Monday, September 15, 2008

Invisible Hand Economics - podcast review

Professor Deepak Lal's lecture at the RSA (University channel podcast on August 8) bears in the title his defense for an old-fashioned idea of economic policy: the policy of the invisible hand. For some it may be very unexpected to have classical liberalism be defended in this day and age. I was surely eager to find out myself.

In many ways, Lal did not make a real case for liberalism in his lecture. The lecture was very valuable, but rather than making a normative point as expected, it was much more descriptive. The resulting historical analysis of capitalism and global economy was very instructive. The fact that Dr. Lal applauds all these developments, is tangible, but no so explicit.

The best explication he makes, nevertheless, but his case comes up only by the question and answer section in the end. This is not always the best part of UChannel lectures, but this is one to stay around for. Lal tackles the qualms of moderate, modern, non-liberal economy with the example of child labor, which, as you can see in a previous lecture on UChannel, would normally serve as the case against all out capitalism. His example is that of a factory in Bangladesh that extensively employs young girls. When modern requirements in the Supply Chain come into effect, this factory must lay off the girls, lest it loses its 'free of child labor' certificate.

Lal says: 'Child labor is a symptom of poverty. If standards of living sufficiently rise, the families will no longer send their girls out to work.' If you close their way in the official economy, like in the Bengal example, the next day they are on the street and will work in the unofficial economy (read: they will work in prostitution). Thus he shows a point also made by Thomas Barnett (earlier on UChannel) that nothing is achieved by imposing our standards on the developing countries. You cannot solve the problem by suppressing the symptoms. That I can understand, but I'd love to see another lecture from Lal, or anybody else, how the invisible hand can take these girls out of the factory to school.

More UChannel:
The Second World,
Repairing Failed States,
The Collapse (Republicans and America),
New Map for the Pentagon,
Slavery and the Supply Chain.

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