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Dear Editor:
Mr. Hrab’s recent letter claims that capitalist, or free market countries produce higher per capita incomes and greater economic growth than countries with controlled economies. Mr. Hrab’s discussion clearly ignores that most of the world’s prominent economies have risen under highly controlled and regulated conditions. Up until WWII, the US flourished behind fierce tariff and duty walls. Having emerged as the world’s economic powerhouse in 1946, the US made an about face, becoming the self-proclaimed proponent of free market economics. With the help of the IMF and World Bank, the US tried to secure international markets for its goods and to promote a favourable business climate for its companies by breaking down international trade and investment barriers. With superior technical know-how and almost limitless capital, the free market system would clearly work in favour of US business and against the Third World. Those states that embraced the laissez faire market approach experienced extreme disparities between the rich and the poor, low environmental standards, and overly volatile economies. Domestic industries invariably developed at a slower pace, with governments less able to develop infrastructure and social programs. Those countries that wisely rejected the free market doctrine—Korea, Singapore and Japan—became economic power houses with excellent social services and a more egalitarian society.

Proponents of free markets also fail to recognize that the US is more protected than may meet the eye. The US government heavily subsidizes many of its multinationals through the tax-funded Import Export Bank, and through lucrative government contracts. Local governments have also paid hundreds of millions of dollars to companies to lure them to move to certain states.

Before people jump on the free market band wagon, they should observe that all of the world’s most powerful economies rose amidst extensive trade barriers. In colonial times, the ultimate goal of an imperialist nation was to break down investment and trade barriers in dependent countries while maintaining controls at home. This scenario is being relived today, forcing underdeveloped states to compete with First World technology and capital.

—George McLeod, BA History, Simon Fraser University

Dear Editor:
I found George McLeod’s response to my article quite interesting. The argument relies heavily on uninformed and flawed interpretations of history. Take, for instance, his statement that the US “flourished” from its protectionist policy prior to WWII. What about the Great Depression, not to mention a few causes of the Great Depression: the Federal Reserve’s refusal to act as a lender of last resort, and banking laws that prohibited bank branches? Indeed, if one were to look at the Great Depression closely, one would find that what should have been a mild recession became a full-blown depression because of government interference.

Second, Mr. McLeod praises Japan for “wisely” rejecting free markets. I find it odd that he does not comment on the present situation of Japan and that of the rest of the “Asian Tigers.” As Korea, Taiwan, and Malaysia have all shown, close co-operation between government and industry eventually leads to corrupt practices that put those enterprises that do stay honest in danger.

History is a good measure of how controlled economies have never stood the test of time, whether under total state control as in the USSR, or partial control as in Japan. Bureaucrats and armchair critics who seek to micromanage the economy will always be out-performed by those economies that allow market forces to function freely.

—Neil Hrab, BA History and Political Science, University of Toronto

[Editor’s Note: Readers who are interested in this topic may want to refer to a book by P.T. Bauer, Equality, The Third World and Economic Delusion (Cambridge, Mass.: Harvard University Press, 1981).]

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Last Modified: Wednesday, October 20, 1999.