Tuesday, August 19, 2008

In Defence of Market Forces

The lumbering processes of Government will never anticipate the decisions of global corporations facing their own competitive challenges.

"The global economy of the 21st century is an unforgiving arena, where product life cycles are shorter than ever, where what was new yesterday is old today - and where what was old yesterday can come up sparkling today. Few better snapshots of this unsettling phenomenon could be provided than the tidings in today's Australian Financial Review. BHP Billiton was dismissed as "old economy" in the 1990s as commodity prices plumbed historic lows, multibillion-dollar investments came unstuck, management, board seemed adrift, and so called dot com companies were all the rage. Yesterday, the company announced a $US15.4 billion ($17.8 billion) net profit - the largest in Australian history … As the Rudd Government prepares to pour money into Australia’s over protected car industry, and probably the textiles and clothing industries too, it is timely to reflect on what this means. The ability of Governments to determine the course of national industries via “industry plans” and “transitional assistance” (a much loved phrase within Rudd policy papers) is weaker now than it ever was. The lumbering processes of Government will never anticipate the decisions of global corporations facing their own competitive challenges. Far better to ensure the workforce and business environment is as competitive as it can be and let market forces decide which firms, industries, products, and services will survive and prosper."

Representing the sum and substance of an editorial piece as it appeared in today’s fin review, “A game too fast for government.”

(Via afr.com)

Today, more than ever before, domestic policy is subject to the discipline of market forces that no one controls, moreover where governments do exercise forms of rule it only serves to distort and hinder economies in the global context. Reality is, in terms of domestic policy measures including protectionism governments are increasingly becoming redundant.

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