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Posted By Russ Roberts On July 25, 2004 @ 2:27 pm In The Economy | Comments Disabled
David Rothkopf in today’s Washington Post  wants us to emulate Singapore:
Take the example of Singapore, a relevant choice because it faces smaller-scale versions of the problems that beset the U.S. economy: It has to compete with much cheaper labor and much larger markets available in its Asian neighbors. Every couple of years Singapore government officials proactively seek the advice of private business leaders and other experts and come up with a National Economic Strategy that reorients public policy — tax laws, worker training, industry regulation — to strengthen competitive industries and shore up weak aspects of the economy. The results of this approach are obvious: Singapore’s economy is growing at an annualized rate of 11 percent (about three times that of the United States), a remarkable pace for an economy that is already so advanced.
What makes Rothkopf nervous is that we’re too worried about terrorism when bad economic policy is much more threatening:
Let’s start with the biggest domestic economic problems. Almost any one of them is a greater threat to the economy than virtually any imaginable form of terrorism. There is the record-breaking budget deficit that is likely to amount to $5 trillion over the next decade. Then there’s the burgeoning trade deficit. And the $72 trillion in unfunded future retirement and health care obligations to our own citizens. And a record low savings rate, which suggests that we will need even more help with retirement funding. And the hemorrhaging of manufacturing jobs and the cost of fixing our dysfunctional health care and energy systems. Every one of these is a gigantic problem on its own. Taken together, they represent a series of bombs placed at the foundations of our society, and they are capable of exploding in ways that would touch more Americans than anything even the most sophisticated terrorists could devise.
I don’t find any of these threats as worrisome as the author. But a National Economic Strategy worked out with “business leaders and other experts” is not where I’d start if I were worried. I’d actually rather see us muddle through and fix and patch here and there rather than come up with some grand scheme. This view of the economy as a giant locomotive or economic growth as an engineering problem is not just the road to serfdom but the road to poverty. The rest of my take on this metaphor, implicit in Rothkopf’s admiration for Singapore, is here .
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