Posts tagged with: market economy

Zhao Xiao, a government economist in China, on the differences between market economies with Churches (like the U.S.) and market economies without churches (like China):

Is it not integrity that you are pursuing? Then you ought to know: places with faith have more integrity. For China’s crawling economic reforms, this ought to be an important inspiration. Market economies with churches are different in another respect from those without: in the former, it is much easier to establish a commonly respected system. The reason is simple: a people that share a faith, compared to people who only believe in themselves, find it easier to establish mutual trust, and through that to conclude agreements. However, where is the cornerstone for the American constitution? In fact, as early as the first group of English Puritans who came over to the New World on the Mayflower, there was the Mayflower Compact, which would become the foundation of autonomous government in the separate states in New England. Its contents comprised civic organizations as well as working out just laws, statutes, regulations, and ordinances, and the first line of the covenant was “In the name of God, Amen.” So shared faith is the foundation for shared law. Otherwise, a legal system, should it arise, will not be respected.

(Via: Economics for Everybody)

A practical man?

On the American Spectator, Acton Research Director Samuel Gregg examines the baleful influence exerted on economic thought and public policy for decades by John Maynard Keynes. Gregg observes that “despite his iconoclastic reputation, Keynes was a quintessentially establishment man.” This was in contrast to free-market critics of Keynes such as Friedrich Hayek and Wilhelm Röpke who generally speaking “exerted influence primarily from the ‘outside’: not least through their writings capturing the imagination of decidedly non-establishment politicians such as Britain’s Margaret Thatcher and West Germany’s Ludwig Erhard.” Perhaps not so surprisingly, many of Keynes’ most prominent devotees are also “insider” types:

The story of Keynes’s rise as the scholar shaping economic policy from “within” is more, however, than just the tale of one man’s meteoric career. It also heralded the surge of an army of activist-intellectuals into the ranks of governments before, during, and after World War II. The revolution in economics pioneered by Keynes effectively accompanied and rationalized an upheaval in the composition and activities of governments.

From this standpoint, it’s not hard to understand why New Dealers such as John Kenneth Galbraith were so giddy when they first read Keynes’s General Theory. Confident that Keynes and his followers had given them the conceptual tools to “run” the economy, scholars like Galbraith increasingly spent their careers shifting between tenured university posts, government advisory boards, international financial institutions, and political appointments — without, of course, spending any time whatsoever in the private sector.

In short, Keynes helped make possible the Jeffrey Sachs, Robert Reichs, Joseph Stiglitz’s, and Timothy Geithners of this world. Moreover, features of post-Keynesian economics — especially a penchant for econometrics and building abstract models that borders on physics-envy — fueled hopes that an expert-guided state could direct economic life without necessarily embracing socialism. A type of nexus consequently developed between postwar economists seeking influence (and jobs), and governments wanting studies that conferred scientific authority upon interventionist policies.

Read Samuel Gregg’s “The Madness of Lord Keynes” on the American Spectator.

Blog author: jcouretas
Wednesday, November 16, 2011

Picking up the comment thread from this post.

pauldanon says: “Because distributism is people-centred, things like medicine would be a priority. There’d need to be infrastructure for that, but nothing like the grotesque infrastructure we presently have for shipping frivolous imported goods around the country.”

I know it’s futile to point out obvious things to a distributist. The fixed, false beliefs undergirding distributism are impervious to reason and experience. But let me try one more time, perhaps for the benefit of those new to this nonsense.

Wishing a “people-centred” economy into existence is integral to the distributist fantasy. But how does its magical, humane “infrastructure” come into being? Would you have the steelworker who loads the arc furnace at the mill that supplies the metal for the dentist’s drill become more “people-centred”? How? Maybe he is ordered to pause every 30 minutes to read Wendell Berry poems to his co-workers as the furnace melts its batch of scrap? Or perhaps the fellow on the diesel engine line gets a union-mandated break to strum folk music on his banjo? Or maybe the jumbo jet assembly plant can set aside plots of land for organic gardening?

These examples are as absurd as distributism. Which is more of an aesthetic, a sensibility, a nostalgia for a bygone era that conveniently ignores pervasive wretchedness, than an economic possibility. And at the heart of distributism is the hidden coercive impulse that would prohibit ordinary folk from behaving and consuming, as pauldanon says, in “frivolous” ways.

