Saturday, February 25, 2006
The Coming Trade Wars - Pt3
Market fundamentalism is the belief that the optimum common interest is only achievable through a market equilibrium created by the effect of countless individual decisions of all market participants each seeking to maximize his own private gain, and that such market equilibrium should not be distorted by any collective measures in the name of the common good. It is summed up by Margaret Thatcher's infamous declaration that there is no such thing as society
US policymakers are beginning to realize that a capitalist China in a neo-liberal world order is by far more of a threat to US national interests as a superpower than a communist China in the Cold War.
What Toyota really wants is to keep GM manufacturing in the US, where it can never achieve cost competitiveness, and not move its manufacturing to China with a new business paradigm to compete with Japanese auto makers there.
On one level, the world economy needs to develop these populous markets to relieve global overcapacity; on another level, the rise of income necessary for such expanded consumption translates into a leveling of the power differential long enjoyed by the world's sole superpower. Suddenly, the needs of the global market to overcome global overcapacity with new consumers are turning against the traditional security and economic interests of the United States. In response, the US is turning back toward its own history of command economy. Emotional debates have emerged within US policy circles on the merits of globalized neo-liberal market fundamentalism versus the need for protectionist economic nationalism.
Policymakers in self-proclaimed market economies normally manage their policy objective through monetary and tax policies in accordance to macro-economic theories, but even then they do so with national objectives in mind. Such national objectives are known as national interests in policy nomenclature. For example, the Fed defers to the Treasury on determination of the proper exchange rate for the dollar. When market forces move against the Treasury's view, moving the dollar either too high or too low in relation to other currencies, the Fed supports the Treasury as a matter of national security in its effort to intervene in the market to bring the dollar back in line, or at least moderate the volatility. All nations employ industrial policy when it comes to defense and defense-related sectors. And as military/civilian dual-use definition expands, more and more of research and development, high-tech production, heavy manufacturing and strategic materials are removed from free trade to rely on government subsidies and procurement contracts. Dual-use restriction is one of the major factors contributing to trade imbalances between the US and China. Beyond dual-use technology, the US has very little to sell. Free trade in the US perspective is not remotely the same as freedom to trade.
US policymakers are beginning to realize that a capitalist China in a neo-liberal world order is by far more of a threat to US national interests as a superpower than a communist China in the Cold War.
What Toyota really wants is to keep GM manufacturing in the US, where it can never achieve cost competitiveness, and not move its manufacturing to China with a new business paradigm to compete with Japanese auto makers there.
On one level, the world economy needs to develop these populous markets to relieve global overcapacity; on another level, the rise of income necessary for such expanded consumption translates into a leveling of the power differential long enjoyed by the world's sole superpower. Suddenly, the needs of the global market to overcome global overcapacity with new consumers are turning against the traditional security and economic interests of the United States. In response, the US is turning back toward its own history of command economy. Emotional debates have emerged within US policy circles on the merits of globalized neo-liberal market fundamentalism versus the need for protectionist economic nationalism.
Policymakers in self-proclaimed market economies normally manage their policy objective through monetary and tax policies in accordance to macro-economic theories, but even then they do so with national objectives in mind. Such national objectives are known as national interests in policy nomenclature. For example, the Fed defers to the Treasury on determination of the proper exchange rate for the dollar. When market forces move against the Treasury's view, moving the dollar either too high or too low in relation to other currencies, the Fed supports the Treasury as a matter of national security in its effort to intervene in the market to bring the dollar back in line, or at least moderate the volatility. All nations employ industrial policy when it comes to defense and defense-related sectors. And as military/civilian dual-use definition expands, more and more of research and development, high-tech production, heavy manufacturing and strategic materials are removed from free trade to rely on government subsidies and procurement contracts. Dual-use restriction is one of the major factors contributing to trade imbalances between the US and China. Beyond dual-use technology, the US has very little to sell. Free trade in the US perspective is not remotely the same as freedom to trade.
# posted by MobyGrape : 6:52 PM
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