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Politics Over Economics: Thinking About Trade and Industry
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16675 |
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Section : |
MODERN THOUGHT
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| Issue
Date : |
10 / 1989 |
7,510 Words |
| Author
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William R. Hawkins
William R. Hawkins is a policy analyst at the U.S. Business
and Industry Council. |
It is a mistake to think about America's problems with international trade, foreign investment, and techno-industrial competitiveness as purely business issues. Business deals with the creation and distribution of private income and wealth. Its basic unit is the individual or firm. While the macroeconomic base suffices as a foundation for domestic analysis, economic activity that crosses national borders must be analyzed at a higher level. Borders are political demarcations. Anything that crosses them (people, goods, money) becomes a subject of political economy, which is concerned with national power and collective security as well as private wealth. Its unit is the nation-state. Relative capabilities, independence, and survival are vital to a nation's international standing, and those who aspire to statesmanship need to take a wider view of world affairs.
Political economy is, as its name implies, a mix of political and economic theories. Unfortunately, recent debate has focused entirely on the application of economic theories. This is particularly true of those advocates of free trade who claim their program is the result of economic determinism and thus unassailable. Nothing could be more misleading.
Economic theory lays out certain cause-and-effect relationships; for example, if prices go up, consumers will buy less. These relationships are complicated by the large number of contributing factors. Changes in income, in prices of substitute or complementary goods, in tastes, and so forth, can modify the relationship between prices and consumption. Economists' heated debates over the equations used to build models testify to how complex these matters can
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