Can trade be something else than free? Can trade still be possible in the absence of competition? We all understand the idea of perfect competition which presupposes among other things trade in homogeneous products. In an economy dominated by services and complex products (that can never be homogeneous) comparison between products is not possible on objective bases. We do not buy products, but images that appeal to us and fit to our self image. Would you consider that the notion of trade and competition should be revisited and maybe redefined?
Dear Emanuela
As you well know this is not my field, but if you don't mind I would like to 'break the ice' and contribute my 2 cents' worth.
Free trade is a system in which goods, capital, and labor flow freely between nations, without barriers which could hinder the trade process. This is why nations have trade agreements to promote free trade between them.
So things like taxes, tariffs, import quotas and restrictions on the flow of currency are all eliminated, as are subsidies, tax breaks and other forms of support to domestic producers. This is all done so that foreign companies can trade just as efficiently, easily, and effectively as domestic companies.
The idea of free trade is that by promoting competition you lower prices of goods and services. Domestic producers can no longer rely on government subsidies and assistance. But that is not the only advantage of free trade, free trade also encourage innovation, since competition between companies pushes companies to come up with innovative methods to reduce costs and innovative products and solutions to capture market share.
In conclusion, trade in the absence of competition is not a free trade.
Thank you for your contribution dear Issam! I will just add a bit more information in order to understand why a lawyer and an economist will never have exactly the same approach. Ideally, a market where the competition works well (close to the perfect competition definition) should be free of regulatory interventions interfering with price setting. However we live in a world where regulation is embedded in 'every breath you take, every step you make'. Therefore I must include regulation as a component of the market.
Pre-existent unbalance is also a component of the market. Many of the 'benign' forms of subsidies are meant in fact to compensate the social injustice embedded in the system. From a philosophical point of view all these ideas (competition, trade, free markets) are ingrained in liberalism and oriented towards the same ideal: freedom.
Of course, I am biased but I believe that the juridical view is a bit more realistic; freedoms (such as freedom to contract, to enjoy property, to trade etc) are fundamental, but not absolute (derogations being allowed under specific circumstances)
I am interested in new forms of balance assessment between conflicting interests that must be exercised by disclosing the presence of the pre-existing injustices and do not allow a blunt allocation of priorities, but an intelligent confrontation of divergent stand points, a dialectical form of confrontation.
I disagree with views that propose freedom as an end or even worse as a present reality. Freedom is in the means, in the actual possibility to change the course of events. In the meanwhile in many treaties free trade and competition may appear as a goal thus some people can understand them in this way. Even if it would be something like a target, it is a moving target, that can never be reached but only approached.
In my profession it is not sufficient with the only "free trade". For example, the illness of less prevalence or incidence would go undone. (Not invest in rare diseases... but sometimes these investigations solved a new or more prevalent illness).
Pharmacy.
I am not sure that we mean the same thing, Ana Maria therefore I will specify that free trade and competition mainly refer to big businesses and states, while consumer protection and unfair competition rules protect the weak parties (consumer and smaller competitors). Public procurement is meant to deal with buyer power in the hands of state and municipalities. All of them are important of course, but I am talking just about the first type, big business and states since the story starts there.
The other rules are meant to correct and complete, but the core remains related to the behaviour of states and big businesses. Attention I am not trying to give solutions or recommendations of the kind: cooperatives are better than the corporations a s o. Confronting does not mean picking alternative solutions or showing the way. My pursuit with that question is only to encourage a discussion on the meaning of the named terms (the general meaning)
Some sectors have special rules among others health sector. My intention was not to be very specific, but just the opposite to redefine the large scale picture. (A satellite type of picture, not a microscopic one :)-
This discussion puts another question, for a completely free trade, ruled only by lex mercatoria, cannot be possible, for there must be a definition, into the countries, of the regimen of contracts (what kind of contracts may be able to exchange goods?), property (which goods can and which cannot be owned by a single person?), and there must be a force organized to protect both (e. g., Courts, police etc.).
Pharmaceutical Laboratories are big businesses. We have had to make laws for a small constant percentage in Labs dedicated to unprofitable diseases.
I think that free trade and competition are very good, (but I think all need limits).
I didn't know what you were after Ana Maria. I am currently working with an article with starting point in Astra Zeneca case. I believe that you are going to find some interesting ideas there on antitrust, innovation, abuse of rights, IPR competition on merits as indicator of consumer welfare etc....
I agree Ricardo. The term unregulated market, which means free to some people, depending on their school is a contradiction in terms. Trade per definition implies rules, written and unwritten. But I still claim that free is an important epithet, if used in a different manner.
This is a Capitalist creed. Yes trade be non-competitive and non-free. This is the case when only a one or a few have the privilege of trade in certain goods. These could be private company monopolists but also state enterprises. I think one should restrict the free trade and capitalism. Monopoly is the the worst but even the so-called competitive free trade is bad for consumers as the companies can conspire to lift up the prices, collectively. Moreover, unlike the political system, companies are not subject to the democratic popular supervision.
One of the possible future scenarios is moving from global capitalism towards a form of global communism and replacing the corporations with cooperatives (one person one vote). I am interested to find out more on this line of argumentation Babak, if this is the direction towards your criticism is oriented (lack of democratic governance and abuse of market power). The communism failed for its lack of efficiency in regard of resource allocation and funny enough, in all the communist countries the abuse of power and corruption escalated as well. Something went terribly wrong, but no one has made a real intelligent analysis of the actual causes of this total failure. Many try to argue that China is an example of successful communism, but China is in many ways a more cruel capitalist exploiter than any of the actual (declared) capitalist countries.
