Greg Mankiw's Blog: Fear of Asia

リンク: Greg Mankiw's Blog: Fear of Asia.

His humility notwithstanding, Jay Matthews, the education columnist for the Washington Post, would have made a pretty good economist:

I am not an international economist, to say the least. I had to struggle to get through Ec 1 my sophomore year of college. But I am a careful reader of the business and economic reporting of my newspaper, so I think I am qualified to ask two questions -- neither of which are answered in this report -- about those scary folk in south and east Asia.

Question one: Isn't the freedom and flexibility of American culture and politics, not the quality of our educational system, what has given us such power in the world? India appears to have adopted many of those freedoms and its people have a chance to be just as creative as we are. But I have spent much of my life studying China and I don't see any way that country is going to set its great culture free any time soon. The China brain drain will be in our favor until Beijing adopts democracy and human rights, and that will take a long time.

Question two: Even if both India and China do attain that potent blend of liberty and creativity, how exactly is that going to hurt Americans? Their economies are thriving because world commerce is losing its dependence on borders and tariffs, and the old way of thinking (accepted without question in this report) that if some poor countries get rich, then some rich countries, like us, are going to become poor. The experts on these issues that I find most persuasive point out that only countries cut off from the world economy, like North Korea, are declining, and that is because they are not globalized. Everyone else is discovering that the better off India and China and El Salvador and Tanzania become, the better off we all are. The more middle-class people overseas, the more customers there will be for the newest gizmos that our large and innovative middle-class country keeps coming up with.

From today's Washington Post.
permanent link

8 Comments:
GVV said...
"India appears to have adopted many of those freedoms...." How one can classify these "freedoms" so particular to US?
From India with regards

12:59 PM
Mr. Mercy Vetsel said...
India has had political freedom for a long time, but they are well behind China when it comes to economic liberation. China started privatizing with Deng Xiaoping in 1979, while India (along with the American pseudo-economist John Kenneth Galbraith) followed the Soviet economic model right up until it collapsed in 1989.

As another poster pointed out, there is at least one (and I think) several backwards Indian states that are still run by outright communists. In contrast, communists in China are increasingly hard to find as the Communist Party struggles to contain the forces of economic liberalization that have been unleashed. To make that happen, the new model is a harsher version of Swedish style fascism with Chinese characteristics.

Democracies (like the U.S. after WWII and all of western Europe) that do not offer adequate protection of property rights from the tyranny of the majority are at an economic disadvantage to more authoritarian states like Singapore, Taiwan and "Red" China which do not permit the tragedy of the common voters to create the distortions that would otherwise severely effect the efficiency and long run growth of the economy.

The Post writer is correct that a rich Asia is good for our absolute wealth. Those on the left would expect us to be worse off because in their view destroying the wealth of rich people makes everyone else better off in relative terms. That's why the folks at UNESCO (who have probably never experienced absolute poverty themselves) think child poverty is a bigger problem in the U.S. than in India.

• Mercy

1:38 PM
Saad said...
A lot of the pro-protectionist rhetoric often assumes that the size of the pie is constant, and that China/India & Co. will get a bigger slice at the expense of the West. Perhaps in the short run - and the short run can often be painfully long with people losing jobs. In the long run, the pie is bigger, and everyone gains (but some more than others).

The protectionist rhetoric has implicit a number of inter-generational arguments. It would be interesting to carefully study them from this point of view.

4:35 PM
Anonymous said...
mr mercy: "Swedish style fascism" seems a novel concept. May I ask you to point us to your sources?

