]

By itself, trade is not a magic bullet for development; there are other factors at work. Here's a good summary of this recent survey of the determinants of economic growth (pdf file).

[ 21 December 2005: Message edited by: Stephen Gordon ]

quote:

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Originally posted by Stephen Gordon:
Larry Elliot forgot to mention that Mexico's per-capita GDP is roughly three times that of Vietnam.

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So too it seems did Harvard economist Dani Rodrik ... did they have a reason for doing so? Could it be that it wasn't that relevant to the theory being presented?

Show me some compelling examples where the neoliberal agenda has been successful in developing economies -- where there hasn't been a significant component of dirigisme and protection.

[ 21 December 2005: Message edited by: rasmus raven ]

quote:

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Xavier Sala-i-Martin, Professor of Economics, Columbia University, USA, echoed the sentiments of the panellists before him. As an economist he indicated that central to the needs of the people are supply and demand. He posed the question of what government and business should do to address poverty in the disadvantaged communities. He went on to say that there are many ways to reduce poverty and jokingly said that one of them is to take from the rich and give to the poor. He indicated that poor people need to grow. The reason why there are poor people is lack of education. At the same time, unless there is demand for education nothing will happen. In addition, unless one attacks health issues people will not develop. He mentioned that crime and property rights are also important at all levels, that is at government, business and individual levels.

The culture of subsidies, in his view, is not the way to go. Studies have shown that countries that receive subsidies become poorer and poorer. He argued that subsidies should be used only as a short-term solution. He believes that people are demoralized, they have no hope that things will get better. He compared Africa to China and concluded that China is growing at a fast rate because the people are excited about what is happening around them. Although Sala-i-Martin sees lack of hope as a problem, he said that he has no solutions on how this can be addressed.

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It would seem that his examples argue against his thesis.

[ 21 December 2005: Message edited by: Lard tunderin' jeesus ]

quote:

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Studies have shown that countries that receive subsidies become poorer and poorer.

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Specifically; "Studies have shown that countries that receive subsidies become poorer and poorer."

I don't see anything there that says that trade liberalisation was a bad thing for Mexico, or that more wouldn't be a good thing for Vietnam. When he says

quote:

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Both countries experienced sharp increases in international trade and foreign investment

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What I got out of it is that there are other, domestic, factors at work as well, and that getting them right appears to be a prerequisite for making the most from trade. That's a pretty mainstream point, and Larry Elliot seems to have missed it.

[ 21 December 2005: Message edited by: Stephen Gordon ]

Rodrik also says in that article:

quote:

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What these examples show is that domestic efforts trump everything else in determining a country’s economic fortunes. All the opportunities that the US market presented to Mexico could not offset the consequences of policy mistakes at home, especially the failure to reverse the real appreciation of the peso’s exchange rate and the inability to extend the productivity gains achieved in a narrow range of export activities to the rest of the economy.

What matters most is whether a country adopts the right growth strategy. With none of Mexico’s advantages, Vietnam pursued a strategy that focused on diversifying its economy and enhancing the productive capacity of domestic suppliers.

---

The question is, would Vietnam have been equally able to do so under an onerous neoliberal economic regime?

I refer back to two of Rodrik's earlier works, which I think have stood the test of time and which definitely leave no doubt about where his analysis is coming from. In the first paper, he begins by explicitly posing the question, "Do countries with lower barriers to international trade experience faster economic
progress?"

Trade and Growth: A Skeptic's Guide to the Cross-National Evidence

The second is his well-known reply to Dollar and Kraay.

Rodrik on Dollar and Kraay

quote:

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The paper poses an interesting and important question: Have post-1980 "globalizers" performed
better than "non-globalizers"? The authors answer the question affirmatively, but only by
applying a suitably arbitrary set of selection criteria to their sample of countries.
Here are examples of arbitrary decisions that bias the results in the selection of "globalizers":
· The authors combine a policy measure (tariff averages) with an outcome (import/GDP)
measure in selecting countries. This is conceptually inappropriate, as policy makers do
not directly control the level of trade. Saying that “participation in world trade is good
for a country” is as meaningful as saying that “upgrading technological capabilities is
good for growth” (and equally helpful to policy makers). The tools at the disposal of
governments are tariff and non-tariff barriers, not import or export levels.
· The paper uses different base years for calculating changes in tariffs and trade volumes.
Leaving the conceptual muddle aside, the authors also bias their results by using the early
1980s as their base for tariff reductions, and the late 1970s as their base for increases in
imports. As I will show below, this makes a difference.
· They exclude one country (Colombia) that should be in their list of “globalizers”
according to all their stated criteria. This is apparently inadvertent.
· They include in their list 6 additional countries (out of 18) that do not fit the stated
criteria. The major reason offered is that these countries joined the GATT/WTO since
the 1980s. In reality, a total of 42 countries have joined GATT/WTO since 1980; we are
not told why the remaining countries have not been included by the same logic.

