The (in)Visisble Hand

There are economists out there who actually tell us the truth. Paul Krugman, in The Great Unravelling. Didier Sornett, in Why Stock Markets Crash. John Maynard Keynes in Essays in Persuasion.

Then there are those who tell us fairy stories, sort of like the tooth fairy, of ‘the invisible hand of the market’ which always makes everything come out fair and kind and nice and equitable. Let me point out several instances of where this is clearly bafflegab, intended perhaps to hide the real ogrish appetites of the marketplace and those who control it for their own profit.

Critics of NAFTA predicted ‘a great sucking sound’ as jobs went south to Mexico. Here is a Wikipedia article on this:

The export-oriented argument is also critiqued because of the discrepancy between domestically produced exports and exports produced in foreign countries. For example, many US exports are simply being shipped to Mexican maquiladores where they are assembled, and then shipped back to the U.S. as final products. These are not products destined for consumption by Mexicans, yet they made up 61% of exports in 2002. However, only domestically produced exports are the ones that support U.S. labor. Therefore, the measure of net impact of trade should be calculated using only domestically produced exports as an indicator of job creation.

In fact, Mexican farmers lost their jobs due to NAFTA ending subsidies, and thus were able to work in the maquiladores, modern factories, while living in cardboard and tin shacks.

At that time, someone asked one factory owner what would happen if it were possible to do the assembly or stitching work elsewhere. Presciently, the reply was: ‘If it becomes cheaper to do this in Bangladesh, we’ll move production there in a heartbeat.’

GATT and a few other trade deals later, we have garments being made in Bangladesh, in dangerous factories and, apparently, using child labour.

Let’s move on to the price of diamonds. Here (and in other places) you will find that the diamond is no longer scarce, but that it’s rarity exists because supplies are carefully controlled. And, it’s necessity in an engagement ring was more or less invented by de Beers.

That’s a pretty visible hand, eh?

Let’s go to Haiti (not literally) and look at two things: the price of rice and the capability of the government to fix things.

Rice first. Bill Clinton apologized on television: President Bill Clinton, now the UN Special Envoy to Haiti, publicly apologized last month for forcing Haiti to drop tariffs on imported, subsidized US rice during his time in office. The policy wiped out Haitian rice farming and seriously damaged Haiti’s ability to be self-sufficient.

Why did he do this? So the Arkansas farmers could sell more rice. Big hand, Bill Clinton had, and not invisible.

NGOs in Haiti. Here you will find these words:

Why, for example, does there seem to be so little co-ordination between NGOs in a place like Haiti? Why, despite the vast effort and resources that flowed after the earthquake two years ago, are people still living in tents without basic amenities?

NGOs are there, imho, to cultivate influence. Influence means money.

Conversely, after an earthquake in China, it took only days to start dropping supplies.

Loaded with bottled water, instant noodles and other food, an Air Force helicopter took off from Qionglai Airport to Baosheng township, where the rescue teams are struggling to reach after landslides blocked the approach roads, a report by state-run Xinhua news agency said. So far 2.6 tonnes of supplied were airdropped, state media reported.

What’s special about China? It may not be a traditional economy run by invisible hands.

Another visible hand is advertising. Remember when all detergents had to have phosphates in them? and now, they all advertise as being phosphate-free? Don’t take my word for it, click here to see one article on this.

Imho, much of today’s advertising is outright silly. Sky active. Plat-formate. Ec-oboost. Cars that blow down snow fences just by passing them. Gory ram guts. But, somebody believes these ads change our behaviour. Again, the hand isn’t invisible and it isn’t benign. It is profit-seeking.

So, what do you think is a good recommendation? Government control? Control by educated consumers and donors? Control by corporations, including NGOs? If you’re waiting for the dumb question, this is it: Is control by educated consumers and donors even conceivable? and, Is there any way we can wrest control away from these o-so-benign, invisible hands?

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