Perhaps India’s honeymoon with Barack Obama is over. He has just announced higher taxes for companies that outsource jobs. His slogan, “Say no to Bangalore and Yes to Buffalo” referring to the US city in upstate New York, bordering Canada.
Read the full ToI news report here.
Obama is talking about creating local jobs and a “national economy.” He also wants to get tough on businessmen taking money abroad. No more tax havens. All the moolah goes to Uncle Sam to blow up in Iraq or Af-Pak. Sounds familiar?
Ludwig von Mises often wrote that the laws of economics are about means and ends. Every politician and his party wants to increase national wealth – the end is the same – but they choose means which only the trained economist can predict will backfire. Protectionism is one such error. The laws of economics indicate that economic harmony prevails equally between nations as it does within them. The bigger the market, the higher the division of labour, the higher the productivity, the higher the wages, the greater the abundance of goods and services… this is the road of globalization, open borders, free trade and free capital flows in sound money.
Obama will raise the price of labour in the US. He will make America uncompetitive. Huge inflation is anyway expected. And the economy is in a tailspin. And Obama doesn’t seem to know what “sound money” means. He is a Keynesian fiat paper man.
Here is Jim Rogers saying that he is NOT selling his gold. He says that gold prices are falling because the IMF is trying to sell massive quantities of gold. Once these sales are over and the market bottoms out, it will be time to buy gold again. The long-run view is that gold wins over the US dollar.
Anyway, as they say, the sword cuts both ways. We in India have never supported globalization and free borders. Kamal Nutt as WTO-wrecker was our hero. Who are we to complain when the error that guides our policies becomes the foundation for similar policies elsewhere?
India should champion free trade, free immigration and sound money by practising all three herself.
Only this can bring peace and prosperity to South Asia. Pakistan, Bangladesh, Nepal, Sri Lanka, Myanmar… they are all awaiting such a call from India, the largest and strongest of the pack, with the biggest markets. Free India should talk the language of free markets.
So we would ask Prachanda in Nepal to advise his foot-soldiers to forget about jobs in the Nepal Army and become entrepreneurs in Thamel.
Recall that when the Prophet Muhammad, peace be upon him, arrived at Medina with his followers, these first Muslims spoke in one voice to the citizens of Medina, saying, “Show us the way to The Market and we will make our way by working.”
The Lesson: People are expected to survive by The Market and not The State.
This lesson is not understood in Washington DC.
It is not understood in New Delhi.
How can it be understood in Kathmandu?
Sir,
ReplyDeleteWhenever I argue in favor of free trade people rundown the argument saying that most of the workers can not learn new skills to survive after their jobs have been wiped out by cheaper alternatives. Most of them do not have the resources, vision or the guidance required to look at other vistas. Also a person can learn new things effectively only until a certain age. Further, responsibilities towards his or her family make him stay away from new ventures. I am also concerned about this. How do liberal economists approach this problem?
Regards,
Kalind
Dear Sauvik da
ReplyDeleteAs usual, it has become morning ritual for me to read your post everyday. Of late, I have felt the need to revisit your old posts but soon, I realized what a vast treasure-house this blog has become now. I would have to remember either all of your posts or I would have to go through them one by one in order to find the right article. After yesterday's telephonic talk, you have responded positively by labeling this post as free trade. thanks for that. But I hope that some kind of reorganization of your blog with a broader list of labels can really help me and my students.
Kalind:
ReplyDeleteFree trade and free markets ensure that all products are produced at their cheapest locations. There is thus more of everything, and all these things are the cheapest possible. Thus, workers succeed as consumers; their "real wealth" increases.
Protectionism aims to increase workers' wages, but fails, because if the entire world went this way, every country would have to produce everything at high cost and sell it locally . If we look back at the last 60 years of Indian history, we find that protectionism and autarky kept us all poor. Even unionised workers failed as consumers. The fact, after all, is that we not only work, we also consume, and we work in order to consume. If our markets are closed, we cannot consume, and we fail as economic agents.
Finally, it must be noted that there are no certainties in life and everything is in a flux. This applies even more so to economic life. Even the richest man is unsure of the future and may lose his wealth if things go wrong. Nothing that politicians say or do can really "protect" us all from these uncertainties of life. If we vote for policies based on these false promises, we lose.
Unfortunately, in the modern world it is well nigh impossible to live your entire life with just one kind of knowledge. Just think of the da da dit dit Morse code guys in the telegraph office; they have lost their jobs because of SMS. So what? They must learn something new. As must the professors of Morse code! And I refuse to believe that we cannot learn new things. We can and we must. That is what keeps us young and competitive.
A protected worker in a protected factory is just a vegetable. Think of the Sales Manager at Bajaj Auto when getting a scooter took 10 years. He was "protected" from the challenges of being a human being.
Governments can try and protect all of us from assault, from robbery, from fraud - but they cannot protect everyone from everything. They certainly cannot protect us from the uncertainties of the market.
Sir,
ReplyDeleteThanks a lot for taking time out for replying to my question. What you say does make sense. Perhaps one should keep on improving himself or herself continuously so that he or she is not caught napping. A person who does not will perish. That is a challenging but a frightening thought.:-)
Kalind: You are making a serious error. To you, Life is "challenging but frightening."
ReplyDeleteCut out the "frightening."
Be brave.
Joh dar gaya, woh mar gaya.
:-)
ReplyDeleteTrue!
Thanks for the encouragement.
Regards,
Kalind