7:06 PM
GVV said...
Mr.Mercy Vetsel,
I disagree with some points.
First your statement "American pseudo-economist John Kenneth Galbraith" is highly biased.He was a great Harvard institutional economist who explained to us through his numerous outstanding contributions the vices of an affluet economy which free market supporters of higher order like you cannot digest.
Second your statement "there is ..several backward Indian states that are still run by outright communists" is not right.There are three states under communist rule.They are West Bengal,Tripura and Kerala.West Bengal,currently, is one of the fast growing states with several booming industries.My state of Kerala had the first ever democrtically elected communist government in the 1950s.It ranks top among other states in the matter of Physical Quality of Life Index(PQLI) and Human Development Index (HDI) comparable to western coutries which experts call as the "Kerala Model of Development".See a few data for Kerala : Adult literacy,2001 Census :(94.20%);
Life expectancy (76 years);
Infant mortality per 1000 live births :(13);
Birth rate per 1000:(17);
100% girls between age 6-14 attend school;
Good Public distribution system;
Network of high quality medical institutions;
Radical land reforms
Gender equality and so on.
All these are brought mainly by communist-led governments who were in power in the State.

7:11 PM
Anonymous said...
...the short run can often be painfully long with people losing jobs. In the long run, the pie is bigger, and everyone gains (but some more than others).

Being a leftist, I'd like to correct the misrepresentations of the right-wing ideologues on this blog. The statement above is exactly how I see the problem with free trade. In the short run, there are economic shifts which destroy lives. These shifts are exacerbated because not all countries play by the free-trade ideals while trying to exploit free trade to their own advantage.

The duty of the government is to provide for the general welfare. As such, it is irresponsible for the government to allow foreign powers to exploit the current economic changes and destroy the lives of Americans. This does not mean we should engage in all out protectionism. It means the government must provide appropriate safety nets and social programs to allow American workers to retrain and find new employment. But it also means that the US should apply negative incentives to governments which artificially manipulate the economic system to their own advantage while hurting American workers (read China and their artificial control of exchange rates). It also means that the US should be wary of foreign governments (read Chinese) which are amassing US debt to be used as an economic weapon. Does Taiwan have a chance when the Chinese government moves on it with the threat of dumping 1 trillion in American currency on the market if the US interferes? You can make all the "rationalist" arguments for why or why not something would happen. Unfortunately, rationality doesn't always align with ideology-driven action.

7:44 PM
Sam S. Park said...
Why do protectionists not understand this concept of free-trade benefits? Did these protectionists not hear about this little event called the Great Depression?

The wonderful Smoot-Hawley Tariff Act was passed right after the Crash of 1929 to help out the farmers. All sarcasm aside, this time-bomb was a factor in fueling the Great Depression.

Did the tariff supporters really think other countries would not retaliate, as Smoot-Hawley nearly killed foreign trade?

Fast forward several decades to recent events. The US is shifting from a manufacturing economy to that of service, which - in my opinion - is a good transition.

Face the facts, China can produce manufactured goods much cheaper then it is to do so here. Why try to slow this transition? A 27.5% tariff on Chinese goods is not going to benefit Americans.

I don’t know a better thing than that protectionist measure to increase inflation, thus increasing interest rates in an already delicate situation, thus killing spending, thus putting the US right into recession.

8:09 PM
BRKelley said...
" . . . provide for the common defense, promote the general welfare, . . . "

Hey, guys, it's called The Constitution. Look it up.

Anonymous and GVV's defense of statism and the crackpot JK Galbraith makes a nice holiday gift for the rest of us. Once again we get a glance how morally bankrupt and intellectually inept the Left really is.

India followed US Amb JKG's advice of collectivism, state ownership, regulation, tariffs and taxes and produced nothing but misery and waste for 30 years. The Indian subcontinent was a living monument to failure of central planning. Finally Indians got sick of poverty, voted out the Leftists and deregulated industries, foreign investment, currency controls and look what's happened since. Glory be!

The American Left (and the Pat Buchanan Right to a lesser degree) complain about foreign "exploitation" of our "free trade" philosophy costing US jobs. Yet this ignoramuses turn a blind eye how American tariffs on steel destroyed US jobs in autos and construction, or ag quotas and subsidies puts thousands of food processors out of work and kills the purchasing power of consumers.

There are plenty of protectionist sinners, many more than free trade saints.

8:26 PM