Shortsightedness is a serious affliction that plagues both
politicians and the media (and the public at large).
- The rise in living standards has been unprecedented.
- Free markets have triumphed.
- Technological advances have rapidly transformed our lives.
- Developed economies have become "deagriculturalized" and
- There has been no shortage of natural resources.
- Poverty level have fallen, but income inequality has not always
- Financial volatility is no longer synonymous with economic
spring up in the most unlikely places — and often where they are
- Markets are the best aggregators of information.
- Markets represent a process of constant trial and error.
Famines, environmental damage, and financial crises: how government
failures have often been more damaging than market failures.
on subsidies, tax breaks, and protectionism. Each comes with a
large price tag.
delivers steady improvements in goods and services, ofter at lower
competitive by enforcing antitrust laws and regulating markets when
- Competition keeps prices low and limits profit margins.
- In competitive markets, there also is a strong incentive for
companies to compete by continuously improving quality and
- The downward pressure on prices and profit margins forces
companies to keep improving their efficiency — they have no choice
if they not to go out of business.
- As a result, competitive markets are more innovative and enjoy
stronger productivity growth than markets in which competition is
- Finally, competition reduces the scope for corruption and
influence peddling, and this can enhance the democratic
schools so bad? In a word: competition — and the lack
and is even less of a problem now than it was a century ago.
Consider the following facts:
- Monopolists don’t always raise prices.
- Many industries that were once classified as "natural
monopolies" have since been privatized and/or deregulated.
- The market concentration in most U.S. industries has diminished
over the past century.
The bottom line: What matters is the "contestability" of
- Rising labor-force participation, especially among women.
- Rising educational attainment.
- High level of savings and investment.
- Resource mobility.
- Technology transfer.
- Low inflation and fiscal prudence.
- Good (or better) governance.
one in which a shortage of any raw material will raise its price,
boosting the incentives to develop alternatives or new technologies
and to use the scarce resource more efficiently.
synonymous with happiness, which also depends on love, friendship,
respect, family, social standing, and fun.
love), rather than zero-sum forces (like war).
than limit them, as we do now.
problem, and more of a blessing than a curse.
and, believe it or not, American workers.
1990s, the US population (including immigrants) grew about 25
percent. But the number of employed Americans increased about 40
percent! So, there were plenty of jobs for men and women,
immigrants and natives, legals and illegals.
primarily to low-wage countries, they are playing into people’s
fears. In fact, globalization benefits every country that maximizes
its strategic advantages — and no country has more strategic
advantages than the US. We are blessed with many of the best
universities in the world; an enormous domestic consumer market;
the most cutting-edge technological, medical and scientific
research communities; deep capital markets that offer financing to
businesses of every kind; and a level of freedom, opportunity and
diversity that is unmatched.
interests, cloaked in nationalistic/xenophobic terms.
- A far better solution is to increase the skills and mobility of
workers so that they can take advantage of all the new (and
higher-skill) jobs that are being created.
- During 1990s, only 1.5 percent of the job losses resulting from
mass layoffs had anything to do with import competition.
Good policies to help displaced workers should have two key
- They should address the insecurities of workers who are facing
possible lay-offs as a result of technology and globalization,
- They should neither limit labor mobility and flexibility nor
slow the evolution of the economy to higher-skilled and
improving labor mobility and increasing the ease with which workers
can make the transition from jobs that are being destroyed by
technology and globalization to the vast number of new jobs that
are being created by those same forces.
- None of the rich countries of the world has reached that
position because of aid and debt forgiveness. They became rich
through being successful market economies.
complement and reinforce the beneficial impact of trade:
- Health care
- Technology transfer
Free trade is much more powerful than aid as a way of boosting
growth and reducing poverty in the world’s poorest countries.
Moreover, the goal of rich countries’ aid programs should be to
help poor countries grow rapidly, so that they don’t need aid
governments is to know how much or how little intervention is
needed — in other words, to balance the social benefits of market
interference against the social costs.
- What will be the new role of government? After all, there is no
market without a government to define the rules and context. The
state accepts the discipline of the market; government moves away
from being producer, controller and intervener, and becomes the
referee, setting the rules of the game to ensure competition and
preconditions for the success of privatization.
- Privatization provides the largest efficiency gains and cost
savings when it is undertaken in a locally or globally competitive
- To ensure a competitive environment, governments should
deregulate the affected markets, lower barriers to entry, and
remove or reduce import protection.
- The gains from privatization can be undermined if other
externalities and spillovers, such as pollution, play a big role in
the industries involved.
Finally, the gains from privatization should be widely
beneficial for consumers and for the overall efficiency and
productivity of the economy. The trick is knowing what to privatize
and how. Pure public goods, such as national defense, public
safety, and clean air, can’t be privatized. Mixed public-private
goods, such as airports, bridges, toll roads, and postal services,
can be — if the privatization is done well.
public goods. In very simple terms, more market forces are needed
on the supply side of both, while continued government involvement
is required on the demand side. In other words, both health care
and education will benefit from more competition.
parts of the economy.
and has actually decreased in recent years.
The best antidote for poverty is growth; the best antidote for
inequality is equal access to education and jobs.
Inflation is always and everywhere a monetary phenomenon. — by
Milton Friedman (Nobel Prize Winner economist)
Legitimate national security concerns aside, it does seem illogical
for rich countries to buy Middle eastern oil and Chinese goods with
few qualms, while at the same time refusing to allow those same
countries to buy the assets of the rich countries in return. This
is especially true since sovereign wealth funds have, to date, been
a source of stability in global financial markets.
Financial stability is hard to achieve. In fact, financial crises
may be the price that must be paid for financial innovation. It is
far more important to insulate that economy from financial
instability. On this score, there is room for modest optimism, and
no need to fix what isn’t broken.
Nine economic lessons for a polarized world:
- Embrace and trust markets.
- Remove distortions to economic incentives.
- Reduce the concentration of economic and market power and the
potential for theft from the public.
- Adopt growth-friendly policies.
- Accelerate economic integration with the rest of the
- Focus government programs on areas where they can be most
beneficial, and assist free-market forces without interfering with
- Help the disadvantaged, without hurting the rest.
- Develop macroeconomic policies that reduce economic uncertainty
- Encourage the development of innovative financial markets that
help growth, while reducing the risk of boom-bust cycles.
Markets really do work — if we let them and (when needed) help