Central planning will not again stop globalisation

February 12, 2002

Free Market Foundation

Brink Lindsey, who founded the Centre for Trade Policy Studies at the Cato Institute, U.S.A., wanted to counter what he called “equal doses of hype on both sides of the globalisation debate,” and to explore “why the process of globalisation has been shown to be so infernally messy.” The result is a new book, “Against the Dead Hand: The Uncertain Struggle for Global Capitalism.”

In 1913, he writes, “merchandise trade as a percentage of gross output totalled an estimated 11.9 percent for the industrialised countries” a level unmatched until the 1970s.

The hiatus which occurred between the two periods was a result of the notion that if large commercial enterprises could advance by planning and control, national economies could be run the same way with more efficient and humane results than the “chaos” and competition of the marketplace.

This “industrial counterrevolution” took many forms, from the politically benign to the totalitarian but the result was a turn from economic openness toward closed national markets, the better to enable political planning and control.

Today’s globalisation is occurring because political leaders no longer believe that state-directed economic decision making is the path to prosperity.

The result has been a clash between Adam Smith’s invisible hand and the “dead hand” of central planning, and what Lindsey calls the “blind pragmatist lurch” away from the worldview and policies that ended the last great era of globalisation almost a century ago.

Lindsey notes the importance of countries establishing trustworthy judicial systems, as well as removing government controls. Despite his cautionary tone, Lindsey believes that economic liberalism with reliance on markets and competition will eventually win out.

Source: Virginia Postrel (author of The Future and Its Enemies), Economic Scene: Globalism and the Liberal Model: Playing the Invisible Hand That’s Dealt Us, New York Times, January 31, 2002.

For text http://www.nytimes.com/2002/01/31/business/31SCEN.html
For more on International Trade and Globalisation http://www.ncpa.org/iss/int/

FMF Policy Bulletin\6 February 2002