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Market Principles?


Take the US. In 1750… it was one of the richest societies on earth, but it was, of course, pre-industrial. If it had pursued its comparative advantage in accordance with market principles, it would now be exporting fish, fur, agricultural products, etc.

Instead, it industrialized, but not by adherence to market principles. Rather, by radical violation of these principles consciously undertaken to change its comparative advantage (otherwise known as development). Did it participate in “globalization”? Sure. Cotton in the early period of industrialization was rather like oil today, and the US was the major cotton exporter, thanks to extermination or expulsion of the native population and slavery — not exactly in accord with market principles, but perhaps the world’s leading illustration of “globalization.” Part of the motive for annexing Texas and conquering about half of Mexico was to try to gain a monopoly over cotton, to bring the major rival, England, to our feet, as the Jacksonian Democrats proclaimed — rather like the charges against Saddam Hussein when he invaded Kuwait, though in this case much more realistic. Not market economies, but certainly export orientation, hence “globalization.” These are standard features of economic history. They include the current poster children, China and India. China is among the most extreme violators of market principles, and one of the leading exporters (though a good deal of the export, particularly towards the higher technology end, is foreign owned). So it illustrates “globalization,” but not market principles. India is similar…the inequalities are extraordinary. The same neoliberal principles that lead commentators to swoon over the marvelous high tech centers in Hyderabad and Bangalore are a primary cause of the rise of peasant suicides right nearby, as the rural economy is devastated by withdrawal of state support for credit, irrigation, etc., and pressures on poor farmers to undertake very hazardous production of export crops. The results are a horror for the majority of the population. China appears to be similar, but in its much more closed society inquiry is more constrained.

In brief, these formulas don’t mean much. What does mean a lot, however, are some of the phenomena reviewed in the UN development report …which, incidentally, is a scathing indictment of US government policies, facts not mentioned in the news reports I saw. Take child poverty in England. It increased sharply during the neoliberal Thatcher years, pursuing the principles of “market economies,” and declined sharply when the government began carrying out fiscal and other policies to support poor families, violating market principles but acting more humanely. Choice of policies depends on what goals one wants to achieve.

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