That’s the key isn’t it? In a distributist economy, we’ll need a Czar of Aesthetic Consumption to decree what is “frivolous” and what is not. That’s how you order “priorities.” Perhaps the Czar would publish a regular Compendium of Consumer Errors, updated to thwart any new and distasteful consumer demand. But pauldanon’s frivolity and mine won’t always line up. Imagine all the frivolous things and past times that actually make life tolerable for masses of people who care nothing about the distributist program. Would the Czar of Aesthetic Consumption allow a person to walk into Walmart and buy a box set of some really bad TV show for viewing on a monstrously large flat panel HD screen? Horrors! How about a weekend bus trip to Branson to take in the latest Elvis tribute? Are you kidding? Playing golf on a summer afternoon? The Czar would not be amused.

But oh wait — there’s Mondragon, a “cooperative.”

pauldanon says, “Mondragon looks a bit industrial and kibbutz-like. Don’t they make machines and run supermarkets? That’s somewhat removed from three acres and a cow.”

But Mondragon sells its capital goods, appliances, industrial components and whatnot into the vastly larger market economy – according to the market economy’s competitive demands – and without which Mondragon would cease to exist.

Here’s the latest news about Mondragon’s global expansion in the auto industry. Doesn’t sound much like the guild system to me. Btw, “polymer” is a euphemism for plastic, the raw materials for which are made in petrochemical refineries. These refineries can cost billions of dollars to build, and millions of dollars annually to maintain. The engineers who construct these plants don’t follow a “small is beautiful” ethic. And where does Mondragon get the computer-controlled machine tools necessary for molding the auto parts? Does it ring up the Ancient Order of Molding Machine Craftsmen?

Mondragon auto parts coop moves into India

This joint venture is a part of the globalization process which the cooperative is undergoing in order to meet the requirements of the key players in automotive manufacturing, who aim to set up a panel of suppliers able to offer global development and production. The new India plant will be the second Cikautxo facility in Asia, as this year production was commenced in China, in the plant located in the industrial park which MONDRAGON has in Kunshan, an area close to Shanghai. Cikautxo, apart from its plants in the Basque Country and Aragón, also has production plants in Brazil, the Czech Republic, Slovakia, China and now India.

The Cikautxo Group, which develops and manufactures parts and groups in polymer materials for different applications, forecasts consolidated sales this year of 220 million euros, of which 85% will be from the Automotive market.

A funny thing happens when you give people the freedom to make their own economic choices. They do quirky and “frivolous” things. But that freedom is indispensable to the sort of life we actually live today in this country. Most don’t want to join the distributist hobbits in their workshops hand tooling leather sandals and fitting barrel staves together. Short of a distributist takeover of America (which could only happen in a bad TV show), millions of souls who daily and freely make untold numbers of economic choices that affect their own well being will merrily go on doing their own thing. They may choose to work and shop in co-ops, or not. Whatever they choose to do, one thing is certain. The distributists will carry on with their fixed, false beliefs.

In a report on the Republican roundtable debate at Dartmouth College in New Hampshire, National Review Online’s Kathryn Lopez writes about the ongoing breakdown of the family and its role in economic life. She talks to Acton’s Samuel Gregg about the clashing views that often exist in the conservative world on economic questions.

“There are obvious tensions between those free marketers who have problems with objective morality and those social conservatives who have a bad habit of blaming the market economy for many of society’s problems,” says Samuel Gregg, research director at the Acton Institute. “But it seems to me that free societies characterized by a robust market economy, strong civil associations, and a limited state need (a) market institutions underpinned by a commitment to liberty and property rights and (b) social institutions that are characterized by unapologetically nonliberal conceptions of family and associational life. . . . Large, expansionist states tend to undermine not just the market but also civil society and strong families.”

Read “Love on the Campaign Trail” on National Review Online.

Blog author: kspence
Wednesday, October 12, 2011

Acton director of research Samuel Gregg offers his thoughts on last night’s GOP Roundtable in this NRO Symposium. Gregg thinks the debate offered an important alternative to the government-driven economy talk that fills the news every other night of the week.

