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Making a case for classical liberalism and the shrinking of the state
Email Article. Not Member. Thank you for your RSVP. More detailed message would go here to provide context for the user and how to proceed. Furthermore, he demonstrates that the greatest threat to world economic progress and stability comes not from old-fashioned socialism, but from the recent, fashionable modifications of the classical liberal model. It is remarkable that a technical economist should display such competence and originality in areas seemingly far removed from the diagrams and equations of orthodoxy.
And his style is rigorous, well-paced, and just a little cheeky. Deepak Lal. Illus: 14 line illus. Overview Author s Reviews 3. Deepak Lal is James S. He has advised many governments and international agencies and is the author of numerous books on economic development and public policy, including In Praise of Empires Palgrave Macmillan , The Poverty of Development Economics , and Unintended Consequences.
Sankar, The Hindu "An erudite and spirited defense of the only approach to public policy that has brought mankind sustained economic growth, widespread alleviation of poverty, and embedded respect for the worth and dignity of the individual. Findlay, Columbia University "This splendidly and subtly argued defense of the classical liberal position makes a highly valuable contribution to the globalization debate.
Skepticism and Freedom: A Modern Case for Classical Liberalism | Manhattan Institute
However, as Lal points out, the greatest capitalist nation on earth was historically protectionist and hamstrung by its own version of dirigisme embedded liberalism and by the congressional grip on trade policy. The congressional grip was loosened in by the Reciprocal Trade Agreements Act, which gave the president power to conclude foreign-trade agreements, by-passing the need for Senate ratification.
Even so, major threats to free trade and laissez-faire still persist. Explaining these threats and their causes occupies Lal in the most important and compelling parts of the book. The greatest threat remains dirigiste dogma. Lal detects in popular thinking the recurrence of J. The trouble is that every time the government regulates distribution, it distorts the price signals that determine what is produced, when, where, how, and in what measure.
Even redistribution through tax-subsidy schemes changes property rights and transaction costs. The quest for the optimal trade-off between equity and efficiency, as Lal observes, is doomed from the start because it assumes that governments are capable of acting as Platonic Guardians. Once the government starts to subsidize local producers, however, a new game begins. The notion of domestic distortion is debatable, highly political, and impossible to verify. Producers use the political process to garner rents, and the public bears the social cost of this unproductive activity and the actual cost of the subsidy.
These bribes enrich governments and their clients and take jobs away from the poor. They also penalize Americans twice, first by taxation and then through consumer price increases.
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Dumping occurs when a country discounts its product in the short term to drive others out of the world market. It is a rare occurrence. Measures to stamp out dumping hurt the poorest in the world, penalize consumers, and distort markets. It protects not only inventions, but also pure research, books, music, and films.
As a free-market economist, Lal favors minimal use of patent protection. Lal reserves some of his strongest volleys for these new dirigiste measures. They benefit organized labor at the expense of consumers and of the poorest workers in producing countries.
The Case for Classical Liberalism
Lal observes the elements of the emerging backlash against globalization. There are fears in the East of the cultural fallout from Western individualism and license. In the West, moral crusaders, environmentalists, remnant Marxist radicals, and organized labor coalesce to oppose free trade. Adding to the discontent is the wage depression of low-skilled workers in the West.
On Eastern fears, Lal points to the example of Japan, which has embraced capitalism while preserving its valued cultural heritage and indeed its cosmological beliefs. We might also identify other dynamic Asian economies, such as Korea, Taiwan, Singapore, Hong Kong, and Malaysia, and more recently China and India, as following this path. Since the demise of overt socialism in all but a handful of countries, threats to capitalism have taken different covert forms that classical liberals have found difficult to combat.