While Steve Kates was selling Say’s Law to the socialists, three other Cats were soaking up the genteel fervor of the Mont Pelerin Society’s Hong Kong meeting.
Highlights for the first day or so included Vaclav Klaus who reckons the threats to future posed by the global warming scam and its policy ramifications have been added to by transnationalism. An important aspect he considers is the EU and its “undemocratic arrangement” where big shots see themselves at the vanguard of a new historical progress. His concerns about global governance are that decisions are being taken by functionaries, “cosmopolitan elites”, who want to impose their own ideas.
Although Klaus did not detail particular harmful policies, we see them in “fair trade”, and green organisations imposing standards like those covering forest products. By requiring producers to delve all the way back into their supply chain this prevents the “I Pencil” story where Milton Friedman shows how prices simplify information gathering and allow markets to operate economically and speedily.
This theme of democracy was picked up in the context of China. MPS President Allan Meltzer boldly declared that China will never make the transition to an entrepreneurial society that did other than copy innovations unless it became democratic. He maintained that the memory stick, google, cloud storage and all the other innovations that have transformed society came only from free societies for good reason. Others warmed to that theme including, in muted form, the censored Chinese speakers.
But there were a few voices – well mainly me – pointing to the tensions of democracy and growth. This is epitomised by the “47 per cent” who would eat the whole cake. A glib remark was that if Hong Kong achieved true democracy that was being urged on China, in ten years time it would be like France. And though there are forebodings about the sustainability of Chinese growth on the basis of economic liberalism alongside political repression, it remains a beacon of growth.
On the other hand Korea was evidenced as a nation that had achieved continuously impressive growth with democracy (Taiwan too, though it is a forbidden topic). And in a masterly demolition of international aid, William Easterly pointed out that it was no coincidence that aid recipients were mainly autocratic nations. Work exploring the tensions between democracy (in its populist unconstitutionally constrained form) and economic efficiency is somewhat overdue.
Others also pointed to the deficiencies in property rights in China as a major downside to sustainability. Some tend to over-egg this contention. Chenggang Xu from HK University even suggested in his speech that property rights in China were among the least secure in the world though under questioning he agreed that informal reforms in the late 1970’s, the Civil Law in 1986 and formal recognition of private property rights in 2004 had been vital in allowing the economic take-off.
Aside from the economic development theme, there was the how-do-we-get out of the stagnation theme. Here most answers were unpersuasive. Japan’s Yoshinori Shimizu plumped for a massive infusion of money, a Friedmanite tinged Keynesian solution that has as much chance of working as any previous government induced money gluts. To be fair, he also advocated deregulation but this is an outcome unlikely to be agreed in a Japan that continues to motor on growthlessly. John Taylor gave an excellent review of the macro calling for an end to quantitative easing and steady monetary growth with the reserve banks choosing firm monetary rules and sticking to them. As a solution this too has caveats in not doing much for the supply side, not mending the budget or reversing the regulatory excesses, failing to address flagging savings and not really recognising the extent of the malinvestment shedding that is required.
Doubtless by Friday we will have the blueprint for the future.