Mercantilism’s ugly return, and a policy that’s too top-down for Communists
Just when you thought the enlightenment’s aftermath had slain the mercantilist dragon for good, you find out about Treasury Secretary Timmay Geithner’s plan for G-20 nations’ current-account balances. Apparently, our favorite South Park denizen-cum-cabinet member has proposed that all G-20 nations keep their current-account balances within 4% of GDP. This represents an understanding of economics that was more at home in the 18th century, when people still thought that exports were a reasonable proxy for a polity’s wealth. Apparently, Timmy hasn’t heard of time preferences in consumption/investment, and therefore, he thinks that this will be a good idea.
However, according to Tim Adams (in the Japan Times, above), there may be an underlying motive:
“It not only won’t solve the imbalances problem, it will become a distraction from the need to make progress on the underlying policies from which the current account is derived…”
If I’m Timmy Geithner, I’m probably thinking that this distraction is a feature, not a bug. Why deal with the fight for real reform when we could just conjure a fight over a talismanic 4% limit that wouldn’t matter at all anyway? That’s one way to pass the buck.
Meanwhile, over at Cato at Liberty, Daniel Ikenson has noted another interesting take on this ridiculous plan:
But I marvel at how deeply Chinese Vice Foreign Minister Cui Tiankai’s tongue must have been planted in cheek when he uttered this rich rejection of Geithner’s idea: “The artificial setting of a numerical target cannot but remind us of the days of a planned economy.” If the shoe fits…
I’ll bet it would work just about as well as a planned economy, too.