Emanuela, you cannot regard the failure of former communist countries as the truth in capitalism. Those countries were not the most developed countries in the world. Mostly rural countries, which were trying hard to industrialize. They had build few checks and balances and above all the Capitalist block had put boycott on them. At the end the USSR was brought into its knees due to the high cost of the Star Wars program, while the USA could finance itself as its currency was the standard "global" currency. It could coin as much as it wanted and due and USA itself wouldn't get hurt by inflation (due to dollar's vast circulation and desire to have it, worldwide). It is important to fight asocial policy of the government in Europe. Scandinavian countries (except Denmark) have still well-developed social laws. But the right-wing parties have destroyed all social legislation and well-fare measures in the rest of Europe. And as you are a lawyer: these asocial policy-makers (or better said breakers) should be trialed and jailed, for their misdeeds against the citizens).
"Free trade" helps to promote goods made by strong economies towrds developing markets. It suffocates diversity and competition on global scale, so what we name "Free trade" is , in fact, way to stop freedom of production and trade in favour of existing TNC.
I want to remind that the perspective here is mainly legal. From this position the fact that free trade and competition must be recognised as principles, legitimate objectives and fundamental values implies a duty to respect them. This is the axiom. The lawyer can not change the law, but can only interpret it in different more or less inspired manners. Is 'free trade and competition' a tautology or an oxymoron? Do they mean the same thing or do they oppose each other? Can we imagine free trade without competition? Is competition imaginable without free trade? What is the role of law in this context? Law implies a diminishing of the scope of freedom per definition, since law defines which market behaviour is licit and which is prohibited. Of course that in the context of IR the term is used in different manners and on sometimes illegitimate purposes, but I don't have any competence to change that. The only thing I can do is to improve the level of knowledge on this issue. I have experienced that the expression 'trade and competition' is often repeated as a mantra without meaning to transmit any relevant information. Therefore I am asking this question about the deeper meaning of these terms. Of course that they express a capitalist mind frame, no doubt about it, but there are many other subtle aspects to discover, I think.
Free trade, although it is based on ocmpetition, tends to merger, for all competitors want to win, and winning means to put an end to competition. In 19th century Germany, the rule was not competition, but merger: Kartellvertrag was one of the typical contracts (see Conrad Kosak's Handelsrecht, 1898) and there was not cogitation of controlling merger, there, until 1923, when the Kartellengericht (Court of Cartels) was created. During National-Socialism, the court has not worked.
I must specify that competition law includes the following legal areas:
1. Antitrust laws (prohibitions on cartel and abuse of dominance)
2. State aid control (prohibition on unjustified interventions of the state)
3. Merger control (prohibition of any harmful concentration of market power)
4. Public procurement rules (the control of the public acquisitions)
Al these rules exist in a form or another in all capitalist legal systems at the level of state or supranational entities (EU) or trade organisations (incl WTO, OECD). It has been recognised that if we just prohibit cartels while allowing other forms of cooperation, coordination, concentrations, interventions, the competition will be distorted anyway. This very developed apparatus of legal protection brings evidence of the importance attached to it by the politicians. It's also true that these laws concern foremost the big companies (they are the usual suspects and in some cases the only suspects) and therefore these laws are not very well known by the common citizen. However as I've told in the beginning they are inspired by a contemporary mind set that competition and trade are important values and the welfare of the consumer depends on them. It is true that the German philosophy (ordoliberalism) is important since it is primordial for the development of the EU competition doctrines.
Dear emanuela, you know better than anyone else that these "laws" are only paperworks; the reality is different.
Today the European Commission has imposed a fine of € 561 million on Microsoft for a breach of its antitrust commitments. (see article 9 of Regulation no 1/2003) Law is written (or not) on paper but the reality of law is everywhere. We all act in known of the law, therefore most people act differently in public than in intimacy or private space. For animals there is no such separation (for this reason it is so relaxing to have a pet and watch its 100% natural way of being) Law is an integral part of human life, at least in my view (our fears and needs & interests constitute a permanent generator of new laws). There are many philosophical aspects into this inquiry, but I will stop here. Of course that I defend my subject, law is not so prosaic as it seems at first glance.
Dear Emanuela, I think you are very much influenced by the reality in Sweden. Not everywhere is Sweden. European Commission and any other responsible institution apply the rules only selectively. To know the reality elsewhere: There is an expression in Dutch "Regels zijn, om ze te breken" in good Dutch "Regels dienen gebroken te worden", which means the rules are there to break them!
I know what you mean, Babak, the best EU tax lawyers are Dutch (no doubt about it). However they do not advice the client to break the law, but to use it their favour, find the most financially rewarding manner to tax plan the incomes report a s o. It's fine with me, I am not a moralist. I also know that laws are applied by people not by Gods, no doubt about it. But in between the dictatum 'Break the law' and the ultra-orthodox view of 'Obey the law no matter what', there are many nuances. My 'job' so to speak is to discover this range of nuances.
those tax lawyers are in fact clients of criminals. These financial criminals have the means of paying for these "creative" creatures called tax lawyers. n the other hand working people have to give almost the half of their salary as taxes and they get fired when they are not "profitable" anymore. Holland has been once one of the most socially advanced countries in the world, but it is now destroyed by these parasites and right wing political parties such as VVD and CDA.
Dear Babak, I can perceive that anger is one of your main engines and anger helps sometimes, but anger is not a feeling to live with every day. I also feel at times like helpless, realize that some things are pre-determined I can't do much to bring things in their 'normal' course. In the next step, I reject the helplessness and try to think NOW, what can I do now to break the trend, to correct the course even with just a little bit. I love Europe and I know that Holland is one of the most open and tolerant countries and I can believe that people have completely lost their way due to the last decade of confusion. In fact confusion is necessary because it leads to acceptance in the end. The acceptance of the new status quo. Changes are always scary before they settle and we get used to them.
Of course that tax planning is only for the rich. Living from a salary is not much to tax plan so to speak. It's also funny that there is a say: 'Nothing is certain except death and taxes' followed by Will Rogers: 'The difference between death and taxes is death doesn't get worse every time Congress meets.' It's a very bad comparison between death and taxes in my view. First the taxes must be certain (the principle of legitimate expectations and legal certainty require it). If death had been certain in the same way (to know when and how) then things would have been different than they are in the life. 'Certain' is not always good. Secondly my death does not interest me so much (I will not be able to experience it, but my death will be an experience of the people around me) while taxes that I have to pay are my business and nobody's else .... Uncertainly is good since as long as things are not certain they can be changed and moved in the right direction. I hope that I've brought a smile on your face today. Have a nice Friday!
