Economics, Literature and Scepticism

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I am a PhD student in Economics. I am originally from South Africa and plan to return there after my PhD. I completed my M. Comm in Economics and my MA In Creative Writing (Poetry) at the University of Cape Town, where I worked as a lecturer before starting my PhD.

Monday, January 23, 2006

Random Rantings

Posted by Simon Halliday | Monday, January 23, 2006 | Category: |

Hey guys, I wrote this thing below while I was on holiday in Plett. Bit of a rant I know, but hey why not give it a read.


A Clash of Ideological Perspectives

The West, as it is regarded in modern economic and political ideology, inherently bases most of its policy in both political and economic terms in liberal and neo-classical ideologies. What this means is that they believe in Free Trade, in the efficiency of the market structure without interference from government, on the liberty of the individual in the face of constraints by international and national political will and the ability of individual markets to become more efficient than others inevitably resulting in lower prices and greater employment if there is great competition.

As this ideology is promoted throughout the world by the US and most of the EU we must then believe that they want to affirm this process as the ‘right’ and morally correct pursuit for most of humanity. Thus they wish to propose to most of the developing world that their liberal and neo-classical policies are the policies that they should be adopting in order to improve their economies. Thus membership in the World Trade Organisation (WTO), or getting access to the International Monetary Fund (IMF) is inherently dependent on the implementation of policies that reflect these Western ideological structures.

In the developing world it is thus necessary for us to exercise fiscal restraint: running low budget deficits and paying off both public and foreign debt (even though increased spending could help in the long run), additionally there are demands placed upon us to control inflation and not enter into employment-targeted economic policies (even though various UN bodies have actually suggested more employment-oriented policies than have previously been pursued in countries such as South Africa (UNDP, 2005)). Furthermore, there are heightened demands for access to developing markets, the lowering of tariffs, the decrease of subsidies and the increase of competition – all in the name of increased competition and enhanced international trade efficiency. These are both worthy pursuits.

However, the problem lies in the internal politics of the countries prescribing such policies. They demand that the developing world implement these policies, but they have massive subsidies and high tariffs which prevent the access of the developing world to their markets. For example, as the BBC reported (BBC, 2003), the subsidies in the EU and the US are often as much as $2 per cow – contrasting this with the millions of people throughout Africa and the rest of the developing world that survive on less than a dollar a day this subsidization policy becomes highly immoral.[1] In addition to this it is highly hypocritical – the West prescribes to the developing world that they should have accessible markets for the developed world in order to increase the efficiency of their domestic markets and compete efficiently. But, as soon as it comes to increasing efficiency and decreasing prices in their own markets, they refuse to pursue the policies they prescribe in their domestic environments.

This is easily enough excused on behalf of political realism and interest group economics – the farmers make money enough to ensure that their politicians are in power and that they won’t change policy such that they are damaged. The problem though is that they are damaging international relations because of their hypocrisy. As much as Thabo Mbeki is tarnished by his doublespeak on HIV/AIDS, George W Bush, Robert Zoellick, Pascal Lamy and co should also be found guilty of the same sin – they do not live up to the ideologies that they so viciously tout as the would-be saviours of the world economy. The only way that the developing world is possibly going to decrease their tariffs, their subsidies and increase the access to their markets is if the developed world does the same.

As much as China and much of the developing world currently have lower labour prices than the US and the EU, in the long run their economies will become more highly skilled as education programmes take effect, and as such individuals will demand higher wages. The long-run, that mechanism so enigmatic to economists, is the ultimate throwback for the developing world. If the G8 wish to prescribe labor conditions, environmental policy and a general ideological approach to politics and economics, then they are going to have to up their own ante. Such changes do not come in a costless manner. As a result of increases in efficiency the unemployment in the west may increase, as they are not as efficient and do not have as low a cost of labour as the developing world. Nevertheless, as already stated, in the long-run all’s well that end’s well, we’ll have a world in which liberal and neo-classical values are the prevailing force and the shadows of communism and fascism are but distant memories. So long to Marx, yay for Smith.

[1] Note that I am not requesting the Western World to all become moral vegetarians, rather that they should review their subsidy policy.

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