I have not reviewed this book yet, but this article offers me an opportunity to pontificate.
One thing that attracted me to the FCPP in the past was its emphasis on high performance government. The concept, which I believe originated in New Zealand, was based on the principle that public sector and unionized operations could function as effectively as non-unionized private sector organizations if they were presented with the appropriate motivations and performance standards.
It might be that that approach is a naive concept, but I still acknowledge that there are a lot of motivated, principled and effective people working in public sector administration in Canada. From my experience, these individuals are not the under-worked, pension-gobbling, seat-warming people presented by the Tea Party movements of this world. For the most part, they are motivated to make a positive contribution and our challenge as policy analysts is to figure out how to make that situation a reality.
When it comes to manufacturing policy, the subject scares the heck out of me, but on the other hand, we have to realize that we are living in a world where foreign governments practice merchantile industrial policies. When our manufacturers or others are confronting state-backed competitors, we need smart government, not minimal government in my mind.
A comparable situation exists when foreign governments are tempted to employ non-tariff barriers to limit the export of our products into their markets. To me, the Keystone Pipeline debate in the US is exactly this type of process, where some players in the Washington environment are playing the environment card to restrict exports of Canadian crude supplies into the US market in the misguided notion that that tactic will increase the value of oil produced in the USA.
A Libertarian vision of minimal government is a worthy goal, but that approach only works as long as we are living in an environment where competition operating in foreign countries operate in a comparable environment.
Hey Les – you write this: “A Libertarian vision of minimal government is a worthy goal, but that approach only works as long as we are living in an environment where competition operating in foreign countries operate in a comparable environment.”
My question for you is, “Why?”
Ok, I know you’re probably busy. So instead, I’ll answer my question for you. I’m assuming that you think if another country provides subsidies, or has lax environmental controls, or presents an oppressive government, or generates other competitive advantages, that it’ll compete unfairly with us, causing us to somehow lose.
On the simplest level, take these examples. The EU, via the CAP, subsidizes their farmers and hence provides the world market with cheaper than expected food. S Korea has trade barriers that make it difficult for foreign cars and heavy equipment to be sold in country. The United States allows it’s citizens to vacation in Mexico, a country with a sub-par environmental record, high corruption, and exceptionally low (and sometimes subsidy affected) prices. Alberta is endowed with great gobs of oil and Ontario is not, allowing it to generate more cash and wealth, allowing it to purchase more cars, and more expensive ones, often, temporarily, driving up the price for new models. Todd’s household refuses to import products from the BeltLine kids store, instead importing children’s jeans from Wal-Mart, as he is biased against the BeltLine store since the owner has been known to drive fast down residential streets.
Which of these deserve government intervention to maintain a fair, competitive environment? If you’re a nationalist of the not-merely-flag-waving-type, all would require some correction, as the environment created shifts jobs from one jurisdiction to another. If you’re not a nationalist then why would we not take advantage of lower prices, wider variety and quality regardless of what machine, nation or environment created them? China subsidizing its exports, as far as Canada goes, is no different than Amazon providing a better ereader than Indigo. (Though if I was a Chinese national, I’d be more than a little choked that their government baldly promotes mercantilism at my expense.)
As for the line of yours that I quoted, I would suggest that since no two countries, regions, or households operate in comparable environments, we should significantly restrict trade – in retaliation of course – amongst all of us.
Am I off base?
Read:
http://cafehayek.com/2011/08/open-letter-to-a-correspondent.html
http://cafehayek.com/2011/08/baby-you-can-drive-my-car.html
http://cafehayek.com/2011/07/so-good-of-the-likes-of-sen-schumer-to-care-so-deeply-for-ordinary-chinese-citizens.html
http://cafehayek.com/2011/06/bhagwati-on-the-morality-of-free-trade.html
http://cafehayek.com/2011/04/energized-by-free-trade.html
http://cafehayek.com/2011/07/the-curse-of-nationalism.html
I am not attempting to avoid you and yes I will read through your comment s
For now, I have some crop in the field and that task is concentrating my attention.
I think I follow you reasoning, but I would like to see you apply it to the case of China and rare earth minerals. Several years ago, the state government subsidized their operations which resulted in most of the production in the rest of the world being driven out of business. Now that they have a lock on the supply, they are using that power strategically to build their industry that uses those materials and restricting / denying supply to others. This is one example where I believe there is merit in state intervention to ensure the foundation of a competitive market continues to exist.
Hey Les, that is an interesting one for sure – and it looks sticky, as if China has a lock on the market. It’s more interesting than manipulations in other markets, given the narrowness of that market.
It does seem simple on the face of it, though. If China won’t sell to you (e.g. Japan/Japanese Companies), or will only sell to you at a very high price, then you do have options to get your supply from the other production (small though it may be), or from recycled materials. The other mines aren’t all fully decommissioned, a few of them are idle, and quite capable of ramping up if the Chinese help shift demand through punitive supply actions. I would also assume that if the Chinese continue to be punitive, it wouldn’t be simple for them to be fully-reactively punitive – i.e. they can’t get away with yanking chains for very long, until the risk of not obtaining the supply would provide another price rise, allowing other mines to reenter the market. If the embargo tactics continue, you’ll see alternative technologies emerge.
Taking a look at Neodymium, Gadolinium, Cerium prices in the past few months, they’ve come down significantly since their 2011 highs, meaning, either the Chinese gov’t is playing slightly nicely, or other options have become available – possible evidence that their move is unsustainable.
Additionally the Japanese government is offering to subsidize other sources to keep them open as well. Given the government and industry integration in Japan, I’d take this move as a proxy for industry, what you’d expect given the risk of Japanese companies facing supply restrictions.
(And like I said before, if the Chinese/Japanese want to subsidize the rare earth market, I have no problem with it. It’s citizens that should get angry.)
Sorry, should have added:
I also think that a transparent market, one that takes into account the Chinese (and Japanese) moves, will do a better job of finding alternative sources, and substitutes than a government intervention project that merely bets on rare earth metals, existing extraction methodologies, or some wild untested alternative. The Chinese move shouldn’t be seen by the market as anything different than any other physical disruption – e.g. supply exhaustion, transportation network breakdown, extreme weather, etc.
I personally don’t trust – a lack of trust that’s empirically based – bureaucrats to design something that will mitigate the problem and not create a myriad of other, more significant problems quickly and in the future.
Hey, and by the way, hope you pull off a bumper crop!
The only way my crop this year after the wet spring will be a bumper is if the brakes go out on the truck as I pull it up to the bin to unload.
On the other hand, I consider myself fortunate this year to have any crop to take off. The farmers to the west of me are not turning a wheel this fall because they never had an opportunity to get seed into the ground.
That’s lousy, sorry to hear it – I hadn’t been keeping tabs on weather out your way. Mostly hoping that some of our relatively dry August had made it to you as well. Good luck regardless.