Even taxes are not so inexorable as death, for there are hypothesis of exemption or immunities. And Emmanuela & Babak, there is a dutch thinker I do like very much, whose approach has been followed by Max Weber: "not to cry, not to rejoice, but understanding" - Baruch Spinoza.
Emanuela, It is not anger, it is desire to change. I definitely do not love EU and I see EU as an agent of Capitalism, which has destroyed Holland. Holland has never been tolerant. It has always been a racist country. Wilders/Fortuyn/Verdonk are nothing new. the Dutch have invented Apartheid, were slave traders and general Koster who killed native Americans were Dutch. Catholics and protestants lived in segregation in Holland until 45 years ago. Holland was never tolerant but it had become of the most developed social democratic countries, but thanks to Europe it is totally destroyed.
Europe as continent is just meaningless to me. Its borders are arbitrary. I do not hate it. It is just a piece of land. It has beautiful places but is not the most beautiful place on the world. The Balkan countries are in Europe because Europe's borders are arbitrary. Balkans is not located in Europe in the mental maps of West Europeans. It has been researched many times. In popular belief Europe means the center of democracy, welfare and humanism. And these are certainly not the values associated with Balkans. Even Hungary does not "score" very highly on the European scale. And I know that you and the other Romanian guy didn't like it but I see no reason why people in the West have to pay for the Europeans enlargement. (similarly I do not see any reason why the Western countries should absorb so many immigrants other than political refugees). Western Europe is bankrupted. It is not the land of dreams. These African migrants/East Europeans should better go to the USA or Australia instead. If EU-dictators were democratic they would have allowed referenda. I bet 80% of the Dutch, German etc. would opt to leave EU and whatever it is.
Ricardo, people like Spinoza are exceptions. Most Dutch do not know his ideas. I bet even 70% of high-school students may not even have heard his name!
Dear Babak, democracy is central for any modern society, however the definitions employed to define democracy are very different. To tell you clear and honest for me there is only one democracy in Europe and this is Switzerland. Only the others are imperfect to such an extent that can be called partial democracies. Why do we accept partial democracy today? Well for pragmatic reasons, foremost. It takes longer time to take decisions in a direct democracy than in an indirect democracy. More often a country uses referenda, stronger is its character of direct democracy. Look at the landscape and you will see that direct democracy exercise is the exception, not the rule.
Another concept of importance is relative justice. Asking for justice, one must ask also justice for whom and why and how we ensure it. The 'whom' is not static, it's historically determined (here finally we have something in common, we two, I am also a dialectical w/o becoming a Marxist, but recognising the great ideas in both Hegel, Marx and recently Zizek). After the war we were poor in Europe (the best situation was in Sweden in fact because it had not participated in the war and it had not been affected by war too much). We had to rebuilt the industry. In this context two big events happened: the split of Europe in West and East and the Marshall plan. These two events in their turn lead to the birth of the EU. Reconstruction is the main slogan and in this conjuncture people WHO were capable to do that, great business families of the continental Europe have been granted a central role. Collusion is enshrined in our DNA, here is the start of it in the economic, big business department with a plan to recover the position on the economic map of the world. Therefore we have now in the EU the most advanced economic interpenetration (goods, services, capital circulate freely). But this closeness has opened the gate that it was not supposed to be opened in the beginning: the social dumping. For a non-Marxist dialectical as I am this is not necessarily a bad thing. The economic big business recovery is the thesis, the social dumping is the antithesis (the dark face of the economic boost) and now we have to complete the synthesis, to bring every aspect together in a clever manner. There is never just one way to do that. I don't give solutions, I just underline that the return to the point zero before the accession to the EU is not possible (for none of the countries). Second despite the difficulties brought by the 'antithesis' in a global frame, EU is still the best solution.
Now of course it's not possible to test hypotheses, but I will make some suppositions and we will see what happens. The most probable quitter is not Netherlands, but UK and my opinion is that these guys are too smart to leave. They play their cards right and I appreciate this quality, but I do not believe that they will leave. Neither does the big brother, U.S. The games are not transparent, as one could may...
I do not consider the Baltics or Poland as my enemies. But I do consider the inclusion of the Baltic countries in the EU as a very unwise decision. Because these are nationalist countries and do not share the same political culture as ours and 2- EU infringes in the Russian sphere of influence and EU does not need enemies such as Russia. Moreover these East European countries were ruled by corrupt cliques who were too pro-American and they functioned as a Trojan horse in order to paralyze Europe from within. I was pro-Europe first but not any more.EU was hijacked by a bunch of corrupt politicians connected to big companies. They are financing an agent of global capitalism at the cost of poor working people. Moreover they are destroying all the achievements of social democracy in Europe. This latter has an ideological basis.
I agree with you about the achievements of social democracy in Europe and I also agree that these achievements are endangered if we are not vigilant enough. We do not agree on the reasons of endangerment. This is all our disagreement. There are chances and forces involved in this lowering of the rights already achieved by the workers that are completely on a different level than one usually imagines. In clear words I can also agree that for some countries has been too early to join, but once they have been accepted we must deal with this status quo. It's is still Europe that we have, not the Europe that we should have had that I am concerned about. It is clear to me that even in a Europe of 15, the workers rights would have been still endangered. It's the globalisation and the new global structure of power and the end of the industrialisation that have brought this about.
