neomercantilism, trade

["Forstater, Mathew" <ForstaterM@xxxxxxxx>]

Rakesh and others raise a number of important concerns and criticisms
with regard to Keynesian type analyses and policies.  In this post I
want to address the trade issue. I agree that there are problems with
'Keynesian protectionism.'  But it should be noted that many Keynesians,
like Joan Robinson and Abba Lerner, and arguably Keynes himself,
forcefully opposed this position. Promoting exports and/or limiting
imports (by whatever means, e.g., import tariffs or quotas, export
subsidies, exchange rate or currency depreciation, etc.) as a way of
promoting domestic output, income, and employment was referred to as a
"beggar-thy-neighbor" approach that these authors criticized.  It
increases domestic activity without increasing world activity, whereas
promoting domestic (private or public) investment has the same effect on
the domestic economy but not at the expense of other nations.  In
addition, there are many situations where the beggar thy neighbor game
won't work anyway, and everyone ends up with lower output and
employment.  Lerner in particular railed against the whole view as
confused. For Lerner, exports are a cost, imports are a benefit. Only in
a "topsy-turvey" world of unemployment does this get turned around.
Lerner argued for a domestic full employment policy, which would make
such a strange position unnecessary.

It is true that Keynes saw some similarities between his position on
effective demand and some mercantilist writings, but first, this was not
solely with respect to trade policy, and second, like Keynes's position
on Malthus, we need not accept Keynes's view on this to recognize
something like the principle of effective demand. In addition, although
I think Rakesh raises good points on all this, I am not ready to
completely throw out the possibility that protectionism may be desirable
under certain conditions. Not to promote employment, but more along the
lines of the infant industry hypothesis, or when countries in a
structural position in the global economy that is otherwise
disadvantageous needs to find strategies for dealing with these
situations.

So, on the trade point, I don't accept that a Post Keynesian analysis is
inseparable from beggar-my-neighbor trade policies, nor that the
mercantilists are always and everywhere wrong about everything, nor that
Keynes is always and everywhere a mercantilist.  That is not to say
there are not problems here. Keynesianism has always been weakest when
dealing with the conditions facing lesser industrialized nations, some
Keynesians may be 'chauvinist neomercantilists', Keynes himself held
some very objectionable views.  But to say that the principle of
effective demand is inherently tied to either beggar thy neighbor or
Keynes's political positions is not right, I think.  Mat