In a week in which two American economists from the non-Keynesian side of the ledger received the Nobel Prize for Economics, last night’s GOP debate gave us some insight into the depth and character of the various candidates’ free-market commitments and the different policy priorities which flow from the various forms of those commitments.

But if the ideas were strong, they were a reminder of separation between our free market ideals and our considerably less free economy:

For the most part, the candidates focused upon the institutional background that either impedes or facilitates economic growth: the regulatory environment, tax levels, trade policy, monetary policy, etc. Listening to the responses was a salutary reminder of the gap betweenAmerica’s free-market aspirations and rhetoric, and the rather different Eurosclerotic economic reality that has slowly envelopedAmerica– and not just over the past three years, but over several decades.

The only way we’re really going to get our economy going, is by addressing entitlements.

The surprising omission was substantial discussion of the issue of welfare reform and the related question of America’s public debt. While Obamacare was continually criticized because of its costs, that’s only part of the picture. Substantive entitlement reform is indispensable if we want to significantly reduce the spending and deficits that threaten to suck the life out of America’s economy. Addressing this subject is of course very politically risky because far too many Americans are more attached to the welfare state than they care to admit. But if fiscal conservatives aren’t willing to tackle this issue, then who will?

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AEI President Arthur Brooks answers the question from MSNBC’s Matt Miller, “What do we do when huge forces beyond our control shape our destiny?”

Blog author: jcouretas
Tuesday, June 21, 2011

On RealClearMarkets, Mark Hunter dismantles “The End of Capitalism and the Wellsprings of Radical Hope,” by Eugene McCarraher in the Nation magazine. McCarraher’s article appears to be destined for the ash heap of Marxist utopian literature. But Hunter’s critique is valuable for his reminder that capitalism, free enterprise, the market economy — all the systems of mutually beneficial free exchange by whatever name — have actually been ingrained in human culture as far back as the ancient spice trade and probably earlier.

McCarraher’s denunciation of capitalism is in fact an attack on human nature disguised as political discourse. The “pernicious” traits he attributes to capitalism are, in fact, traits globally present in every political/social order — in many cases far worse in non-capitalistic societies — because they are traits of humanity itself.

His entire argument against capitalism consists of nothing more than an elaborate correlation-proves-causation fallacy (cum hoc ergo propter hoc – “with this, therefore because of this”). He wants us to believe that since capitalism contains greed it causes greed. Furthermore, McCarraher seems content to overlook the fact that capitalism is an organic economic system not created as much as evolving naturally as a consequence of free individuals interacting with other free individuals. Private property and the production of goods may be a part of capitalism, but its most essential virtue is as a guardian of man’s freedom.

Criticizing capitalism for its avarice is not unlike condemning representative democracy for its failure to elect the wisest of men — each may occur, but it is not relevant to their fundamental purpose. Both capitalism and representative democracy maximize freedom by diffusing power and responsibility across the broadest spectrum of society. Rigid control is antithetical to freedom and it is this that most vexes the liberal intellectual.

Hunter, a professor of humanities at St. Petersburg College in St. Petersburg, Fla., exposes the empty spiritual promise of collectivist schemes. McCarraher’s “radical hope” is:

… in the end enslavement. The only way to deliver mankind from the demon Mammon will be by removing the greatest gift of the gods – freedom. In this Faustian exchange we are guaranteed the Marxist security of bread, authoritarian certainty of order and utopian unity of world government.

It’s not clear if Hunter’s definition of freedom as the “gift of the gods” is meant literally, in a pantheistic sense, or is merely employed as a rhetorical flourish. But he doesn’t make McCarraher’s mistake and propose capitalism as a path to salvation (For a deep going exposition of Christian anthropology, see Metropolitan Jonah’s AU talk we posted on the PowerBlog yesterday).

Hunter defines capitalism as “an organic economic system not created as much as evolving naturally as a consequence of free individuals interacting with other free individuals. Private property and the production of goods may be a part of capitalism, but its most essential virtue is as a guardian of man’s freedom.”

Read “To Attack Capitalism Is To Attack Human Nature” on RealClearMarkets.