Economic imagery pervades societal discourse. Part of this imagery projects markets as existing everywhere; the common societal parlance sees talk of the car market, the grocery market, the computer market, or, simply, the market. Yet, excepting traditional marketplaces or medinas, these markets have no physical manifestation. Unlike with other major social institutions there is no where to visit; there is no headquarters. Instead, markets are said to exist when there are competitors in the provision of services or goods and where each competitor has a fair and equal chance of succeeding. The market, then, exists in a metaphorical, rather than physical, sense – it implies that the capitalist system operates diffusely like a marketplace, rather than there being an actual marketplace in which economic transactions take place.
The further extension of economic imagery has seen the market metaphor applied to the provision of political and economic ideas, with the notion being that there exists a level-playing field on which ideas are free to compete and that this competition will weed out weaker ideas. Hence, “no platforming” of racist or homophobic speakers should be staunchly opposed as it will impede the competitive destruction of abhorrent ideas. An important ancillary notion is that any idea that has come to be orthodox received wisdom has justly achieved this status through free and fair competition in the marketplace of ideas.
The problems with this account of the ideational development of society are legion, but I’ll limit myself to explaining just three, namely 1) product heterogeneity, 2) distribution of ideas, and 3) production of ideas.Read More »
Late developers are nowadays confronted with the problem of having to earn foreign currency to finance structural transformation under extremely unfavourable conditions. The dependency on forex is rooted in the international financial architecture and represents a major pitfall for countries trying to catch up. However, this structural impediment to transformation is not paid much attention to by the dominant development economics.Read More »
At the OECD’s origin, we find the 1947 Marshall Plan that re-industrialised a war-torn Europe. At the very core of the Marshall Plan was a profound understanding of the relationship between a nation’s economic structure and its carrying capacity in terms of population density. We argue that it is necessary to rediscover this theoretical understanding now, in the mutual interest of Africa and Europe.Read More »
Thepromise of more open societies following Mikhail Gorbachev’s perestroikaannouncement set in motion powerful dynamics completely transforming the world.The Berlin Wall fell in 1989 and by the end of 1991 the Soviet Union disintegrated bringing down the entire socialist institutional edifice. Newly independent nation-states emerged across Europe, the Caucasus, and Central Asia. Thisnew “wind” was that of hope, progressive stabilityand economic prosperity, or so it seemed at the time. And yet, “[f]or whom the wall fell?”asBranko Milanovic has recently inquired, is not as straightforward as might have been expected.
Despite the independence premium in national policy and in parallel withevidence suggesting recent strong economic growththe post-socialist economiesare yet to achieve the ideals announced at the outset of market reforms.Ironically, the most unfortunateeconomic planwasthe 1990s script of transitionfrom planned economy to free market in the EE and FSU.
On Saturday, April 19th 1817, David Ricardo published The Principles of Political Economy and Taxation, where he laid out the idea of comparative advantage, which since has become the foundation of neoclassical, ‘mainstream’ international trade theory. 200 years – and lots of theoretical and empirical criticism later – it’s appropriate to ask, how is this still a thing?
This week we saw lots of praise of Ricardo, by the likes of The Economist, CNN, Forbes and Vox. Mainstream economists today tend to see the rejection of free trade implicit in Trump and Brexit as populist nonsense by people who don’t understand the complicated theory of comparative advantage (“Ricardo’s Difficult Idea”, as Paul Krugman once called it in his explanation of why non-economists seem to not understand comparative advantage). However, there are fundamental problems with the assumptions embedded in Ricardo’s theory and there’s little evidence, if any, to back up the Ricardian claim that free trade leads to balanced trade. On this bicentenary, I therefore think it’s timely to revisit some of the fundamental assumptions behind Ricardo’s theory of comparative advantage, that should have led us to consider alternative trade theories a long time ago. Read More »
For years, policy-makers have used the United Nations’ country classification, based on per capita gross national income, as the measurement of their country’s development. The aspiration to move up the scale assumes that: 1) economic growth is the international standard measurement of development; and 2) the more one produces, the better one’s quality of life will be. The history of political movements and economic policies has witnessed both successful and failed attempts to move up the scale. The countries that have accelerated their economic growth have been celebrated worldwide and the general perception is that the people in these countries now enjoy a more resourceful life. This attitude towards economic growth has created a presumption that pro-growth policies observed in more developed countries and actively promoted by international institutions could be applicable in other developing countries. Can this classification ever be misleading?Read More »