The fact that workers have rights today is only contingent to the development of industrialisation in Europe after the World War II. The post-industrialisation has come with ideas like flexibility and with the corrosion of the character (see the discussion on Richard Sennett) with an arsenal of techniques of survival, of increasing the efficiency for the undertakings, but with NO VALID politics on the matter of depreciation of the welfare of the worker of the pensioner of the young graduate etc you can only add more to it. My claim here is that an actual democratic government would have cared about all these categories representing a majority of citizens. They have never done it not before the enlargement in 2004 and not afterwards either... other forces have led to the increasing of work protection and later (beginning with the 70-80ties) to its perpetual depreciation.
In Sweden the law allowing Bemanning (Staff manning) is the start of a regressive development, not the enlargement of the EU. Despite the fact that Sweden is open to workers from all the other 26, this openness has not been abused by anyone. Workers from the Eastern Europe are mostly temporary workers, such as forest workers, they often do jobs that no one else wants. In the meanwhile in Norway, Swedish youngsters are employed in activities (more or less temporary) that no Norwegian person wants to be bothered with. This is how it actually happens (with visas or w/o visas the result is similar, the jobs are moved around in order to lower the salaries). In the face of this strategy, the workers must understand the actual causes instead of 'unfriending' each other across the borders. I am not for revolutions, I am for understanding, for speaking less and thinking more. The situation is a clear result of the fact that a majority of people has been deceived by 'individualism', they actually do not care about each other in a genuine manner and therefore can be used as puppets. There is a contradiction between individualism and democracy, that has made exploitation possible again. The cohesion of the social life of the family and society has been lost on the way to the bank for the next credit or mortgage. We don't need each other ...we have institutions as surrogates of the previously engaged social relations between individuals.
The nineties is marking the gap in clear voice, where the first serious crisis incurs after the success of the Marshall plan and the recovery of Europe. The crisis has been concealed, it has been enveloped in financial measures (cheap credit a s o) until the end of 2000 (around 2007) when the concealment started to decay and the crisis face could be seen again in all its 'splendour'. Crises are to me moments of truth, I don't despair on the ongoing crisis, but on people who refuse to think clearly or maybe are afraid to think not to discover the reality. Since I have a broad experience of actually living in Europe in different conditions, I can tell with no hesitation that the common European denominator of the usual person, Otto Normalverbraucher (as Germans say), is a life under a kind of hypnosis (not wanting to leave the trance, choosing constantly the blue pill, choosing to remain captive in an illusion). I don't blame them as long as they do not blame the people who are on 'red pills' so to speak, because they also have the right to choose.
http://www.youtube.com/watch?v=A9vGMMPM5Lg
Well, as I am not a revolutionary but a thinker from my perspective I see that we need new theories (some of them have been already created, but we still have big gaps) and intelligent ways to apply them. Economical theories do not have general validity, they are actually frames of timely limited use. I am very disappointed also with the schooling (I am myself a MBA, so I speak again from my own experiences). People who actually have worked in the financial economy and return to school just to get a degree that they need for a new job, (as I did) can see the disconnection between reality and theory in a more flagrant manner. Despite the fact that people today can learn after their 30 years anniversary, the school has still an attitude of baby-sitting (selling blue pills to young people). Consecutively with getting seriously engaged in a theoretical reformation, we must reform some institutions i a the schools. For the workers, it's necessary to be organized cross-borders, but not only symbolically but in reality, pragmatically. The democratic instruments that we have as citizens must be used more cleverly. I am very disappointed in the actual representation by Trade Unions today (a complete sham).
Emanuela,
A neolithic tribe is intrinsicly democratic. The bigger is the society and the more difficult it is for the society to remain truly democratic. One of the argument for the creation of Europe was that small states have no voice on the international stage where more and more decisions are taken. As a result of being in Europe, the whole Greek people are rendered powerless. What political decision is left to them? A lot of economists are saying that if they had their own money, they could lower its value and get out of this situation much faster.
Dear Louis, I do not agree with the economists preaching to the choir. I understand exactly how the mechanism of trade and financing of trade function and I am not a naive academician when it comes to these questions. The only thing that I am still naive about is the naivety of people in general. Crisis is the constant in economy, not the exception. Any new transaction moves the point of equilibrium. Any new piece of information destroys the old equilibrium and redefines a new one. It's a form of financial acrobatics with no landing mat that one can actually rely on. The risks are also objects of trade. We have created this complex creature, that we can neither tame or fully understand. It's a very interesting object of study, but this study must start from the foundations. My claim is that the foundation is not solid and continuing to built on it, only increases the risks. And guess what: Risks are good for some actors! High risks might give high return to some lucky smart skilful informed in time agents... but the same risks will bring a minus to everyone else... For me this is like A B C... it is not even worth to start engaging in a more complex analysis. The system is designed to collapse time to time. Do we want to continue to work with this system as it is or not? I am tired of not very convincing poker faces. (of economists or non-economists).
Dear Emanuela,
You are right to say that in very complex economic systems crisis is part of the game. I am not trying to make a case for or against the European union. After a few generation of any complex systems, the institutions and actors in these institutions (banks, stock exchange, large corporation administrator, etc etc) naturally get to know how to manipulate the system, like virus in the living world, and to use the system more than they serve it. The financial system with these stock exchange is like a pump to suck all the profits from the economy. I know this is a very simplistic and crude and naive idea. I do not think it is a well plan , organized conspiracy. I think it is a natural mathematical tendency of very complex systems to have very well placed powerfull actors which turn into cancerous cells/behavior, cell serving their own interests, free from common good. Societies have learned how to prevent unimportant actors to conform: you and me. We have nothing of the sort for the most important actors. More transparency at all levels would help. Everyone watching everyone everywhere in society would help against cancerous behavior.
Transparency is indeed important for both democracy and financial markets... a very important specification, thank you Louis!
Another thing I feel obliged to name is that of course the question is not about EU, yes or no, but about global trade and competition. EU is an answer for the problem of European integration including almost all domains and where trade and competition are central. However my question is general and I invite everyone to give an answer even making abstraction of the Union and the European internal affairs. My first thought was that in WTO-law trade and competition are more closely related than in the EU-law. This observation leads in its turn to many ideas, but I don't want to reduce the discussion to EU, I want to learn something new about other perspectives.
