An imperfect liberal democratic perspective

Kasper’s views are often completely out of touch with reality. While Kasper advised one Australian parliamentarian to “rely on common sense and opt for free trade” when considering two models advocating car tariffs or abolishing them, a recent CNN money article highlighted concern from Western automobile company executives about China’s potential for overcapacity which may force them to export Chinese-made vehicles to other markets.

While many of Australia’s journalists also appear happy with free trade, probably on the basis that Australia may long benefit from a rising China, other nations express greater sentiment about the need to alter one’s industry approach. Just a week ago, one  Washington Post journalist argued just how incompatible China was with free trade ideals. With Evergreen Solar closing its solar panel factory in Devens, Massachusetts, after opening just three years ago with at least $US43 million in state subsidies, the US learned that Evergreen is shifting its production to China because of lower costs and considerable government subsidies offered by the government there.

Further, while the US company Manitowoc Co had been exporting giant cranes to China for years for use in giant construction projects, Chinese firms – now ready to enter the market – were to be assisted by Beijing slapping a 30 per cent tariff on Manitowoc’s exports under global trade rules that allow “developing” countries to protect “emerging” industries. Manitowoc now has entered a joint venture with one of its Chinese competitors, which means much of the work will be done there.

As David Cay Johnston argues, a 2001 Pulitzer Prize winner for exposing tax loopholes and inequities, today’s ‘free trade’ is representative of “tax-subsidized mechanisms that encourage American manufacturers to close their domestic factories, fire workers, and then use cheap labor in China for products they send right back to the United States”. He points out that this has not only created enormous downward pressure on wages, not just for factory workers, which means “less money earned from labor translates into less money to finance the United States of America”.

To conclude, Western societies will indeed need further policy reform in the future as our reliance upon debt (public and/or private) cannot go on forever at such high levels. But while centre-right think tanks will play a role through policy ideas that hep a society encourage efficiency in regard to the public purse, reform is unlikely to occur in the dramatic way advocated by followers of the Austrian school, especially if communist China is cited as an example of Schumpeter’s can-do approach.