Dickson Igwe. Photo: Provided

China, the most populous country on Earth, inherited Hong Kong from Britain in 1997, but, ‘’ China, instead of replacing Hong Kong’s culture and economy with its Communist imprint,’’ found herself, ‘’ increasingly influenced by the culture and economic rules of Hong Kong.’’ Hong Kong became a type of Trojan horse loaded with free trading ideas, and a financial and market capitalism the Chinese Politburo and Communist Party establishment found scintillatingly attractive.   Hong Kong was a delectable Delilah next to the Giant Han!

Hong Kong’s injection of the free market gene into the Chinese body Politic was aided by a new Chinese acceptance of free market ideas, beginning even before Hong Kong’s return to Chinese rule from British control. Beginning in the early 1970s, China’s willingness to protect the property rights of foreign investors and slowly surmount barriers to free trade and inflows of foreign capital, developed into a new prosperity that has seen China’s, ’’real per capita GDP grow faster than that of the ‘ developed counties,’’ largely, the result of technology borrowed from the more advanced economies.

It must be acknowledged that East Asia’s Post World War 2 economies were heavily subsidized and protected, a result of communism and totalitarianism in the region. However, by lowering barriers to trade and accepting the inflow of Foreign Investment and Capital, by the 1970s, countries in East Asia were seeing rising exports and improved standards of living as a result of these Western Capitalist influences.

And by the 1980s, Asian Tiger nations such as Taiwan, Singapore, South Korea, and Malaysia were, ‘’ largely off the competition stifling subsidies to which much of Asia was still addicted.’’ Free market capitalism, driven by foreign investment, in essence, was the catalyst that triggered prosperity and economic development in Asia that has propelled the region into the fastest growing, and most commercially dynamic part of the globe.  

In a related stream, the current foreign investment discussion and how it affects development and economic growth in the Virgin Islands is microcosm of a much larger global debate.  In the USA and Europe, the idea that it is desirable to pursue greater freedom of capital movement across international borders, and adopt the free market as supreme determinant of scarce resource allocation, is opposed by the polemic that government interference in the management of national economics is better for society. That is the argument of those against too much Foreign Direct Investment and unrestrained free international trade.

Currently, the most evident arena of economic debate is the US election campaign. In that contest, the two polarities in contemporary economic dialectic: the Milton Friedman argument for the supremacy of the free market in economic policy, and John Maynard Keynes’ polemic on the necessity of government intervention and state management of the economy, are the main ideological drivers defining the platforms of each of the contestants. The Republicans favour the former, the Democrats the latter.  

In Europe, a continent under intense social and economic pressure, there is greater ambiguity in defining the parameters of economic argument for and against unfettered free market economics. However, it would appear that the Euro Crisis is a battle between policy makers who feel that austerity and the natural correction of the market will get Europe once more on the fast track in the global game, a Friedman free market orientation, and those who want to see massive intervention by the European Central bank, and the creation of a federal type European polity, the Keynesian economic philosophy of big government. 

Angela Merkel, the German Chancellor is of the viewpoint that Europe is best left to the mercy of the free market. On the other hand, the new French President, Francois Hollande appears to be an interventionist, and is ready to tax the rich to ensure that social welfare and government investment in France continues at the traditional high rate. 

Across the North Atlantic from Europe, the Republican contenders: Mitt Romney and Paul Ryan are proponents of small government, free trade, and the market as critical determinant of the economic and commercial direction of the USA. President Barack Obama and his running mate Joe Biden on the other hand are big government types, who believe in government intervention in, and management of the economy, as appropriate and desirable.

Mitt Romney, despite his myriad gaffes, and wooden image, attributes that appear to be about to cost him the November 2012 USA Presidential Election, is right in his economic assertions in this layman’s opinion. However, he has failed to acknowledge that there are times government must step in, like saving the US car industry from implosion, and the nation from financial collapse in 2007, when a global recession threatened the world economy with depression and deflation.

In 1942, the Harvard  Economist Joseph Schumpeter introduced the idea of CREATIVE DESTRUCTION, in which he asserted that, ‘’ a market economy will incessantly revitalize itself from within by scrapping old and failing businesses and then reallocating resources to newer more productive ones.’’ The same idea holds for the global economy.

Countries that fail to compete in this aggressive new world will simply get left behind, and the Virgin Islands are not an exception to Schumpeter’s assertion. Survival of the fittest is a Darwinist assertion that for the sake of the present discussion means that power and prosperity will go to those societies that integrate with new global synergies driven by international capital, free markets, deregulation, and science and technology.

These are global forces that governments can no longer influence. Countries will either sink or swim, depending upon how they adapt to a world where physical boundaries are rapidly disappearing as money, technology, and ideas, cross national borders at the speed of light, and in search of optimal financial returns and commercial opportunity.

To be continued...

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