"END OF LAISSEZ-FAIRE, THE"   Term Paper ID:19588 Click to get this paper

Essay Subject: (Robert Kuttner). Reviews work on changes in national economy & tendency toward globalism.... More...

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Paper Abstract: (Robert Kuttner). Reviews work on changes in national economy & tendency toward globalism. Paper Introduction: "Laissez-faire" is a French term which literally means to "leave alone." In economics, the phrase is used to indicate a situation in which government exercises little or no control or interference in the affairs of business. Republican administrations are, by tradition, strong proponents of a laissez-faire tradition; Democratic administrations traditionally favor more regulation. In his book, The End of Laissez-Faire, Robert Kuttner addresses the status of the laissez-faire movement in the economy today. Kuttner uses the conference at Bretton Woods, New Hampshire, held in 1944, as the focal point for his first chapter. It was at this conference that the foundation was laid for the next half century of global economics (25). Kuttner also uses this chapter to provide the reader with the historical background necessary to under Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. The Japanese, Kuttner observes, do not behave asAmericans do. In chapter 6, Kuttner turns his attention to the issue of security,both economic and military. What Kuttner finds particularly interesting isthat the industries which were subject to this national policy often faredconsiderably better than industries which were left to compete in the worldmarket without a national trade policy, and which fell prey to othercompetitors from countries which engaged in active trade policy. In addition, Kuttner argues that prolonging the illusion of Americandominance of the world economy failed to take into account the changingeconomic and political landscape. Instead, he recommends a strategy whereby the UnitedStates encourages an agreement based on a balance of benefits andresponsibilities for the world's major trading partners. Ronald Reagan and MargaretThatcher presided over two powerful states during this time, and theirpractices, Kuttner asserts, brought forth the high budget deficits andpolitical confusion which characterizes the economy today (81). This is the one area where the American post-war goal of laissez-faire policy faltered. Instead of trying to encourage the restof the world to embrace a laissez-faire attitude, particularly since therest of the world is not predisposed to doing so, the American politicalsystem needs to consider the possibility of a pluralistic world where theUnited States is only one among many significant factors. Price was rarely citedas an issue. The End of Laissez-Faire. In future General Agreement on Tariffs and Trade (GATT) talks, Kuttnersuggests that the United States forgo discussion of free trade as a matterof high priority. He begins by asserting that theUnited States must let go of its attachment to free trade lackinggovernment involvement. It was at this conferencethat the foundation was laid for the next half century of global economics(25). Kuttner suggests that the burden should be sharedamong the dominant currencies so that one economy does not bear the burden,or responsibility, of suffering from the variations in the internationalcurrency market. Where American companies are likely to put out bids forprojects or products, with no guarantee that companies which are awardedbusiness one year will be awarded business the next year, the Japaneseenjoy long-term relationships with their suppliers. While overt technology transfers were not permitted,technology could be transferred (and was, according to Kuttner) throughless direct means. On the onehand, the economy benefited from the technological and economic stimulusprovided by the military expenditures. In chapter four, Kuttner sets out his ideas for how the United Statesshould approach trade in the coming years. Itbecame clear during the 198 s that capital was associated with nationalboundaries, and that some nations, including Japan, took an active interestin where and how their capital flowed. Republican administrations are, by tradition, strong proponentsof a laissez-faire tradition; Democratic administrations traditionallyfavor more regulation. Roosevelt opted toforget the post-war environment even while the war itself was beingpursued. Like other nations of the world, the United Statesneeds to recognize that it is in the national interest for the governmentto take an active role in the private sector in order to facilitate thecreation of wealth within that nation (157). In fact, Kuttner also suggests a move toward a three-part currencyprogram: the American dollar, German mark and Japanese yen. The result of this strategy was the establishment of theInternational Monetary Fund (IMF), the World Bank and the United Nations.Roosevelt's death, Truman's presidency and the end of the war left littleof the same sense of urgency which led to the formation of theseorganizations. "National security" was an obvious way in which thegovernment did engage in a national trade policy, while at the same timeproclaiming that the world as a whole should move toward a free market(laissez-faire) system. Such a worldwould require that the United States adopt regulation which is in its ownself-interest as well as in the interest of the global economy, which hasnot universally benefited from the United States' recent move to a debtornation status. Engaging in life-long employment assome Japanese companies do engenders a feeling of loyalty to the companythat American firms are hard pressed to duplicate. In one study conductedin Australia, the observer reported that American and EC companies used thebidding process (generally) and selected the lowest bidder on projects,regardless of the nation of origin associated with the company. Even internationaltransactions which originate in Japan are arranged in dollars. Knopf, 1991. Similarly, recognizingthat business relationships of vendor-customer are long-term, there is aloyalty and dedication which develops which surmounts the short-term priceadvantage that European or American firms might encounter. The problemwith this strategy is that it places the burden of the vagaries of thecurrency market on the Americans, since it is the dollar which is used asthe medium of exchange. Chapter 7 takes on the issue of international finance, and Kuttnersuggests several strategies to improve the current situation. Kuttner reiterates his position that the end of the ColdWar offers the United States a unique opportunity to redefine its goals andits position in the world economy. If outside competition did undercut prices, the Japanesesupplier would generally meet those prices in order to preserve thebusiness. These are thestrongest currencies in today's economy, yet a disproportionate amount ofthe world's commerce is conducted in American dollars. The conceptthat "what's good for General Motors is good for the country," iscontrasted with the Japanese practice of high levels of governmentintervention in the marketplace (1 9). However,Japanese companies ordered from Japanese suppliers. While the United States clung tothe laissez-faire, free-market ideal, other economies and governments beganmoving away from that ideal and toward a protectionist approach to capital. Predatory pricingand dumping could be discussed under such auspices, which provides aconcrete environment instead of the abstract concept of "free trade."Kuttner postulates that since the world is unlikely to come under a singleworld government anytime soon, global trading cannot be subject to a singleset of rules. Commerce became a global activity,but political institutions remained localized. In chapter 3, Kuttner suggests that Ronald Reagan prolonged theeconomic hegemony of the United States, but did so artificially and at agreat price -- the staggering budget deficits which now plague the nation(84). those nations which areable to do so quickly will benefit; others, which fight the system (as theUnited States did during the 198 s), will suffer (157). Britain emerged from the war considerably weaker than itentered the war, and the United States came to dominate the worldorganizations which it helped to set up at Bretton Woods (4 ). In chapter two, Kuttner turns his attention to the 197 s and early198 s, and the rise of conservatism in England and the United States.These conservatives, according to Kuttner, did not attribute the economicproblems of the 197 s to the collapse of the international monetary systemor OPEC price increases. New York: Alfred A. The result was a windfall for conservatives, who could claim thatredistribution of wealth through these social welfare programs andexcessive taxation of the middle classes to support those programs were atthe heart of the problem (81). Chapter 5 takes on the issue of the Japanese, and contrasts thetrading practices and strategies of the Japanese, the European Community(EC) and the Americans. Recognizing and accepting these conditions is inthe national interest of all nations involved. In that essay, Keynes suggested that enlightened self-interestdoes not always lead to the best public interest, nor should thatconclusion be inferred from the "Principles of Economics" (i). He suggests,for example, a true global central bank, much broader in scope andresources than either the World Bank or the International Monetary Fund.Central bankers, according to Kuttner, tend to shy away from inflationarymeasures, and keep close tabs on the prevailing currency (27 ). The title for Kuttner's book comes from a 1926 essay by John MaynardKeynes. Kuttner uses the conference at Bretton Woods, New Hampshire, held in1944, as the focal point for his first chapter. When theworld economy entered a period of stagflation during the 197 s, the socialwelfare programs could no longer be funded, and political upheaval began toerupt in a number of different countries (71). Just as the beginning of the Cold War inthe late 194 s signaled a change in global economic relations, so the endof the Cold War in the late 198 s demanded another, equally drastic changein global economic relations. The Cold War proved tobe good for the economy. In practical terms, health, education andsimilar welfare programs were cut back or eliminated in order to providebasic services to the unemployed and new poor. But Kuttner suggests that such high levels of military spending andinvolvement in the private sector were doubled-edged swords. On the other hand, "nationalsecurity" kept some of the technology from being effectively marketed inthe world economy. Just as Roosevelt (and Wilson before him) had done,these nations prepared for the post-war order before the war actuallyended. Instead, the mixed economy which emerged afterWorld War II, charged as it was with regulation, welfare-state policies,labor unions and public spending (64). There is, according to Kuttner (as illustrated by this example),a fundamental difference in the emphasis between the way American companiesand Japanese companies do business (166). While the United States cried "foul!" and sought to defend the post-warplaying field, other nations adjusted to the post-Cold War economic andpolitical realities. Work CitedKuttner, Robert. Capital is not supposed to besubject to national boundaries, but there was resentment at the intrusionof Japanese capital into the American economy (although Canadian andEuropean capital was apparently not subject to these same criticisms). Kuttner finds that Reagan viewed most government intrusion on businessto be bad, whether in the United States or in other countries. That BrettonWoods happened at all Kuttner attributes to Roosevelt's desire to avoid thedisintegration of international cooperation which occurred in the aftermathof the Versailles conference following World War I. The American military wasresponsible for fueling the growth of high-technology industries and thenumerous technological innovations which came out of those industries.Public contracts awarded to private industries provided numerous jobs, andfueled the economic growth of the 195 s and 196 s. The Japanese emphasize long-term relationships and the ideal ofmutually beneficial relationships. In hissummary to this text, Kuttner suggests that the hands which shape theglobal economy in the coming century should be visible ones, a directreference to the "invisible hand" associated with laissez-faire strategy.Market economics should not be totally discarded, but must be balanced withappropriate regulation and strategy imposed by politicians willing to takeon the economic ramifications, and willing to officially yield America'seconomic hegemony in favor of a global perspective. "Laissez-faire" is a French term which literally means to "leavealone." In economics, the phrase is used to indicate a situation in whichgovernment exercises little or no control or interference in the affairs ofbusiness. Kuttner also uses this chapter to provide the reader with thehistorical background necessary to understand not only laissez-fairetheory, but also general economic theory and political realities. So long as economic growthcontinued, social welfare programs could continue and the politicians whoenacted those social welfare programs would remain in power. WesternEuropean history and tradition is contrasted with the stark realities ofthe two World Wars, and America's reluctant role in both. The last chapter of the text is Kuttner's attempt to forecast wherethe global economy is headed, and what that strategy portends for theAmerican economy. Instead, nations must learn to trade under multiple sets ofrules, and understand that the conditions of trade are going to bepolitically motivated. In his book, The End of Laissez-Faire, RobertKuttner addresses the status of the laissez-faire movement in the economytoday. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.