So it funny to watch all of the squabbling and hand wringing about how awful free markets are in the wake of this global financial swamp we've dropped ourselves in. Here is an op-ed from the New York Times (Yes yes, I know always a bastion of free market and libertarian thought) which is trying to use this crisis to suggest that isolationism is a way to protect against the global market place tanking your local marketplace.
Hmmm well technically this guy is right. If a country doesn't globalize or throws up large barriers to foreign investment, then there is a buffer to protect a state from fluctuations in the global economy. But is this a beneficial thing? Protectionist countries usually have a much lower growth rate for small businesses because they will limit the amount of foreign investment, which shrinks up the market for loanable funds or it directly shrinks the possibility for Foreign Direct Investment. Closing down those cash flows harms businesses and entrepreneurs.
The other problem with this loon's article is statements like this:
In contrast, the countries that opened the most to the international capital markets, and that sought to bring in business with relatively lax regulations, now are suffering the most. Iceland was the wonder economy of the world; now it is broke.Iceland is broke because the banks SERIOUSLY over-leveraged themselves and lets face it, lots of banks got into investments that they have NO business being involved in. When an institution piles itself in risk and then fails, why is anyone surprised? So the Globalization is not the problem, the malinvestment by banks is the problem not the lack of "regulatory framework".
But the world might be in better shape now if more countries had chosen that route[financial autarchy], and thus been more insulated from the credit storm that has left companies and countries around the world fearful that they will be unable to obtain needed financing.Right, If countries had chosen autarchy, then companies would sure as hell be fearful that they would be unable to attain the needed financing. If you shrink up a market, goods become more scarce. This goes for a market for investment just like it does a market for apples. This is not ROCKET SCIENCE PEOPLE!
Oh a chart, I like charts. Pictures tell cool stories.
This kind of idiocy will bury this country and it's views like Floyd Norris' (yeah the guy who wrote the article) that will drive this economy into the ground and begin to dig. Closing our borders to capital is NOT how you prevent or even mitigate a financial mess like we have on our hands.
Don Boudreaux over at Cafe Hayek put it this way:
But the Times should be consistent and have, say, one of its medical reporters write about the upside to suicide. Suicide's practitioners, after all, inoculate themselves against all future illnesses.Bingo!
[Hat Tip to Cafe Hayek]