Sunday, August 16, 2009

GS.NGUYỄN CAO HÁCH * KINH TẾ

The dream of humankind to a perfect future for everyone

Prof. NGUYEN CAO HACH

In the countryside in the North of the state of New York, there is a community called Bruderhof. That small community of about 400 persons adheres to a view of life taught by the Amish religious church, called "Christian communism", aiming at:

- people loving one another

- prohibiting TV and radio stations

- Avoiding the penetration of decadent ways of life, especially divorce and homosexuality.

Expanding private property is considered a bad habit, though they also have separate families. They consider Cuban society as a good example of morality, as Cubans know how to set aside the sins of the flesh, in contrary to Hollywood.

The Amish ideals originated from Europe since the 1920s. But they faced the deadly campaigns of atrocity from Hitler as a result of being considered as a competition force in attracting the populace. We all know that Hitlerism was demagoguism at the time. The Amish population was afraid and fled all over the world, especially to Great Britain and South America. From there, they moved to the United States.

A famous author who leaned to the Amish ideals — John Maynard Keynes — was against the morals and customs of the then Victorian era in England. He criticized the unrestrained liberalism similarly to the Amish view. But this is only on morality. In economics, he made an exception. In his thought, free trade is a fundamental principle. He stated: "We must hold to Free Trade, in its widest interpretation, as an inflexible dogma to which no exception is admitted. We should hold Free Trade as a principle of international morals, and not merely as a doctrine of economic advantage"

The basics for the solid standpoints of the above principle are the three famous books in that historical period:

- The Wealth of Nations by Adam Smith (published in 1776)

- On the Principles of Political Economy and Taxation by David Ricardo (1817)

- Elements of Political Economy by James Mill (1821)

Smith indicated that economic development is best when it is placed under the invisible hand of the market. Protectionism is the worst mistake. We called it state protectionism.

Mill consolidated Smith’s reasoning by raising high mercantilism, which is still highly valued today. This view advocates expanding exports, as exports allow imports, which mean increase of general living standard.

Ricardo emphasized comparative advantage in trade. He explained that trade is beneficial for all participants: rich as well as poor countries, by specializing in the most capable economic activities for the country: this is called "comparative advantage".

The debates between free trade and protectionism had prolonged for a long time, until 1846, when Robert Peel decided to follow the new view of free trade. That was a common trend, which led to prosperity.

Following that trend, Keynes emphasized that the Great Britain, which was on top of development at the time, would hold the leading role in international trade.

Nowadays, that view of free trade of the Keynes time is still narrow, because they only paid attention to trade in agricultural and mining products. Today, free trade has been expanding to capital flows and specialized knowledge. These flows of trade are what the classical authors never imagined.

Right in 1913, capital flows for international investments had been totally over 44 billion dollars.

For one aspect, the world in that era might have been blossoming in immigration: citizenship was issued easily. The population moved very easy to the places which had the opportunities for employment, such as the case of the Chinese since 1882 in the United States. They were free to immigrate to the U.S.A. to work. The abundant volume of workers was a key factor leading to development and prosperity. That is what we saw in US history since 1882.

In the late 19th century, London was a place of originating the flows of international trade to every region in the world. London was on top in product development and international trade, far excess that of Europe. Only in early 20th century, as a result of extensive flows of immigrants to U.S.A., the American economy expanded rapidly in agricultural production.

According to Keynes, at the time, only the Great Britain held the power to push the world into a free-trading system. Nowadays, the flows of services prevailed, especially, the capital market operations have been extremely strong.

Free trade has become almost a dogma. It has been influenced by the works of Adam Smith, David Ricardo and James Mill. According to that view, protectionism is disastrous to the economy, as the government manipulates political power to control the market.

(to be continued)

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