Peter Hume, i am not going to rant, but I do feel you misrepresent my views.

I, and others that comment to me (although not all), do not see myself as a fanatic interventionist, although i do offer reasons why govt's do behave in the way they do.

imajulianutter,

"Now 'state directed capitalism' is a contradiction in terms.."

No, it isn't. "Capitalism" simply refers to an economic system in which the means of production are privately owned, it's a mistake to assume that a pure market system is a necessary condition for capitalism.

Chris
It’s not about personality, it’s about whether statements are demonstrably false, in which we should all have an equal interest.

Mac
“No government, in a democracy, can afford to allow 'market forces' to correct imbalances without intervention,the result, as usual, is 'private profit, public loss'…. Capitalism" simply refers to an economic system in which the means of production are privately owned.”

I’m not clear what you’re saying there. If capitalism means an economic system in which the means of production are privately owned, but government exercises an overriding power to dictate any and every aspect of production then
a) what does ownership mean?
b) how is that economically different from a system in which government owns the means of production?, and
c) the resulting economic disorder should be correctly attributed to government, not capitalism.

Also, it’s not clear why no government can afford to allow ‘market forces’ to correct imbalances without intervention, if the imbalances are caused by interventions in the first place. Putting aside captious reasons – wanting to appear to do something to the electorate. A classic example is the Non-great depression of 1920 to 1921. It didn’t happen, did it? This is because President Hoover *did nothing*. He just let the market liquidate the misallocation of resources caused by government inflating the money supply, and the whole thing was over in a year or two.

But let the Keynesians at the problem, and they’ll really show how to turn it into a chronic weeping sore and grand destruction of capital, as we’re witnessing now.

“Yes, economics isn't a science, citizens are basically lab rats in social experiments run by the ruling economic ideologues and the sectional interests that benefit from their policies.”

Economic ideologues per se don’t make policies. Politicians do.

The fact is, economics has *completely disproved* the pretensions of politicians to create general benefits out of thin air by economic interventions, and *that* is why the very possibility of economic science is denied.

If you’re against the treatment of government’s subjects as lab rats, you should be against such interventions, not in favour.

Every market economy needs a market. If we are to be impoverished by a major competitors such as China, ultimately they will lose out.

Douglas Adams picked it, over thirty years ago:

"The home of this industry was the planet Magrathea, where vast hyperspatial engineering works were constructed to suck matter through white holes in space and form it into dream planets, lovingly made to meet the exacting standards of the galaxy’s richest men. And so successful was this venture that very soon Magrathea itself became the richest planet of all time, and the rest of the galaxy was reduced to abject poverty. And so the system broke down, the empire collapsed, and a long, sullen silence settled over the galaxy, disturbed only by the pen-scratchings of scholars as they laboured into the night over smug little treatises on the value of a planned political economy" Douglas Adams: Hitchhikers Guide to the Galaxy, 1978

"Decline" can therefore be viewed, if we wish to do so, as simply another location on the economic cycle. There is - or should be - no disgrace in taking up a different role for a while. It is worth remembering that prior to the arrival of the colonialists, India's economy was the largest in the world. It is entirely possible that they will regain this position sometime in the next fifty to a hundred years.

But however you view the longer term, protectionism is never anything more than a temporary change of pace - it can never be a permanent solution, because it addresses the wrong problem.

Perciles, said

"But however you view the longer term, protectionism is never anything more than a temporary change of pace - it can never be a permanent solution, because it addresses the wrong problem".

Lot of truth in that, that is why my biased Western perspective calls for sophisticated solutions that do not abandon the rights of poorer nations to attract FDI and so on.

Yes, the answers are hard and I wish someone would come up with something a bit more plausible that simply accommodating the rise of authoritarian China because the dipsticks of Western govts cannot think beyond quantitative easing, a recipe for disaster for most in the longer term. Same is true of market economists who do not give enough consideration to political considerations.

All i know is that something needs to be done, and soon, if we are to avoid all-out protectionism

I hardly have any knowledge of economics, so I am sailing out into a dangerous sea where Australian sharks swim around when I post this comment.

Free trade is an interesting and important concept of economics. It tells us who gets what and how much of it at which cost. But whether it should be applied and practiced is quite another matter, for there are almost always some who are going to lose.

I read this story a long time ago. I do not know whether it was a historical fact or a thought-provoking excercise. The governments of Great Britain and Portugal agreed that the former concentrate on wool industry and the latter on wine production, a kind of trade based on the theory of comparative advantage. No doubt, the welfare of the two peoples was promoted; Great Britain put itself in a good position for industrial take-off; as all of us know, P in Piigs is for Portugal.

The British debate of free trade or not in the first half of the nineteenth century was a classical instance. Free trade represented the interests of rising industrialists and protectionism came from the declining landed gentry.

Free trade was also a theory for international peace. It was an easy affair for Great Bitain to advocate it at that time, but Germany came up in the last half of the century with a differnt theory of international trade. The United States was at that time a protectionist country. As for Japan, it was in a peaceful slumber of seclusion; it wanted no one to disturb.

Could a United States afford to transfer the production of tanks, jet fighters, bombs and missiles to a China if these things were made at lower costs? That would be a best solution from an economic point of view, particularly when the U.S painfully feels the need for budgetary cuts. To be continued