Academic journal article Independent Review

World Regulations and Harmonization

Academic journal article Independent Review

World Regulations and Harmonization

Article excerpt

The analysis of world regulations and harmonization is a challenge for someone who does not--as I do not--accept regulations or believe in so-called public goods. However, we have to concede that it is increasingly accepted that globalization needs a counterbalancing power in increased worldwide regulations and harmonization. Most people have now accepted both trade liberalization and deregulation on a national basis. They have noticed that trade liberalization is beneficial as far as consumers can get a larger range of choice and lower prices. However, many object to the assumed perverse effect on employment, low-income workers being supposed to suffer from the competition of workers from less-developed countries. The reduction of regulations limiting competition inside a country has obviously contributed to more competition between national producers, but people are often opposed to more competition from outside. Meanwhile, the development of the Internet and the growth of e-business contribute to the acceptance of a worldwide perspective and to the awareness that markets are international. Therefore, the "globalization" of activities is increasingly felt as a fact of life against which it would be unrealistic to fight, although nostalgia for protectionism and state regulations exists everywhere. Still, most people also feel that we should minimize or suppress the assumed perverse effects of deregulation and world competition by means of world harmonization and regulations.

According to mainstream thinking, in order to avoid anarchy, global rules must be substituted for the previous scattered regulations, which, because of their national character, are considered unsustainable. Because economic problems have become worldwide problems, they must be solved directly at the global level. The argument for global policies also stems from the idea that certain desirable policies cannot be fully effective insofar as they are undertaken at the national level. Two main obstacles are perceived:

* First, spillover effects would occur so that the result of a particular policy in one country would depend not only on its own implementation, but also on the design of policies made by other countries. To reach an "optimum situation," governments would have to coordinate their policies so as to minimize negative externalities and maximize positive externalities.

* Second, certain public goods or public bads, by their very nature, are produced at the world level. An obvious example would be atmospheric pollution.

My tasks in this article are to discover any apparently acceptable argument in this dominant economic approach, notwithstanding my initial doubt that any such argument exists, and to identify the best counterarguments we might use to explain the main errors of the mainstream view.

Differentiation and Homogenization

One fears diversity, one stigmatizes it under the name of anarchy; but it is necessarily the outcome of the very diversity of intelligent minds and convictions, a diversity which furthermore tends to be erased by discussion, study and experience.

--Frederic Bastiat, Justice et Fraternite

We ought to meditate on this beautiful argument of Frederic Bastiat in favor of diversity and ponder his trust in the ability of free human beings to converge progressively toward the common discovery of true knowledge, especially at a time such as ours when efforts are constantly being made to standardize human situations by compulsion. In fact, "unity in diversity" could be considered a major characteristic of humanity: unity because human nature has certain universal features, implying in particular that humans are rational, which means that any human action is directed by the use of reason; and diversity because any human being is concretely different from any other and even aims at differentiating himself or herself from others. Indeed, this concrete diversity is what makes exchange possible and profitable, so that a human society can be defined as an exchange society. …

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