Dwight Meredith
seems to like a
post of mine from back in 2002, about the inadequacy of prewar
planning for anything but a best-case scenario. He thinks that was
prescient. I'm not sure, myself. For those with eyes to see, it was
all over the news; the thing itself starts off with Pentagon insiders
who were airing their frustrations to, of all people, Robert Novak.
But as the count of American casualties, post-"Mission Accomplished",
edges towards 2000 (and will Dubya's body count stop short of al
Qaeda's at the WTC by the time this is finished?), I can say this: I'd
rather have been wrong.
Another post I'd rather be wrong about is this
one, on the economic policies that the IMF and, to a lesser
extent, the World Bank have been shoving down the throats of
third-world countries, influenced by American administrations
of both parties, for decades.
I argue there that the economic
argument for those policies --- particularly lowering trade barriers
--- is all wrong. And that under plausible real-world conditions, the
very principles that mainstream economists invoke to justify lowering
trade barriers can actually be used to justify protective tariffs.
But I buried the lede, and didn't say so up front.
Here's a capsule version of the argument. Briefly: the standard
case is based on the notion of comparative advantage. That's the idea
that if trade barriers are lowered, each country will naturally
specialize in exporting goods which, in some sense, that particular
country produces better than anything else --- and that this raises
total world output, thus providing more stuff of all kinds for
everybody.
Equally briefly, my counterargument is this: consider a dirt-poor
country. Where's its comparative advantage going to be? Obviously
not in producing any industrial good: the lack of transportation and
other infrastructure will eliminate whatever benefit could possibly be
gained by low wage rates. So, the classic theory of comparative
advantage seems to me to say that in the absence of trade barriers, any attempt to industrialize in
those countries is doomed to be crushed by the market before it can
get halfway started.
And that's what seems to actually happen in
African countries that follow our advice: for example, they are
clothed in cast-off American T-shirts because it is literally cheaper
to cart our discards across the sea than to make new ones on African
soil. And if comparative advantage says that the free market will
inevitably produce this result if it is allowed to operate unhindered,
then the only way to prevent it is to temporarily hinder it, by, e.g.,
imposing protective tariffs. To quote my own conclusion:
-
The idea here isn't that trade barriers are a positive good, to be
maintained in perpetuity -- but rather, that for developing economies,
they are a necessary evil, to be dropped when local industry can stand
on its own. It's not a fairy tale to suppose that can happen.
That's what South Korea
did, for example, last century, pursuing mercantilist policies
while building up its industry in the 1960s and 70s, and progressively
lowering trade barriers after that. For that matter, it's more or
less what the U.S. did in the nineteenth century. And it's what
Mauritius, one of the few bright lights in the dismal African economic
picture is doing
right now. But this flies in the face of conventional "Washington
consensus" advice to developing governments -- which is to drop all
trade barriers immediately, and keep them down.
There is more on both sides of the argument at the
original post.
This is another one I'd very much rather be wrong
about, since if I'm right, we've immiserated literally billions of
people for no good reason at all. But I still can't find the flaw in
the original argument.
