Saturday, July 05, 2008

Illogical economics

There is no reason why developed economies should always be in step, even when they have close interaction; but it seems confounding when thy are totally out of step. I’m referring to Canada here, as far as I can discern the only country currently talking about investigating market deregulation and competition policy.

A report from the Canadian federal Competition Policy Review Panel arrived with fanfare last week, but it is at least 20 years too late. While the rest of the world is starting to realize the folly of these market based policies there seems to be a belated push/pull to bring the maple leaf into the swamp.

The confounding part is; why now and why does anyone think the Canadian dynamic has changed sufficiently to accommodate these policies? We are talking of the only country to champion a true spirit of federalist disparity. Even if we did go into the tedious aspects of that disparity the fact remains, there is simply no chance of one unified policy across the country.

It is those few Canadians who persist with the dream of adopting a uniform market economy who need to look at the signs surfacing around the world. Those of us opposed to global economics, who think the scheme is little more than a corporate hijack of world economies, are described by advocates as ‘flat world’ devotees.

But those same free trade advocates will assure you that:

There's no preordained direction for the world economy --only an undetermined future that will take the shape of whatever ideas and policies we choose to uphold. The lack of an intellectual defence of capitalism has left free markets vulnerable. "The power of the state is reasserting itself," Forbes

Illogical alternatives

While free trade advocates decry the return to nationalist sentiment around the globe we still need to be aware of the illogical aspects of protecting markets and industries. Just looking at some emerging issues of free trade:

According to the Journal of Economic Issues, in the US economic deregulation of electric and gas utilities has not succeeded in lowering price, promoting greater consumer choice, constraining market power or improving infrastructure performance.

But on the protection side we have a Canadian situation where Ontario is producing more cattle and hogs than it has home-grown corn to feed them. The feed has to come from elsewhere, entailing additional freight costs, but it is not coming from Canada, it is coming from the US.

They are buying and shipping feed from the US then selling the produce back again. It doesn’t make sense. To be cost efficient Ontario farmers must be in a position to deliver the whole production cycle; to fail that calls for dubious subsidies.

The term pragmatic has long been used as a put down, generally referring to politicians who desire to line their own pockets. It is now starting to emerge as a description for the sort of economics we need to develop. A pragmatic form of economics would insist on sustainable markets, protected from dumping and natural disaster and perhaps offering marketing scales of economy.

I tend to focus on Canada because the country’s dynamic does not lend itself to top down changes in policy direction. The country’s provinces jealously protect their own powers, which represent an impenetrable tangle. Canada will not become an unregulated free market anytime soon, but they do need to sort out some market logic.

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