"Emanuela Matei · 11.32 · 0.82 · Lunds Universitet
Well, as I am not a revolutionary but a thinker from my perspective I see that we need new theories (some of them have been already created, but we still have big gaps) and intelligent ways to apply them."
Dear Emanuela, theories follow the empirical data, not other way around. But I also agree that the economistic theoreticians these days are not busy with good science but rather with ideological (neoliberal capitalist) indoctrination of masses and pressuring and blackmailing political systems.
A very important observation must be made about economics. The inductive method is not the only one employed and in general most studies employ a combination of inductive and deductive methodology. Exactly as you mentioned above if the doctrinaire perspective is liberal, neo-liberal or libertarian the interpretation of the empirical data will lead to a result that fits in that framework. My proposal above was to change the frames, to buy new, more modern glasses. The empirical data do not speak for themselves, the results of a research study are less determined by data and more dependent on the framework of axioms employed at the outset.
Any empirical study starts from a set of assumptions that can not be contested. Only in the case of a major contradiction the set of assumptions may be revised. The problem today is that despite the obvious contradictions we employ the same 'easy fix' type of solutions. Why? Because there is no political will to revise the named set of axioms and the citizens are still occupied with pointing fingers on each other instead of acting and drawing attention on their actual problems instead of talking again and again non-issues. For instance in the U.S. the discussion on the rights of the homosexuals is such a manipulative tactical distraction. People are sensitive to these issues and they forget what it's really bothering them and go out to protest for the sake of the genuine Christian traditions. Well, I don't say that culture and religion are irrelevant, but that citizens in general lack the sense of priority ...not all issues are equally important.
As I said there are new theories, one of them has recently been awarded with Nobel prize for economics for 2012. It's an amazing improvement brought by this theory on matching the offer and demand on the labour market. It's not completely desert in the field of new thinking, but we need more effort than it's actually done. The problem of who are the sponsors of the business schools is maybe part of this lack of effort and the endeavour to maintain the status-quo.
http://www.guardian.co.uk/business/2012/oct/15/nobel-prize-economics-alvin-roth-lloyd-shapley
In the social sciences, deductive method only is applicable in very basic and general things. Simply because we do not have such governing laws, as we do have in the natural sciences and mathematics.
My claim was that induction and deduction are complementary methods. The inductive method if successfully applied should lead to some form of theory and this one can be tested by deduction by applying it on a different set of empirical data. It's a form of validation. Let's imagine that we have a theory about creativity that relies on observations made in Hi-Tech work environment. You can test this theory by applying it to other creative professionals in other branches. The result will be useful anyway to improve your initial theory.
We need better understanding before we choose a course of action. Theory by itself does not guarantee the accuracy of our decisions, but it helps to understand what might be accurate.
we simply need better policy. We shouldn't repeat the mistakes. Neo-liberalism proves to be damaging for society and it increases poverty. Therefore we should restrict it and control it if not prohibit it all together. Keyensianism has proved to be working. Even USA, which is traditionally more capitalist than Europe applied and applies it. Nevertheless, it is frown upon now by the new generation of European business leaders= politicians = thieves.
I understand your stand point quite well, but policies are applied by politicians and their army of functionaries, of office workers...Once you don't trust the politicians then the possibility to envisage and implement better policies does not actually exist. In a sense the coalition between a bigger on-growing state and multi-corporations can be blamed for many of the disadvantages brought in the context of globalisation. There is only one commando here: a big state shall grow bigger, more taxes, more laws and more policies ... the multi-corporations have a say, because they have financial power and can perform a strong lobbying, the usual citizen has only a vote to give and a voice to raise. This sounds very discouraging, but the empowerment of the individual is a cause worth the effort despite the less good prospects of success. Democracy is not a fait accompli but a permanent and sometimes desperate struggle. Better policy implies better politicians. How do you think that we can actually invest our trust more wisely? Who can be these better politicians able to implement better policies?
I think the best policy would be the confiscation and nationalization of big companies' capital. But it should be done simultaneously at the world-wide level, otherwise they will flee to other countries. I know that it is Utopian but they should begin with a number of them accusing them of fraud etc...and I think it will deter the rest.
Well, my theory is that we always have the government that we deserve. Life is not a walk in a park, what I'd like is that the weak parties, consumer, worker, patient, insured person, simple tax payer etc to be more involved. It's very easy to let others represent you and pray to God that they do a good job. You know the theory on the night watchman state a libertarian theory. We maybe need a new one 'day watchman citizen'. I don't believe in extreme and violent changes, because sudden changes do not hold on long term. You wrote above that you don't trust the politicians, I can't say the same. Some of them are trustworthy people, but they most often lack a clear vision (idealists) and do not have enough knowledge of reality (living on the cloud no 9). Some of them are corrupt as well and in some countries it's more usual than in others. Another weak aspect of our times is the illusory freedom of media. There are lots of things to do and my idea is that an usual politician, one already settled in this branch can not make any difference. A permanent supervision must come from the level of the grass roots, just because media are not free in reality. In the end we have the same old Principal-Agent problem of representation.
I will not discuss the solutions proposed by you because I am not in favour of a bigger state in any sense.
first of all fighting the parasite forces does not mean enlarging the sate, necessarily
secondly, a bigger state is not a bad or a good thing. It depends on what it does
thirdly, you yourself are propagating a bigger state by imposing a supranational authority called EU on the existing states.
"Chaos often breeds life, when order breeds habit."
– Henry Adams
There is a very new line of research according to that the theory of deterministic chaos (mathematics) might apply to social systems. Reliance on the taxation and expropriation always increases the power of the state (leads to a bigger state). If EU were a state, it would be definitely a very weak form of state (a minimalistic). This is good from my perspective. I am against the concentration of power in few hands (no matter whose hands).
