If a country must choose between the economic opportunity of disembedded liberalism and the social benefit of imbedded liberalism, disembedded liberalism would provide the most opportunity for economic prosperity, which would, in turn, benefit common citizens. Imbedded liberalism often leads to a large, stable middle class of people who are kept employed by the internal buying and selling of their products and services, yet it also hinders technology and innovation. Requiring the country to put forth necessary services and materials, supplies, and expertise which cannot be obtained through trade in a free market puts a burden on all of society due to various legal restrictions and oppressive labor laws that prevent the necessary market flexibility to quickly react to economic change. If a country is not burdened by restrictive laws, it has the freedom to quickly adapt to global market demand and specialize in areas where it can excel, while trading for the things it cannot produce itself. As a result of the limited social protection afforded under disembedded liberalism, some of the country’s workers might find themselves unemployed, yet the consequences of a small percentage of the population living in poverty cannot compare to the trouble that results from a stagnant economy and an inefficient workforce protected by the government from the cradle to the grave at the expense of the taxpayer under embedded realism. Taking away people’s incentive to work and their responsibility for their own destiny, killing their ambition to create new technology that might be traded and produce fortune for the creator, results in an atmosphere where people feel safe and do not need to concern themselves about their future and that of their country, as the government will provide for them regardless of whether they perform to their potential. Such a system would choke off economic expansion. Yet, if it is innovation and trade that creates wealth for a nation and its citizens, but restrictive laws prevent such economic development while, in addition, the burden on society is increased due to the graying of the population, how can a nation hold on to its power and position in the world market? Taxing everyone equally does not reward an individual for going the extra mile, thereby feeding the lack of ambition that inhibits the very technological and economic advancement that is necessary to keep the needed revenue. A clear example of the failure of embedded liberalism can be seen in the overburdened social systems of The Netherlands, Germany, France, Italy, and most other northern European nations, who are now in the painful process of much needed reform to adjust to changing demographics and decreasing revenue, as their population is graying (more older people, who need more health care, social services, etc., than young people who work and pay the taxes to pay for them). Technological advance and flexible economic expansion means wealth and power in today’s day and age, and secures a “reservation” at meetings with other powerful nations, where the country’s interests can now be heard. The USA is an example of successful disembedded liberalism, as flexible labor laws and capitalism make for a quickly contracting and expanding economy, as required by the ever changing world market demands. The early bird gets the worm, as the saying goes, and the faster an economy can adjust, the greater the pay-off for the nation and its citizens.
While many might argue that under disembedded liberalism the rich and capable are rewarded with wealth they hardly need, this wealth might very well be spent in a way that would help the poor far more than simply handing them checks (taxing proportional to income). If the rich spend and invest their wealth and thus fuel the economy, more employment and advancement opportunities will be available for the poor to improve, educate, and support themselves. The economy must provide an atmosphere where capitalism can thrive and market forces are allowed to work freely, making it possible for people to better and support themselves, thus controlling their own wealth and destiny, largely independent of the government. As long as flexible laws and an open market make it possible for anyone to make his or her fortune, the economy will provide a source of income for a nation's long-term health and benefit its citizens.
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You mention that disembedded liberalism provides the best chance for promoting the long-term well-being of nation. But many would argue the opposite. They would say the fast-paced nature of capitalism, its emphasis on instant profits and finding the newest niche cause great disruptions in the market. The emphasis is on the cheapest skilled labor and when technology changes many people are left behind. Ultimately they say that disembedded liberalism is a short-term solution.
In contrast embedded liberalism is the long-term solution. Countries like Sweden or Germany provide high-levels of education that allow workers to more easily adapt to technological shifts. There is less emphasis on profits so that long-term projects, such as environmentalism or health care, are more attractive and more investment is put into these areas. Therefore society is helped in the long-run because there is more incentive to fix problems over time instead of the immediate gratification of disembedded liberalism.
Yes, capitalism is fast-paced and, of course, focussed on profits, but that does not mean that should cause disruptions in the market IF it market forces are allowed to work supported by flexible labor laws so that people, whose skills become obsolete due to, for example, outsourcing of labor to China, are able to quickly adapt and find new jobs in those new niches that are created by the flexible, capitalist market. This does mean, of course, that people must take responsibility and follow the market direction, continue to (re)educate themselves, and be prepared to make career changes when necessary. The long-term solution is, after all, an efficient global market and if labor can be performed cheaper elsewhere in the world then that's a good thing; those people find much needed employment while the economies with higher labor costs save money and can put their resources to use in other areas of the market where they excel, such as, for example, services and research and development.
Embedded liberalism provides no such stimulus but rewards people for staying put in what they've done their entire lives, at the cost of an inefficient and shrinking economy and causing an enormous social burden on the elaborate welfare system. Look at the income tax rates in Sweden and Germany (they are around 50%!) and these countries, among others, have come to the conclusion that they need to reform their welfare systems and labor laws because their economies can no longer support them. After all, the profits provide the revenue to pay for education, health care, infrastructure, and (reasonable) welfare, but you must give the economy the best chance to return the highest profits or you'll run out of money to finance the social costs. Health care and its rising costs is a serious issue everywhere and there is no system in the world that is without problems. Ask the Canadians, the Dutch, British, Germans, and Swedes about the quality of their health care and the length of their waiting lists.
Disembedded liberalism is exactly the system that provides solutions long-term, as it takes time for these forces to work and show the pay-off.
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