Wednesday, April 26, 2006

Stupid article on Slate

I don't know who Daniel Gross convinced to let him write about economic matters on Slate, but it speaks more poorly of the website than Daniel himself.

The latest stinker is on globalization causing inflation -- namely by driving up commodity prices. This is like arguing that since F# is salty, the sky must be loud. (????)

As uncle Miltie said, inflation is always a monetary phenomenon and so quite seperate from the question of trade, which is, I'm guessing, what Gross means by "globalization".

It is true that commodity prices are going up, but this is because China and India are growing rich, along with the rest of the world, and as people get richer they consume more stuff. As the demand for stuff goes up, and supplied stay fixed, the price of the stuff goes up as well. If supplies increase, the price will go back down. Note that this is all simple supply and demand stuff, it has nothing to do with globalization.

I would also add that China and India are not getting rich because they're become trading dynamos, they are becoming rich because they are sloughing off years of Communist central planning and confiscatory taxes, and embracing capitalism. Sure, trade for both countries has gone up, but the real key to their success has been internal reform. Globalization is not making them rich, markets are.

As an antidote to this Slate stupidty, here is some Slate good sense arguing that the political rhetoric around gas prices is stupid. Which it is.

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