A recent debate on the matter of EU citizenship has brought together several great minds involved in the construction of EU law. It has been said that the frictions between market forces and other safeguards must be comprehended in depth in order to be able understand the objectives of Treaties and define the rights and freedoms in the light of these objectives.
The debate duration is two hours, but the first 10 minutes are used only for the presentation of the speakers.
http://media.wcl.american.edu/Mediasite/Play/c3a7cdb6aa844fe9a1d0ded99648fb241d
EU a weak State? You may say it is not well-equipped but it is strong. It is like a virus. It remains invisible but it kills you.
In 2010 at UvA a discussion ‘Government and market: night watchman or animal tamer’ has been held. This balance between two types of failure, government and market failure determines how strong a state is. EU is not a state obviously, but if it were it would be one placing trade and free market at its core. This suggests that government actions should be less involved in 'animal taming'.
http://arils.uva.nl/research/research-platforms/content/research-group-market-regulation/news-events/archive/government.html
Emanuela, you are referring to faculty of law at my University? No wonder that institute belongs to the rich-guys' children. Moreover legal studies are not a real Academic discipline. They cannot do profound research and make and interpret theories. They, however, are very selfish and think highly of themselves. The same is true about Amsterdam business school who receive money from companies. They do want to tame animals, because they feed themselves from them!
I didn't say that I agree with everything told on that platform, but just the fact that I've used the term 'small' state in that sense (less governmental interventions in the economy), in contrast to big state (where the market is permanently corrected by state intervention). One intervention leads to the necessity to intervene more and the problem is never solved and the state is growing bigger with every new intervention.
big state is not necessarily meant more intervention in economy. But that is a good thing if the government is a responsible one.
I agree with you about responsibility supported by accountability, transparency and professional competence. I also understand that responsibility can not be taken for granted, more concentration of power at one level, bigger is the temptation to abuse it. The statistics also show that bigger state means larger taxes and of course that the usual family is mostly affected by this burden, not the corporations. In a normal average family (two adults and two children) budget taxes are an inflexible cost. Taxes make poor people poorer, it's a fact of life confirmed by statistical studies and guess what taxes do not help people on the verge of homelessness to recover or find their way back to normal life. It's a myth that not even in Sweden is true, unfortunately. It's the Church and the NGOs helping people who can no longer maintain a normal life standard and do not fit in any predetermined form. Therefore the change we need must be one of substance, not of form.
But now, we are departing very much from the question concerning trade & competition. Let's try to come back to that. I will make appeal to the work of a historian Niall Ferguson author of The West and the Rest. Competition is identified as one of the 6 apps (keys of success) that led to world dominance. Scientific revolution, property rights, modern medicine, a consumer-oriented society, and a strong work ethic are the other 5 apps.
http://www.globalpovertyproject.com/blog/view/542
Well, I have not read Ferguson directly, but some of the "apps" in the role can be brought to debate:
1) "Property rights-Ferguson believes that the firm grounding in respect for democracy and property ownership lead to successful economic growth with a government reflective of these ideals." - not always respect for property and for democracy walk together. Germany under William I and William II was not an example of democracy, although property was sacred.
2) "Work ethic-Ferguson directly attributes hard work to the rise of Protestantism, which stressed hard work, saving, and reading" - Ferguson here marches side by side my beloved Max Weber. However, there is a good reply, based on facts, brought by Werner Sombart, when he has considered the scenarium of Italian cities, where all artisans were catholics.
It is true that democracy and freedom are seen by Ferguson as consequences of the 6 keys of success, but concerning the work ethic, he specifically does not attribute it to any religion, just the opposite he believes that China is much better now-a-days than us in the West. China is still deficient concerning rule of law and property rights.
The final conclusion of Ferguson is rather apocalyptic, in the meaning that the golden times of the West are gone, the turning point is no where to be seen.
'Weber’s thesis is not without its problems. He saw ‘rational conduct on the basis of the idea of the calling’ as ‘one of the fundamental elements of the spirit of modern capitalism’. But elsewhere he acknowledged the irrational character of ‘Christian asceticism’: ‘The ideal type of the capitalistic entrepreneur … gets nothing out of his wealth for himself, except the irrational sense of having done his job well’; he ‘exists for the sake of his business, instead of the reverse’, which ‘from the view-point of personal happiness’ was once again ‘irrational’. Even more problematic was Weber’s scathing sideswipe at the Jews, who posed the most obvious exception to his argument. ‘The Jews’, according to Weber, ‘stood on the side of the politically and speculatively oriented adventurous capitalism; their ethos was … that of pariah-capitalism. Only Puritanism carried the ethos of the rational organisation of capital and labour.’ Weber was also mysteriously blind to the success of Catholic entrepreneurs in France, Belgium and elsewhere. Indeed, Weber’s handling of evidence is one of the more glaring defects of his essay. The words of Martin Luther and the Westminster Confession sit uneasily alongside quotations from Benjamin Franklin and some distinctly unsatisfactory data from Baden about Protestant and Catholic educational attainment and income. Later scholars, notably the British economic historian R.H. Tawney, have tended to cast doubt on Weber’s underlying argument that the direction of causation ran from religious doctrine to economic behaviour. On the contrary, much of the first steps towards a spirit of capitalism occurred before the Reformation, in the Catholic regions like Northern Italy; while both Luther and Calvin expressed distinctly anti-capitalist views. At least one major empirical study of 276 German cities between 1300 and 1900 found ‘no effects of Protestantism on economic growth’, at least as measured by the growth of city size. Cross-country studies have arrived at similar conclusions.'
Excerpted from the book Civilization: The West and the Rest by Niall Ferguson
After all, it seems, for him - although he does not refer - that Sombart is right.
