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Sunday, April 02, 2006

From Karl Marx's copybook

I read an interesting article in the March 4, edition of the Economist. It's all about economic nationalism, the idea that countries protect their borders from foreign countries on the grounds that their blocking foreign companies from entering their economy is good for the state. The article is very strongly written, and it's obviously against economic nationalism. Fitting for "The Economist." I thought the article drew some good inferences that parallel our study of public finance. The writer draws pictures of many different countries blocking out other countries and blames the economic nationalism on rent seeking politicians. Rent seeking is always relevant...right? Marx said that ownership as well as the power to exploit, was everything. This is why socialist governments' desire to nationalise the

"commanding heights(Marx)" of their economies (paraphrase). The author proceeds to state that there are no unfavorable effects produced by opening borders to foreign companies. It does state that, "what is affected, however, is the ability of governments and of individual politicians to use patronage at favoured firms to help their friends, to get favours in return, to support special interests such as trade unions, and, in broad political terms, to paint themselves as patriots."

The article begins with a statement from Samuel Johnson that reads, "Patriotism is the last refuge of a scoundrel." Interesting quote. Economically speaking, policies that promote economic nationalism are ultimately bad for the majority of individuals that make up the American economy. Foreign trade allows consumers to reach a further out production possibility fronteir. In regards to policies that are promoted as, "good for the nation," that in essence further rent seeking behavior are bad policies. An economic cost-benefit analysis of such policies would usually (I say usually because I've never seen any. I'm pretty confident it could be always) show that someone did bad policy analyses, or the politician is simply corrupt. Which the writer of this article would argue.

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