---

Similar tricks continue to be used by the priests of neoliberalism to establish the eternal validity of the one true faith.

[ 21 December 2005: Message edited by: rasmus raven ]

quote:

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I don't see anything there that says that trade liberalisation was a bad thing for Mexico, or that more wouldn't be a good thing for Vietnam. When he says

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"trade liberalization" ... this "short hand term" doesn't seem to have the same meaning as "free trade", the "short hand term" that seems to be the subject of this thread.

I'm pretty sure that no one is suggesting that there should be no trade between countries, or that more of it can never be a good thing ... the issue being discussed is why the trade method picked by the USA, to be forced on anyone that wants to do business with the USA, doesn't seem to work as well as the "trade liberalization" chosen by supposedly backward uncaring uncivilized countries such as Vietnam?

What he takes issue with is the claim that trade openness increases the long-run growth rate of the economy. That's not something the standard trade model predicts, and the there's no a priori reason to expect that trade should affect the long-run growth rate: as he points out, it's pretty easy to put together plausible endogenous growth models where trade increases growth rates, decreases growth rates, or has no effect on them.

quote:

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Originally posted by Stephen Gordon:

What he takes issue with is the claim that trade openness increases the long-run growth rate of the economy. That's not something the standard trade model predicts, and the there's no a priori reason to expect that trade should affect the long-run growth rate: as he points out, it's pretty easy to put together plausible endogenous growth models where trade increases growth rates, decreases growth rates, or has no effect on them.

---

So trade is meaningless then to a country's long term growth?

[ 21 December 2005: Message edited by: No Yards ]

Here are some more of his recent papers.

Rethinking growth policies in the developing world

He starts by laying out a few observations that "most economists" would agree with.

1. The reforms of the 1980s and 1990s have produced disappointing results.
2. The most successful growth performers have followed heterodox policies.
3. There are some general, first-order principles
countries have more or less adhered to.
4. General principles of good economic policy do not map directly and uniquely into
specific policy agendas.
5. Consequently, policy diversity is desirable and a certain amount of policy experimentation is to be recommended.

Growth Diagnostics

quote:

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Most well-trained economists would agree that the standard policy reforms in-
cluded in theWashington Consensus have the potential to be growth-promoting.
What the experience of the last 15 years has shown, however, is that the im-
pact of these reforms is heavily dependent on circumstances. Policies that work
wonders in some places may have weak, unintended, or negative effects in oth-
ers.

[...]

trying to come up with an identical growth strategy for all countries, regardless of their circumstances, is unlikely to prove productive. Growth strategies are likely to differ according to domestic opportunities and constraints.

---

No Doha deal -- not a disaster

quote:

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The silver lining in an amicable break up of the trade talks is that it will give negotiators a chance to focus on issues that are of much greater significance to developing nations. The next time around, trade talks should take up what are the two most glaring omissions to date. First, there needs to be a comprehensive effort to enhance temporary worker mobility from poor to rich countries. This is the area where the gains from liberalization are the largest because the barriers are the highest. Second, WTO agreements need to create “policy space” for developing countries. Developing nations’ pursuit of growth-promoting trade and industrial policies are increasingly running afoul of restrictive WTO rules. Growth superstars such as South Korea, Taiwan, China, and many others would not have been able to adopt the growth strategies that they did had today’s WTO strictures applied to them. Trade officials have to acknowledge the obvious lessons from these countries’ experience and reform the rules accordingly.

---

quote:

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Originally posted by rasmus raven:
It's true that Rodrik is explicit that his work should not be used as an excuse for protectionism.

---

Because it will, inevitably, be a good idea for developing countries to liberalise trade at some point.

[ 21 December 2005: Message edited by: Stephen Gordon ]

quote:

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Originally posted by Stephen Gordon:
Perhaps. But it's certainly not a justification for rich countries to try to impose trade sanctions against poor countries 'for their own good'.

Because it will, inevitably, be a good idea for developing countries to liberalise trade at some point.

---

And what if they want to insulate their own economies from such things as agricultural dumping from agribusiness conglomerates in the USA?