I want to make a very important observation, namely that this time capitalism is not challenged by anything external to capitalism. The challenges are internal to capitalism exactly like Marx predicted (he was wrong about the timing and some other details). What I mean by that? Exactly what I've stated above... the tendency to control the economy and propagate the crisis throughout the economic cycle, delaying the bust, prolonging the boom a s o. This leads to limiting the economic freedom of the individual in an indirect manner. Less freedom in the name of freedom. Less property rights in the name of property rights... and the paradoxes just go on, increasing the tension and emptying the discourse of any positive or ethical values. It becomes a technical non-sense. This is capitalism kicking its own but.
Capitalism in the absence of a sufficiently broad middle class will turn into a form of neo-feudalism. A middle class on default refunded on dubious credit has not provided a solution, but just some delaying tactics. In the EU people are so confused as they do not realize that no matter what the future of EU will be, the real problem is exactly the incompatibility between this new form of economic governance and democracy. In the U.S. people are more aware, though in the typical American style (everything is bigger in the U.S.):
"The shaping of the will of Congress and the choosing of the American president has become a privilege reserved to the country's equestrian classes, a.k.a. the 20 percent of the population that holds 93 percent of the wealth, the happy few who run the corporations and the banks, own and operate the news and entertainment media, compose the laws and govern the universities, control the philanthropic foundations, the policy institutes, the casinos, and the sports arenas." -- Journalist Lewis Lapham
"Our passivity has resulted... in much more than imperial adventurism and a permanent underclass. A slow-motion coup by a corporate state has cemented into place a neofeudalism in which there are only masters and serfs. And the process is one that cannot be reversed through the traditional mechanisms of electoral politics."
Journalist Chris Hedges
Ferguson and Sombart can be compared indeed. I have written a commentary yesterday and deleted later, because it was not clear enough. The last success of humanity in matters of economy is the capitalism, the only divergent movement was the communism in the Eastern Europe and Asia. There is a common misunderstanding that Marx was in favour of implementing communism right-a-way. This is not true. Marx has both admired and criticised the capitalism and had never proposed a practical solution. We have never actually had an alternative to capitalism. It's very possible that the capitalism will reinvent itself and be something different, something more adapted to the new economic realities. This comes almost naturally. However capitalism is deficient in the regulation of the social aspects and the capitalist state has failed to deal with them lately. The money injected in the economy by the state have in fact increased the gap between the poor and the rich, destroying the middle class. Measures to preserve the existence of the middle class have never been taken. The economic freedoms are not absolute and they are impeded by the state interventions in the economy favouring the 'too big to fail'. The help given to the poor is also noxious in the meaning that poor people are kept alive but no actual measure of escaping the poverty, no actual second chance is given to the impoverished person. Marx said that capitalism has an extraordinary capacity of transforming itself, however in Marx time, capitalism was free of state intervention. Now-a-days the state is much bigger and the freedom is limited. The richer segment can maintain their independence by controlling the states, not by competing in the markets. The actual competition, in my opinion is going on at a lower level between medium size enterprises. However in countries where the state is the biggest actor in the economy, even at lower levels the market does not operate free from state intervention. Despite the set of rules in place to have a control on the state actions, the reality is that a bigger state does not allow the free markets to function. We no longer have the same type of capitalism as Marx had experienced in his time and maybe not even the same capitalism as Ferguson talks about. It's more human, more social, but also less free. The interests of the state have penetrated areas traditionally belonging to private law domain. The difference between rule of law and rule by law has metaphorically observed by scholars. The idea of free trade gives me mixed vibes in this context, just because what we defined as free, it's not at all free. Trade is never free, since trade implies rules, however it used to imply private law rules, person-to-person or business-to-business type of relation. Today any relation almost has a hidden part, the state. Using an advantage given by state policy, a tax reduction, funds access etc has become the actual motivation to get engaged in a trade transaction in many cases. Can capitalism exist in the absence of freedom to trade? Can competition work properly in a state-market?
Talking about "theory", I think the most relevant theoretical debate is that between Locke and Hobbes and his Leviathan. It is clear that my view is closer to Hobbes!
Talking about Hobbes, I would like to meet him and ask him when I have signed the social contract, because honestly I do not remember :)- More seriously even if there was any contract, it is almost sure that its terms have not been respected by neither of the parties for the last more than 5000 years, therefore it's a void contract.
The only contract that has been signed in history was into the Mayflower. But the fiction brought by Ockham first and developed by Grotius and Hobbes has been a solution for the great question put at that time of religious fighting - "why should a Catholic subject obey a Protestant sovereign? Why should a Protestant subject obey a Catholic sovereign?"
Pierre-Joseph Proudhom (1809 – 1865) proposed an economic system that he called Mutualism that advocates a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labor in the free market. Integral to the scheme was the establishment of a mutual-credit bank that would lend to producers at a minimal interest rate, just high enough to cover administration. Mutualism is based on a labor theory of value that holds that when labor or its product is sold, in exchange, it ought to receive goods or services embodying "the amount of labor necessary to produce an article of exactly similar and equal utility". Mutualists oppose the idea of individuals receiving an income through loans, investments, and rent, as they believe these individuals are not laboring. Insofar as they ensure the worker's right to the full product of their labor, mutualists support markets(or artificial markets) and property in the product of labor. Mutualism is oriented towards cooperation within free market solutions. Mutalism considers that most inequalities are the result of preferential conditions created by government intervention.
A local exchange trading system ( LETS or LETSystem) is a locally initiated, democratically organised, not-for-profit community enterprise that provides a community information service and record transactions of members exchanging goods and services by using the currency of locally created LETS Credits
LETS networks use interest-free local credit so direct swaps do not need to be made. LETS is a fully fledged monetary or exchange system, unlike direct barter. LETS members are able to earn credits from any member. For instance, a member may earn credit by doing childcare for one person and spend it later on carpentry with another person in the same network. In LETS, unlike other local currencies, no scrip is issued, but rather transactions are recorded in a central location open to all members. As credit is issued by the network members, for the benefit of the members themselves, LETS are considered mutual credit systems.
