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Monday, June 9, 2008

 
Entrepreneurship and Trade in the Balance
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The connection is not made often enough, but the key sources of economic growth -- entrepreneurship and trade -- are imperiled by the volatile dollar.

As usual, economist Judy Shelton has it right:

The connection between price stability and entrepreneurial effort is profound. Why should anyone work hard or take risks if financial rewards can be blithely confiscated through inflation? The old communist aphorism – "They pretend to pay us and we pretend to work" – reflects deep cynicism borne of citizen subservience to totalitarian government. Honest money is the bedrock of democratic capitalism.

Yesterday we wrote about the stalled Doha free trade round. A new report from the Copenhagen Consensus Center found that hardly any near-term policy action would benefit mankind as much as adopting Doha. The U.S. administration sincerely believes in Doha and has fought for it. But how much more difficult do they make their own case when their dollar policy screams protectionism?

Asks Shelton:

How can Americans champion the cause of free trade and exhort other nations to rid themselves of protectionist measures such as tariffs and subsidies – and then smugly claim that U.S. exports are becoming "more competitive" as the dollar sinks?

That's not competing. It's cheating.

In an effort to gain short-term windfall gains for a few industries, we are putting all our companies and consumers at great peril if we don't stabilize the dollar and point the free trade ship back in the right direction.

posted by Bret Swanson @ 12:27 PM | Trade

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