It is abundantly clear that domestic economies can and should be insulated as needed on an ad needed basis whenever the need arises, WTO be damned. The United States has no problem pulling out this trump card whenever it wants and the only reason the WTO can't say no is because the US has nukes and the WTO doesn't.

quote:

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By itself, trade is not a magic bullet for development; there are other factors at work.

---

REALLY? Gosh golly gee. I'll just fall off my chair now.

Look, you've been insistently banging away at the notion that more free trade is better, just because. One of the implicit assumptions in your line of argument has been that free trade tends to enhance growth rates, since it effectively substitutes for an expansion of resource availability in a closed economy.

The corollary of expanded incomes is a faster economic growth rate because, in analogy to the primitive economics 101 model, the production-possibility frontier goes out further.

Now you say, oh, but wait - it doesn't necessarily exist as the only factor.

Rasmus is right - this business of constant ad hoc hand-waving additions of epicycles is not the mark of a self-consistent theory derived from first principles that stands the test of empirical data, or that of time.

It is high time to abandon Ricardo's model in a world that no longer obeys immobility of capital. It is high time to abandon Samuelson-Stolper when poor government intervention in the underdeveloped economies coupled with transnational corporate monopolistic and oligopolistic behavior with respect to wages and prices makes a mockery of the notion that wages naturally just have to rise without affecting the demand for labor (and thus the wage) in the industrial nations.

[ 25 December 2005: Message edited by: DrConway ]

quote:

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Originally posted by DrConway:
And what if they want to insulate their own economies from such things as agricultural dumping from agribusiness conglomerates in the USA?

---

I don't know much about Economics that I didn't get in a basic Labour Ec course, so please forgive my ignorance. My point isn't that the *activity* of FT is suspect (I leave that to others to demonstrate), so much as its inception. When negotiating policies & judging their effectiveness, I often find it helpful to keep an eye on who does the actual negotiating.

Who negotiated for Canada?

I draw from JR Saul for as impartial an historian as anybody else -that & Voltaire's Bastards happens to do a lovely job of the summary which follows:

quote:

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"Finally, James Baker & Simon Riesman - both of whom belong to this same class but are quite different in their methods. Their conflict ended in a victory for indirection and it highlighted which characteristics give the modern technocrat an advantage in the use of power and which, being confused with those of public man, in fact weaken him. Simon Reisman, a product of the Depression, rose to become depupty minister of finance in Ottawa, resigned to become a lobbyist for major corporations, then returned to government ot negotiate the US-CA trade pact in the late 1980s. ...
Resiman, on the other hand, sufferecd from the worst possible of the technocrats' flaws. Whatever the issue at stake, his ego strode before him. This made him a boisterous and bully, but ineffective negotiator.
...
His constant bullying seemed to indicate intellectual superiority

Buy the time there was enough evidence on which to doubt his intelligence and indeed to question his emotional equilibrium, the system already had him on the fast track. And aa single success in the mid-60s - the US/CA Automobile Pact - which he claimed was his own invention, became the concrete proof that he was a competent policymaker and administrator. In reality, he was a rabble-rouser (ASIDE: that sounds like a compliment!!) for conventional wisdom, not intellectually strong enough to break away from from the standard line of the economists.

Reisman was soon one of the pivotal deputy ministers and able to unleash fully his methods, With senior Japanese businessmen in his offfice, he is said to have phoned someone else & shouted down the line - "I've got these doddamned Japs in here who want a lower tariff!" (emphasized here)

During a session with trade negotiators from the EEC in the late 1960s, Reisman suddenly began to bully them as he might his subordinates. When this didn't work, he swore at them. Within moments, he had slipped into a screaming tantum. The result was that Canada made enemies for nothing. The technocrat's power, afterall, is limited to the system he dominates.

While his energy and the fear he generated made his departments work, Reisman's obsession with power led him to undermine his effectiveness on the larger front. He constantly denigated the other deputy ministers. Later, when he was at the summit of his powers, he manageed to defeat a proposal for guaranteed annual income, which an important part of the Cabinet favoured. Resiman boasted openly that he alone had blocked the people's elected prepresentatives.
...
When he resigned early in 1974 as deputy minister of finance, it was to create a lobbying company designed to serve precisely those interests he had been responsible for controlling as a public servant. The protests were so great that they led to strict new goverment regulations on civil servants and conflict of interest. These seemed to ahve little effect.

Reisman's reputation as a tough negotiator and his support for free trade with the US persuaded the Canadian goverment to call on him to lead its team during the US/CA trade pact negotiations. Both sides new the results would alter proufoundly North America's political and economic makeup. It was then that all his theoretical strenghts revealed themselves as weaknesses.

