Tag Archives: economic theory

The Four Pillars of the EU- freedoms or serfdom?

JR Max Wheel

 

14 March 2017

 

When studying economics, it was a virtual article of faith that freedom of movement of goods and services as well as capital were an unmitigated good. This was not only “sound” Ricardian common sense about comparative advantage. that allocation of resources meant that country X would always have the capability to produce goods more efficiently and cheaply than say country Y, but that it would allow the latter to divert resources to where it had a comparative advantage, thereby promoting mutually beneficial trade. We all thus gain. That of course was the textbook explanation.

 

A similar argument is made for allowing free movement of capital this would then flow naturally to areas where it was both needed and most productive, rather than remain bottled up in nations who would in all probability misallocate it. Again, the theory is that it is a win win.

 

Recall these are textbook explanations of economic theory, sometimes they are true, deregulation can produce beneficial outcomes and help develop valuable natural and human resources which otherwise would not have benefitted.

 

Unfortunately, economic textbooks also believe in “efficient markets” and “rational expectations”, where markets price in all known facts to deliver a market clearing price. Regrettably the one fact we all intuit or may claim to know is that the human being is neither remotely rational for much of the time and that markets can be anything but efficient.

 

Freedom of movement of people can also be beneficial and has resulted in some remarkable success stories, where a persecuted minority can move and develop in a new host country to flourish and contribute to national wealth. History is replete with examples of the outright dim-witted- the expulsion of the “Moors” from Spain for religio-social and identity reasons to the Huguenots from France who settled in the UK and elsewhere and brought their skills and industry with them. The United States with its largely immigrant population is probably the most obvious example of unleashing the multiple talents of its newly “liberated” citizens, even whilst holding down its grotesque system of indentured slave workers.  There have always been moments of profound change resulting in mass migration, whether as result of religious or societal persecution or natural disaster. There is however no absolute right or guarantee that mass migration of people is a good thing, it is circumstance dependent.  The economist might assume that extra labour resources are a good thing and for several reasons, they may contribute to increased national income, they may replace economically inactive citizens with productive ones, but it is a hypothesis. The arrival of uneducated manual labourers in an automated and increasingly technologically driven society may mean that there are a limited number of real job and life chances or that resources need to be diverted to train and equip them to be productive. It may mean they are consigned to the most menial forms of labour. In short there are again no guarantees.

 

Economics as taught in much of the 20thC had elevated itself to the level of a hard science with right and wrong and provable answers to its questions. This is not so, as evidenced by its existential crisis as an academic study. It cannot be because its actors are not particles, but people and as we said people are not necessarily rational or at least for much of the time.

 

Recent history [and there are echoes of this in previous centuries] shows that large corporations can shape-shift rapidly and in doing so transfer jobs and capital to exploit market opportunities, these are not written in stone or fundamental principles, they are opportunistic moves. The rise of truly global corporations transcends the power of nation states and even economic power blocs or multilateral organizations. This has happened and is happening. Technology is equally capable of job creation and job destruction, distribution of the spoils of enterprise are neither necessarily distributed equally or equitably, nor are the costs, the destruction and pollution the so-called “negative externalities” of the economists or the bits that go wrong, despoil, or destroy habitat, damage natural systems.

 

The nation state, in many cases gave rise to democracy, which though never a universally adopted system can now be easily over-ridden, it is no surprise that the management of such corporations can disregard the interest of others. Their interests do not align but diverge, thus decisions are taken with a view to maintaining a world view and a set of values that collides with those of the citizens or electorates. Such people are by definition a nuisance and an obstacle and therefore every trick in the book is used to subvert them.

 

These are the self-same so-called freedoms enshrined in our EU power bloc. They trump national interests and because of their astounding capability of creating wealth are profoundly anti-democratic.  They were never meant to be so, but that was another world in which such aspirational and near utopian ideals were viewed as desirable, rational and the pinnacle of liberal values. They have become so deeply subverted that the victims neither see the results or if they do are powerless to prevent them.