It's being described as 'neoliberalism' to prevent the sheer embarrassment of retreating with tails between legs and owning up. Full-circle it has run from protectionism to opening up markets to free-market economies and now back to the old ways. Except, perhaps the new element of might is right. How else can one define the United States slapping punitive taxation on products unless they have components of the supply chain manufactured within? And, in the same breath of "America First" , Apple can blatantly request India to defer its planned taxation on products that don't have local value addition. If it sounds strange a phenomenon, it is. In economic terms it makes perfect sense.
Local value addition doesn't just create jobs, it also builds capacity. The US is willing to reduce corporate tax to allow for such investments.
In economics, cheaper manufacture is always welcome, though it does conflict with minimum wage factors. Governments have been known to look the other way in the 'greater interest', Hence it can be forcefully argued that the greater good has to be for the people. But just as a recent study suggests garments workers pay no longer allows them to live within inflationary increase the same holds true across the board, be it public sector, health, education or transport. Rather than be squashed on the streets while protesting the citizen chooses to economise by reducing consumption or resort to corruption.
It has been standard policy to encourage investments and the special economic zones have all been given targets. The results have been painfully slow and broadly in line with balancing economies of sales. Indian companies have been the biggest beneficiaries, cutting manufacturing and transportation costs through relocation. Japanese motorcycles and even smaller cars were to have been churned out of manufacturing plants; except they haven't. This in spite of plenty of cash available in bank loans and some of the most liberal investment regimes available. Are we then out of sync with times?
The UK has turned out to be one of the best destinations for investment of ill-begotten moneys, a haven for dubious money transactions including laundering regime change and some interesting arms deals with countries accused of grossly falling short in human rights. And yet, unemployment is at an all time low, though real income is as lower. That's just a notch better than in Bangladesh where job creation is far lower than the numbers entering the market and all effort seems to be pinned on the start-up IT sector. That's all very well, but even elasticity has its limits. The Prime Minister is looking at the sector as being the biggest export earner some time in the future. That may well be so. But with Artificial Intelligence (AI) reaching the levels it's doing, policy- thinking has to change, fast, furious and in tangent. It's time for the idiom to expand: everything's fair in love, war and trade.
mahmudrahman@gmail.com