Re: Continuation of free trade

[Abhijeet Pradhan <perdi420@yahoo.com>]

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IPI_Marker

Venu,

Actually my reply was a little indignant, but your temperance has
converted
me.  So no more rhetoric.  Here are the issues as I see them...

My assertion is that by subsidizing agriculture, the West is making a
mistake, and we should not make that mistake, just because they are.

I will give you the example of the US steel industry.  WHen US steel
started
getting uncompetitively priced (maybe because the Jap/Koreans subsidized

their own steel industry), the US govt. put up trade barriers.  The
result
was that cheap subsidised Asian steel found its way into the US market
in
Japanese cars.  The US auto industry could not compete on price because
the
US govt, tried to protect US steel industry.  Anyway you look at it, a
subsidy is free money, and nothing is cheaper than that.  Maybe the
taxes
from car industries made up the subsidies that Japan gave its steel
makers,
who knows!!  But the point is that protection was detrimental to the US
auto
industry and also the US Steel industry.  Until the US automakers either

started making cars outside, or were allowed to use imported steel, and
were
able to cut costs substantially...  Anyways you look at it, subsidies is

like giving away free money, and it is unfair.  But you cannot fight it
by
giving away more money, only by taking more money than the other person
can
give.  If the US had not protected its steel industry, it is possible
that
the Japanese auto industry might have had a much harder time, and may
not
have grown as big.  Consequently the Jap govt would have found less tax
revenue from them, and may have not been able to subsidize the Steel
industry much longer!  Would this have happened, I dont know, and nobody

will know, but it could have happened.

I am not advocating a sudden removal of subsidies for the Indian farmer,

that would be too much of an economic shock; but a gradual decrease over
a
decade or more is not such a bad idea.  But I agree with you, as long as

other Govt policies prevent them from seeking employement else, removal
of
subsidies is not possible.  All around liberalization is reqd.  Removal
of
subsidies, if not accompanied by further liberalization is a recipe for
disaster.

Also you wrote "when the people are not in a position to diversify, when

alternative plan to diversify their occupations is not in place or
anywhere
in sight".  I think you underestimate the ingenuity of people in
general.
Secondly, the government should not really be in the business of
providing
alternate plans or occupations for those who lose their jobs/livelihood.

Short-term financial assistance is good enough.  And most importantly
ACCESS
TO QUALITY EDUCATION.

Later
Abhijeet Pradhan
--- venugopal <gvvs@nird.ap.nic.in> wrote:
> ---------------------------------------------------------------------
> Please help make the Manifesto better, or accept it, and propagate it!

> ---------------------------------------------------------------------
> IPI_Marker
>
> No, Abhijit, nowhere is an assumption that people will be condemned to

> their
> own occupations. What was asserted was the point that when the people
> are
> not in a position to diversify, when alternative plan to diversify
their
>
> occupations is not in place or anywhere in sight, killing them by the
> tool
> of export subsidies is wrong and unfair. This is the underlying point
in
> all
> the WTO discussions and bargaining by developing countries with
> developed
> countries. All I have tried to point is that it is definitely not
'free
> trade' if developed countries try to perpetuate their export
subsidies.
> I
> find it ironical that developed countries have apparently got
convinced
> as
> they keep giving some kind of commitment now and then on deadlines for

> phasing out  export subsidies in agriculture but, I have to convince
so
> many
> of my friends  here in IPI on the same points conceded by the western
> world!
> 2. Higher production of wheat is no insurance against malnutrition or
> starvation as so many studies including the famous one by Amartya Sen
> has
> shown. Indian experience is very much relevant here, as we have seen
> good
> and sustained increase in food grains production in last ten years but

> it
> has not helped in preventing starvation. So, there is no evidence at
all
>
> that calorific intake for the poor will increase if a country imports
> wheat.
> As I have argued, there is no surety that what you term as 'cheap
wheat'
> is
> actually cheap, if you scrutinise the overall cost-benefit aspects of
> this
> series of transactions, after adding the displacement or
diversification
>
> cost of million people and its overall cost for the society. Nothing
> becomes
> cheap just because it is called so.
> 3. If I am convinced that you need my help, I will gladly extend it
> Abhijeet, to the best of my ability. I agree that individual charity
has
> its
> place. But, here the question is that of a socio-economic system. Do
we
> need
> to move towards a socio-economic system where everybody's problems are

> addressed on the basis of justice, equality and fraternity? Do we need

> to ke
> ep the objective of social justice in mind while deliberating on
> economic
> policies? Or, do we give up all pro-poor initiatives and declare a
kind
> of
> Jungle Raj?I have no objection to somebody believing that Adam Smith's

> invisible hand will somehow guide everything nicely. But the point I
am
> trying to make is that you cannot be manipulating the invisible hand
> through
> export subsidies, oligopolies, military manouvering, diplomatic
> manouvering
> etc and at the same time sing the glorious tune of the invisible hand.

> Regards
> Venugopal


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