LETS are generally considered to have the following five fundamental criteria:[3]
• Cost of service: from the community for the community
• Consent: there is no compulsion to trade
• Disclosure: information about balances is available to all members
• Equivalence to the national currency
• No interest
Of these criteria, "equivalence" is the most controversial. According to a 1996 survey by LetsLink UK, only 13% of LETS networks actually practice equivalence, with most groups establishing alternate systems of valuation "in order to divorce [themselves] entirely from the mainstream economy." and spend them with anyone else on the scheme. Since the details are worked out by the users, there is much variation between schemes.Since its commencement over 20 years ago, LETSystems have been highly innovative in adapting to the needs of their local communities in all kinds of ways. For example in Australia, people have built houses using LETS in place of a bank mortgage, freeing the owner from onerous interest payments.
We see that LETS are trying to establish a form of mutalism for a limited community. Maybe it could be possible to establish a worldwide LETS system whose participation would be on a voluntary basis. Once a member of this global LETS system a world wide mutalist economy could be created.
Just a dream.
Proudhon was ethically adverse to capitalism, opposite to Marx-Engels. These both made their opposition on - perhaps, it could be under debate - economic presuppositions, not ethical. That was why Marx had attacked Proudhon in his "Misery of Philosophy". Many people do not see there is a difference between their thoughts,
On Hobbes:
His notion of social contract relates to security. In his view all people need security. They are each other rivals and have a conflict of interests. Only in security they have a harmony of interests. Therefore they need a mighty third party, a Leviathan, to enforce the security. Automatically it means restricting an unlimited free competition.
If I remember correctly Hobbes was the subject of my first lesson in political science and even in the high school his role as a father of the politics is emphasized. He is important, but this does not mean that his theory is valid. What I mean by not being correct in his theory? Well we should build a state to protect us from other peoples evil inclinations but the people in power are also people with evil inclinations + power.
The reality is that a big state leaves a marginal place for competition. The big state has favoured the big corporations and in this manner made very difficult for SME to compete or even to enter the market. Zizek gives an example about the Mali cotton (best quality, best rapport price/quality on real market conditions). Mali as state is insignificant as power on the IR arena, therefore if other countries like U.S. or China use subvention in order to keep the price lower than Mali's price,,,, then the idea of competition becomes just a chimera.
I repeat the affirmation above, if capitalism is going to die, it will be a suicide. Capitalism without competition and respect for private property is a suicidal form of capitalism that can tilt into something else (more egalitarian or not, we don't know yet).
Daily financial transactions around the world are now calculated in trillions of dollars. Half the world’s money supply passes through or is kept in tax havens. This means that colossal volumes of trade are beyond the control of any national laws.
—From Offshore :Tax Havens and the Rule of Global Crime, by
ALAIN DENEAULT
A 2009 Government Accounting Office report revealed that two-thirds of the one hundred largest U.S. publicly traded corporations and largest contractors for the U.S. federal government had subsidiaries in countries generally considered tax havens. According to some estimates, fully half of the world’s wealth is held in offshore accounts, where it is largely beyond the scrutiny or control of governments or laws.
Offshore reveals how a vast network of unregulated financial centers—from Luxembourg to the Cayman islands to the tiny Pacific haven of Nauru—has evolved into an enormous nether realm of drug and arms trading ungoverned by national laws. Delving into the scandals, the financial structure, and the history of this hidden side of globalization, sociologist Alain Deneault depicts something larger and more ominous than simple “tax havens” where financial elites and corporations must reside to protect their earnings. Instead, Offshore describes a global base of operations from which massive criminal enterprises and corrupt corporations operate freely and with impunity, menacing developing nations and advanced democracies alike.
Emanuela,
Here is a video en francais de Alain Deneault. I think that you will like it.
http://www.youtube.com/watch?v=Tqq0KZTx4SA
The trouble with Hobbes' theory has been seen by Spinoza, and that is why he, although agreed with the Englishman in his view of human nature, thought that even power in State should be limited.
Concentration of power of any nature, market power political poweretc increases the risk of abuse. This is the reality and even if liability can be imposed the damages are never recovered.
Deneault's thesis is that the Offshore is not simply a realm of tax evasion, but a realm of legal evasion that has an invisibility cloak where corporate and financial sovereignt agents whose power is superior to many states. This new realm of sovereignty has been put in place by the financial oligarchy with the political backing of all the most advance states. Invisible actors are taking financial decision behind the invisible offshore cloak which have major impacts on African conflicts, arm deals, delocalization of jobs, closing of factory, etc… Hidden behind the expression of “globalization” is the reality of the offshorisation of all economical actors, including all the large scale criminal organizations. Real economic powers is gradually moving behind the offshore cloak and gradually escaping any national regulations and laws with the the full collaboration of the political and financial and criminal elite of all the most developed countries. If this trend continue, all profits will be offshore with no taxes to be paid, all major economic decisions will be offshore by unknown agents, and financial broken states will compete with each other for the localization all economical activies that can be moved or can be done online. How these states will manage to build their infrastructure, educate and care for their peoples will not be part of the concerns of the offshore agents.
Emanuela,
These papers may offer some insights.
https://www.researchgate.net/publication/260638458_Strategies_for_enhancing_Jamaican_competitiveness_in_the_global_knowledge_economy
https://www.researchgate.net/publication/299747565_Towards_a_talent-driven_outward-oriented_globally-competitive_SME_framework_Discussion_Paper
Conference Paper Strategies for enhancing Jamaican competitiveness in the glo...
Technical Report Towards a talent-driven outward-oriented globally-competitiv...
Free trade is an ideology. Those in power can define the regulations around trade and they can achieve that all sorts of regulations are permitted that change the idea of free trade to their advantage. If trade would be entirely free, then most so-called developed countries would not have any farmer left because food elsewhere is produced much cheaper, but this cheaper food often does not have equal access tot he markets of developed countries. With other products it is similar... Not that I want to argue in favour of a race to the bottom what labour, social and environmental standards is concerned, but globalization actually is leading to benefit those economic interests best, which do not bother about such standards.