Let's just boil Gabba Flamenco Crossover's argument down to its bones first:
Resources are finite
Globalisation ignores this
Therefore we need economic planning and protectionist trade policies (i.e. less globalisation).
Is that right?
No, you've misunderstood me a little.
This is the bit you'd concur with: The last 300 year have seen an explosion in the 'wealth' of humanity, insofar as that term can be meaningfully used. The bedrock of this was a complex of intellectual and material innovation that preceeded the wealth explosion by a few hundred years - this allowed humanity access to new natural resources, and to new ways of using those resources. This was independent of both free markets and cross-border trade (which we now call globalization), both of which had existed long before the wealth explosion - in fact, almost as long as human civilization itself.
In this period, the USA that has been most successful state at turning resources into wealth, and at distributing that wealth fairly and effectively. You would say that is overwhelmingly due to it's adherance to a system of free market capitialism - I'd contend that historically specific factors are also important, as is the USA's exploitation of it's dominance to handicap other, rival systems. But, whatever. The USA has done more to improve the lot of the common man over the last few centuries than anyone else and, yes, free market capitalism is a large part of the mix.
I also agree that, all other things being equal, cross-border trade is better than protectionism for the wellbeing of a state's citizens - though I'd say local factors mean that it's hard to generalize, and that trade protection can be viable for some states in specific circumstances. But I'm not down on cross-border trade
per se.
OK, hope that's put a smile on your face. This is the bit you won't like so much.
The foolishness of free market evangelism is that it takes the situation as it's unfolded over the last 300 years, and extrapolates from that a universal truth that the free market is always, under any circumstances, the best hope of humanity to improve it's position - just as Communism saw the Russian revolution as a harbringer of inevitable worldwide overthrow of capitalism. And I think the most pressing example of this is in the free market attitude to finite resources. Let's look at it again.
You said
I thought that the whole point of a market economy (indeed, any economy) was to manage finite resources.
That's a bit vague. I'd like to see an informed definition from a reputable economist, but for me, markets are tools for turning resources into 'wealth'.
When markets consider a resource to be finite, it is within the context of an individual operating in the market. So person X has 50 kilos of something - he sells it all ( I'm sticking with the masculine pronoun because it's easier). It's a finite resource. He needs capital to get some more. If it's apples, he doesn't need too much - if it's lychees, he needs a bit more. If it's truffle oil, he needs a lot. And so on.
The scarcity of the resource denotes how much capital he needs to outlay on new stock, and this fluctuates not only between different resources, but on the same resource over time. However, it is implicit in the market that the resource exists somewhere in the world, and can be brought to market if enough capital exists to overcome the obstacles to supply. Furthermore, although in theory the market only ever exists in the present, in reality it is time conscious - and it tends to assume that the resource will go on existing at whatever scarcity level into the foreseeable future, except in very rare, marginal cases (works of art being already mentioned as the obvious example).
The only other type of resource is one which does not exist, but is present by implication in consumer demand - and incidentally I disagree with you about demand not existing apart from supply. Mr Tea is right. Look at our current and very pressing demand for an abundent, non-polluting power source, even if we don't know the form it will take when, or if, it arrives. Look again at Say's law - what it's saying is that the best way to stimulate demand is to enable the individual's power to create wealth through supply. But that presupposes some demand is already in place, otherwise the individual has nothing to supply to. Supply always presupposes demand, not the other way round.
But this unsatisfied demand for non-existant resources only becomes important in retrospect. It can't affect the current reality of the market, because all participants are in the same boat. So we go on.
This has been the situation so far. But now we're on the brink of a new era, where a third type of resource emerges - the resource which has ceased to exist. Something that humanity has built multiple technologies, markets, epochs and nations on, that we'd always assumed would be there forever, underpinning the process of wealth creation - and then it's gone. Finito, at least while we still remain earthbound. It can't be stressed enough that this is an unprecedented development in human history. The last time we had to deal with the dissappearance of natural resources was during the last ice age, 10,000 years ago, before the advent of agriculture, when we were still effectively a tribe of apes. Even then, it wasn't on a planet-wide scale.
What will the Chinese drive, you asked, if not cars? Well, whatever it is, it will have to be made of something that isn't iron, aluminium or an oil-derived plastic. It will have to be powered by an energy source that isn't fossil-derived. It will be needed within a few generations to avoid seriously damaging the world economy, yet contemplating the mass-production of such a device places you firmly in the realms of science fiction. This is typical of the blase attitude that free market evangelists have towards finite resources. We've established that market demand has no effect on the development of knowledge and technology, which proceeds in bumps and jerks according to it's own arcane logic. We've been very fortunate over the last 300 years, but there's no guarantee that it will continue like that. We need to play the cards in front of us rather than worrying about what we might get dealt next round.
It seems to me that free market economics has absolutely nothing with which to begin this task. Command and Keynesian economics, whatever thier flaws, at least have an emphasis on planning, and thus a consciousness of the probable future. If we can manage markets in finite resources, or at least the demand for them, we can wind down thier economic role in a controlled way, minimise instability and buy ourselves some valuable time. In contrast, all that free market theory has in the cupboard is an ill-defined proposal that innovation will respond to meet demand, which we agree is misplaced, and beyond that a quasi-religious belief that whatever happens, The Market Will Provide. This is completely inadequate.
Personally, I would like to see the democratic nations of the world utilising thier representative systems to hold a debate on future energy policy, and make a decision on what path to pursue - openly and transparently, without vested interests directing things behind the scenes (no sniggering at the back, please; allow me a moment of starry idealism). Free markets are one of the tools on the table - incredible wealth generators, and also fantastic at disseminating information. But, please, lets stop pretending that energy policy is subject to the laws of the free market. With thier banks of lobbyists, sponsored legislation, government subsidies and tied international aid/trade packages, the energy industry is the diametric opposite of a notionally self-regulated trade system.
As far as this debate goes, Vimothy, what I'm asking is this: if the free market is a self-regulating system, what is the mechanism by which it proposes to deal with resources that will cease to exist? I've never read anything plausible from a free market economist on this subject (or from any other mainstream economic school of thought, to be fair), but by no means am I writing the prospect off - my economics reading is hardly exhaustive. So, take as long as you like, do your research, come back with a proper answer, and I'll listen. But I want a serious engagement with the issue at stake - flip one liners will be considered an admission of defeat. Over to you.
