In the appendix to his dystopian novel 1984George Orwell explained:
Newspeak was not only intended to provide a medium of expression for the world-view and mental habits of Ingsok’s devotees. [“English Socialism” in Newspeak]But making all other modes of thought impossible.
We’re not there yet, though Fatal pride (University of Chicago Press, 1988), Friedrich Hayek expressed a related idea:
The inadequacy of the terms we use to refer to various forms of human interaction is only one more symptom, one more manifestation, of the conventional, highly inadequate perceptual processes by which human effort is coordinated.
A story in financial bar Explains how approaches not informed by economics and its individualistic approach can produce flawed interpretations of reality and policy proposals. The story reports on fears that, in the face of gas supply cuts created by Vladimir Putin’s government, the German government, supporting its businesses and consumers, will hurt poorer countries (“EU leaders fail to reach deal to lower energy prices,” financial barOctober 7, 2022):
Italy and several other countries squared off against Germany at a summit in Prague on Friday, in a dispute that echoes clashes from past crises. Heavily indebted countries fear that their wealthier neighbors will gain an unfair advantage by supporting their businesses and consumers.
While this paragraph may not sound like newspeak, almost everything there is weird. It is not “countries” who subsidize and conflict, but their governments. Someone asserting that a country should be confused by its government with a similar statement such as “This country has wonderful mountains.” If “the country” is instead seen as composed of all businesses and consumers, which everyone is, we cannot properly speak of “its” businesses and consumers without a self-referential nonsense: businesses and consumers support their businesses and consumers. Finally, a state s which subsidizes “its” businesses and consumers in the country come by doing no harms individuals in country P, except in the indirect sense that impoverishing individuals anywhere reduces the exchange opportunities of other individuals.
On this last point, consider the following. If the German government subsidizes some German energy consumers with some German taxpayers’ money (resources), that is merely a transfer: it makes some Germans richer and other Germans poorer (granted, there is also some deadweight loss due to taxes). But if German taxpayers are forced to subsidize some German energy businesses, the latter’s increased production and resulting lower energy prices can only benefit energy consumers in other countries.
So why would an Italian care about German taxpayers subsidizing German energy producers and thus, indirectly, Italian energy buyers? Italians and French and many other people generally do not like to be subsidized by someone else? The only reasonable reason for Italian anger would be if the German government banned German energy producers from exporting their products to Italy, i.e. put up a real trade barrier (trade freeze) around Germany.
If, like the Eurocrats, we extend the concept of “protectionism” to whenever a state in the world redistributes money internally or impoverishes its own subjects (say, through deadweight loss), we need to find another word to call it. “Protectionism”, that is, your own government prohibiting you from importing or exporting or doing so under conditions it does not like. (See my EconLog post “Making Comparative Advantage Critical,” November 17, 2017.)
Non-sensical ideas often do not come alone. from the beginning FT Citing the story, we learn more about the thinking of Eurocrats and politicians:
One area of convergence appeared to be member countries’ growing interest in negotiating better prices for gas, some officials said, an approach the EU has previously proposed as a way to boost their collective bargaining power and advise each country to avoid bidding against the other. other
The project is actually being pushed by the European Commission (“EU looks to enforce mandatory cooperation on gas purchases,” financial bar, October 11, 2022). But what could “countries” mean to bid against each other? If it means anything, it is that the rulers of each country do the bidding over and above the heads of their individual subjects. In a free market, by contrast, a German bids as much against other Germans as against Italians. He can stop his underlying bidding and he just doesn’t get the goods, which go to the people who pay the bid-up market price. A free market is a continuous auction where everyone can bid equally. If the rulers of nations form a cartel of states to do their bidding, it will be over and above the heads of their respective subjects. Moreover, since all European utilities and businesses (including those outside the EU) use only 14% of global gas production, it is not certain that the cartel would have enough market power to significantly lower prices.
Going back to the first quote, we can add that if politicians in poorer countries hadn’t pushed their governments into debt to bribe their voters, other countries wouldn’t have “earned the upper hand” now – even assuming there was money laundering inside Germany or something. Subsidizing German producers gave Germans an edge over non-Germans. And I am not talking about the price controls that the German government will impose, as other European governments have already done, and as the EU government is pushing for at its level. (I mentioned this issue in a recent post.)
All of which suggests that a different way of thinking is sorely needed.
(Featured Image: Wikipedia Commons, https://en.wikipedia.org/wiki/File:Le_penseur_de_la_Porte_de_lEnfer_(mus%C3%A9e_Rodin)_(4528252054).jpg)