Friday, November 16, 2007

Thoughts of a young economist

Written just after the contentious period of debate on approval of the Uruguay Round. These days the term "booty capitalism" is more common. Otherwise, still my thoughts on the matter.

Oh yes, if you know the joke, this means that I have no heart.

With the issue of the GATT, the fragmented Philippine left found reason to unite. A common theme in their arguments against ratification was the specter of global capitalism tightening its hold on less developed economies with their integration into the world trading system. Instead of integration, they advocate a return to the "nationalist" strategy based on extensive State intervention, emphasizing controls on imports and foreign investments, selective and generous incentives for heavy industries (steel is a special favorite), cheap foreign exchange, and similar measures.

Unfortunately, their critique of global capitalism and their program of State-sponsored industrialization suffer from a complete misunderstanding of the foundations and dynamics of capitalism. The recent approval fo the GATT is thus regarded as a betrayal of "the people", rather than what it truly is: an opportunity for economic advancement.

Capitalism operates on the dynamic of exchange or market relations made possible by stable property relations. These exchange relations, as they are voluntary, are to the mutual benefit of the transacting parties. If I buy imported sugar, it is beneficial to me, as well as to the foreign sugar grower (but probably not to the domestic sugar planter). Naturally, the process of exchange organizes and improves production. For example, with free trade resources devoted to import-competing sugar may be reallocated export crops, which are sold in more lucrative foreign markets.

However, to teh extent that the State engages in market restrictions, there is an opportunity to accumulate wealth, not by innovating a superior organization of production, but by appropriate the coercive power of the State. For example, domestic sugar planeters may lobby to restrict the entry of cheap foreign sugar; Filipino consumers are coerced into accepting less beneficial trades with these planters. Capitalism, in its free exchange form, organizes and advances production and is therefore a benevolent force. (It's distribution of society's output is, however, only as equitable as the existing property relations.) On the other hand, capitalism which employs State coercion is the foe of economic progress; it is the backbone of a backward conservatism.

It is this reactionary conservatism of a protected few which is most interested in rejecting agreements which restrain State coercion, as the GATT. Ironically, this conservatism is precisely what radicals unanimously advocate, whatever their differences on other issues. All this in the name of "the people."

I do not question the sincerity of the radicals; what they suffer from is a mistaken identification of capitalism in the Philippines as a manifestation of exchange capitalism, rather than what it truly is - coercive capitalism. Mass poverty and underdevelopment are blamed on exchange capitalism, rather than coercive capitalism and unjust property distribution (the heritage of a feudal and colonial past).

In a world where central planning has been totally abandoned, trade barriers are falling and exchange capitalism is replacing structures of coercion, perhaps it is not only the veteran ideologues who are victims of this tragic irony. Unfortunately, the youth and studentry by and large remain captivated by an obsolete mode of analysis (one needs only read many of the other column pieces appearing in this space. If instead the energies of these idealists were directed toward opposing coercive capitalism, as well as toward advocating justice in property relations (such as redistributive land reform), they might yet live up to their vehement profession of being "pro-people."

- Philippine Daily Inquirer, Youngblood, 27 December 1994, p.7; byline corrected December 28, p. 8.

Much later I had another column in Business World, August 20, 2002. But that one has an electronic copy. I've had a few other columns, but the rest are crap.

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