He put together a relatively small team, cut off from well-organized support in the civil service. His aggressive leading from the front, in the manner of an old-fashioned cavalry general with quick spurs and a slow brain, undermined any hope of teamwork. All rested on this legendary powers as a tough negotiator. Washionton played to this weakenss by putting forward an unknow, quiet chief negotiator. Resiman saw this as an insult to his reputation and powers. He was drawn on to ever more egotistical, headline-oriented behaviour. Meanwhile the American negotiator was quietly fronting for an enormous, invisible team in Washington, which was highly organized, highly professional, and walking away with the advantage on most key points. Out of sight and seemingly indifferent sat James Baker, perfectly in control.

Like Reisman, Kissinger and Chirac, Baker, without any accompanying moral purpose or devotion to ideas, is driven by a voracious taste for power and a profound hatred of losing. Unlike them, hower, he is a master of the invisble manipulation which allows a systems man to make full use of the power hea accumulates.

... Baker now understand the international mechanisms. Quite simply, he functions best in secret. He uses the professionals of the State Department, bur primarily as a source of information. He makes policy in a closed circle which consists of four advisers. The problem is that he appears to have no particular set of values..
...
Intentionally or otherwise, their methods induce fear among those who must deal regularly with them. Almost withoug exception they are bullies. Primarily this apppears to be intellectual intimidation. Combine with the use of secrecy and systems manipulation, it is used to frighten people on the practical level of their incomes, pensions and careers.
...
The technocrats suffere from character defects which have to do with thir inability maintain any links with reason, common sense and morality. They believe themselves to be the inheritors of the Age of Reason and therefore do not understand why their talents fail to produce the intended results. Thier abstract view of the machinery of human society prevents them from understanding the natural flow of events and from remembering when they themselves have erred and why.
...
The technocrats are hedonists of power. Their obsession with structures and the inability or unwillingness to link these to the public good make this power an abstract force - a force that works, more foten than not, at cross-purposes to the real needs of a painfully real world."

---

My question: and we expect the common good to flourish in this environment?

quote:

---

Originally posted by Stephen Gordon:
Larry Elliot forgot to mention that Mexico's per-capita GDP is roughly three times that of Vietnam.

---

Did Larry also mention that Viet Nam was the target of an imperialist ten thousand day war waged against it by the most technologically advanced militaries in the world and bombing Vietnam to smithereens ?. Or how about the fact that farmland in VietNam is still contaminated by the millions of gallons of Monsanto's dioxin-based agent orange defoliant ?. Was Mexico tripped up at the starting line in a similar way, Stephen ?. Mexico might have a few more billionaires propping-up the GDP, but what does Chiapas and the rest of the country think of NAFTA eleven years later ?. How about comparing the Mexican-US free trade performance with Singapore's accomplishments since 1965 under the socialist policies of Lee Kwan Yew ?. Like Canada does not, neither Mexico or Chile even rates in the top ten list for economic competitive growth index, and the latter nation was a closed experiment in fully deregulated economy for nine of Pinochet's 16 unelected years in power. Singapore has occupied the top five in recent years and even beating out the USA for top spot at one point as has socialist Finland.

The Vietnamese have offered to buy one of Canada's steel mills, one that's just a shadow of its former cold war production years on the Canada-US border. Say something good about Vietnam, Stephen. I think they deserve it.

[ 11 January 2006: Message edited by: Fidel ]

quote:

---

Originally posted by Fidel:
Did Larry also mention that Viet Nam was the target of an imperialist ten thousand day war waged against it by the most technologically advanced militaries in the world and bombing Vietnam to smithereens

---

Every opposition party in every political arena in any nation in the world (pseudo-democracies, as opposed to monarchies or dictatorships) will expend great energy to paint the governing administration as incompetent, corrupt inept and untrustworthy.

An advanced degree in mathematics (or political “science”) isn’t required to understand the formula being applied.

(Those vying for a shot at the brass ring….say…)

“The current party/administration = corruption and dishonesty…= BAD”.

“We will bring justice integrity vision prosperity and honesty to government = transparency and principled rule…. = GOOD.

We the great unwashed, (and in the estimate of the politico) of short memory and addled thinking, lack the ability temperament and intelligence to differentiate between con job and truth.

And it’s all as though this is “understood” as the “fine print” hidden away discretely in some margin around the Rosetta Stone of Political Theory.

From Sir John A. MacDonald and his liaisons with railroad and business tycoons, to Brian Mulroney “ramming through” the North American Free Trade Agreement, this is the way the practice of politics is accepted in our nation.

