January 31st, 2002

more fuel

"To join the international trading system, nations must now agree to the radical notion of a level playing field and, toward that end, must disallow government intervention in the economy beyond establishing certain minimal norms, like standard accounting procedures and contract law. The World Trade Organization's Multilateral Agreement on Investment, for example, will, if passed, void members' rights to regulate multinationals and promote domestic businesses.

For the large aspiring middle group of developing nations countries like Tunisia, Nigeria and Vietnam the advantage of accepting the doctrine and rules of a level playing field is access to world markets. The disadvantage is a loss of the freedom to subsidize company formation and the necessary learning process. That freedom has been critical to most economic modernizations that have had any lasting success. A level playing field may thus entail a false equality.

As the World Economic Forum's members ponder the problem of leadership, they have the opportunity to stimulate debate on whether the one-size-fits-all principle is too rigid to allow newcomers to enter the world trading system and prosper in it. If the forum succeeds in bringing flexibility to the system by recognizing the benefits of different government policies for countries at different development levels the result may be a more inclusive globalism, one less likely to be passing through "fragile times."

Alice H. Amsden, professor of political economy at the Massachusetts Institute of Technology, is author of "The Rise of 'The Rest': Challenges to the West From Late Industrializing Economies." "

From the NY Times this morning.

Thoughts? These "level playing fields" of course pretty much do away with struggling international companies. But, if governments are subsidizing otherwise struggling companies, isnt there a danger of bringing a whole economy down in the effort to keep a company competative?

Im just interested. My appetite for economics was whet by Spirals demand curve questions last night.