Footnotes
1) Adam
Smith; “The Wealth of Nations” (ed. Robert Heilbroner);
W.W. Norton, New York; 1986; p. 258.
2) Karl
Marx; “The Communist Manifesto”; Bantam Classic, New York; 2004; p.p. 14-15.
3) Jonathan
Spence; “The Search for Modern China”; W.W. Norton, New York; 1990; p.p.
122-123.
4) Yasheng
Huang; “Capitalism with Chinese Characteristics”; Cambridge University Press,
Cambridge; 2008; p. 89.
5) Ibid.;
p.p. 57-58.
6) Ibid.;
p. 111.
7) Ibid.;
p. 113.
8) Kellee
Tsai; “Capitalism Without Democracy”; Cornell
University Press; Ithica; 2007; p.p. 153-166.
9) N.Y. Times,
6/25/11.
10) The
American Scene, “A Post-American World”, 5/7/08.
11) Several
years ago, before the advent of market fundamentalism, a national magazine
noted that if all of society were organized according to neoclassical
principles, it wouldn’t work. We think the main problem with economic theory is
that it lives in a static mathematical universe, whereas people and societies
live in real time. Spence (2011) writes, “Investors have a renewed or
heightened sense that risk is dynamic and far from (Gaussian, static)
stationary as the conventional framework held…”
12) The
Washington Post, 8/21/11.
13) Foreign
trade experts are beginning to reconsider the present laissez-faire World Trade
Organization system, asking whether the present system of international trade
(like neoclassical economics) that favors efficiency and low costs, enables
nations to meet their social goals. An example of this is Harvard Professor Dani Rodrik’s book, “The
Globalization Paradox (2011)” that calls for a rethinking of the system. He
writes, “…we should accept that countries can uphold national standards…and can
do so by raising barriers at the border when
trade demonstrably threatens domestic practices enjoying broad popular support
(p. 241).” This seems to us unworkable because trade policy is negotiated and
highly technical; but Professor Rodrik’s analysis of
present and past trade systems is very informative.
Where
is the foreign exchange rate in this discussion? In theory, flexible exchange
rates are supposed to balance trade and to actualize the theory of comparative
advantage. But first, nations manage their foreign exchange rates to keep their
exports competitive. Second, the labor cost differential between the U.S. and
the developing countries is very large. Third, in the real world you can’t
create something out of nothing; regional industrial clusters develop where
companies reinforce each other’s development. Economic development is therefore
path-dependent. The foreign exchange rate is only a major factor
determining local economic growth.
14) Bloomberg
Business Week, 7/1/10.