“The Secret Mulroney Tapes” aired last night on CBC TV—”the infamous conversations between former Prime Minister Brian Mulroney and journalist Peter C. Newman.” While the selected excerpts reinforced my impression that the former is really full of himself, they did bring me to pause and think about his legacy to this nation, good and bad. We all remember him for “ramming” through the Free Trade Agreement (FTA, now NAFTA)—he even used that verb while talking to Newman—and the much-hated “value-added tax,” the 7-percent Goods and Services Tax (GST).
http://ammusing.ca/?p=846

[Sir John A.] “Macdonald was caught when opposition politicians and newspapers uncovered evidence that a railway baron had channelled $350,000 to him and his Conservatives before the 1872 election.”

“Mackenzie King, the longest-serving prime minister, was opposition leader in 1931-32, when what was called the Beauharnois Scandal erupted in Quebec and thrust the Liberal party into what King called "the valley of humiliation.''”

“King was Opposition leader in 1931-32, when it was learned that Beauharnois Light, Heat and Power Co., had bribed two Liberal senators to win permission for a river diversion when the Liberals were in power.
Commons and Senate committees discovered that Senators W. L. McDougald and Andrew Haydon received Beauharnois money and that the firm gave $700,000 to the federal and Quebec Liberals.”

“No link was ever made between the payments and the government policies, but McDougald resigned from the Senate and Haydon was fired as Liberal campaign treasurer.”
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20050407/patronage_history_050407?s_name=&no_ads=

So what does this mean in the context of a Paul Martin or a Jean Chrétien vis-à-vis the infamous “Sonsorship Scandal”?

Rob McGowan over at Politics Canada believes that “the benefit of the doubt” or “innocent until proven guilty” is appropriately applicable to the objective observer’s scrutiny of these rogues, ditherer’s and charlatans.

Sure if we’re prepared to wait until sufficient time has elapsed to acknowledge the state of Canadian political integrity as being the engine of misinformation and deceit it is, and damages in the billions to say nothing of lives ruined is permitted to drift into the greyness of history, this “tolerance” might be justifiable.

It isn’t!

No one it seems wants to acknowledge how utterly ridiculous the “plan” to bind an enormous nation (geographically) together with a “band of steel” (railroad) actually is!

Similarly the great unwashed and addled population to our south prefers to ignore that their great leader while admitting the “intelligence” was flawed, went ahead and embroiled that nation in the worlds first major Petro-War of the twenty first century.

The consequences of an ill-informed self-interest and actions undertaken without attention to potential outcome only begins to impact the willingly ignorant when the body bags come home.

The credo of the businessman the “make hay while the sun shines” while ignoring any conceivable consequences is the short-term thinking of self-interest governed by greed and fuelled by the epistle of consumerism.

We are this “Theology of consumerism” converts and if we’re prepared to hand our grandchildren and their children a planet no longer capable of supporting life, we’re on the right track!

quote:

---

Originally posted by Stephen Gordon:
Doc, can you show how trade decreases welfare when capital is mobile? Because my understanding is that when capital is mobile, the gains from trade are increased.

---

Russia's growth has increased as natural resources are now paid for in world currencies, but the number of Russian's living in poverty is 30 times greater than before glasnost. Over the course of ten years, the Russian economy has shrunk by 50 percent. Real incomes are down 40 percent. A third of Russian's live in extreme poverty and many are chronically hungry. Eighty per cent of the people have no savings. 10 million Russian children don't attend school. The story is similar for Eastern Bloc nations where trade and GDP are hoisted by politicians who were bought off, coerced and convinced that liberal democracy was going to make things work better than before.

The per capita income in the rich countries of the North, ie Japan, Germany, Europe and the U.S.A., disguise a great deal of poverty with reported GDP figures. The majority of the wealth of these nations is in the hands of the minority who own and control the the means of production and distribution, and ultimately, they are the ones who influence government. The U.S. Conference of Catholic Bishops say that there are
37 million Americans live in a state of poverty, hunger and hardship. "That's more than last year. More than ever before." 12 million American children live in poverty, and over a million Canadian children live below slightly less obscure unofficial Stats Canada poverty lines.

If global trade has increased and adding to the number of billionaires and multi-millionaires in existence in the last few decades, it doesn't seem to be making a difference to the world's poor. 25 years ago, there were 500 million chronically hungry people around the world. Today, there are 800 million. Prosperity exists in urban pockets of major cities, but it's surrounded by increasing layers of want and neglect. Capitalism and its free traders are failing to accomplish the one thing that capitalism and free markets were supposed to do - and that's make everyone better off.

[ 05 February 2006: Message edited by: Fidel ]