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  • G-20 Needs to Emphasize Competition, Not Harmonization

    In a June 5 communiqué, G-20 Finance Ministers collectively recognized that,

    recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability, differentiated for and tailored to national circumstances.

    The words “differentiated for and tailored to national circumstances” are a welcome relief from the more typical “harmonization” (from the EU) or “balance” (from the U.S.) that often dominates G-20 conclusions.  While cooperation can be a healthy thing, we need to remember that it is competition, not cooperation, that is the primary driver of economic growth and progress.

    That’s true when we are talking about competition among firms, and equally true when we are talking about competition among countries. Indeed, we have laws to restrain too much “cooperation” among competing firms, and we shouldn’t be too quick to embrace harmonization among countries’ policies and regulations.

    Although past performance may not guarantee future outcomes, it serves as the best available guide. Over the past decades, policies that promote economic freedom have fueled unprecedented economic growth around the globe. Although there have been ups and downs from 1980 to 2008, the world economy achieved real GDP expansion by around 145 percent over the period, lifting hundreds of millions of people out of poverty!

    A key driver of this economic growth and prosperity has been a healthy competition among countries to create the best possible policy economic environment. Many economies have recognized the importance of freer trade, reducing barriers to conducting business, responsible spending, and cutting taxes while emphasizing greater transparency and accountability. The powerful forces of economic freedom have indeed fostered the spirit of entrepreneurship and competitive innovation that creates more jobs, spreading the benefits of a economic dynamism around the globe. There is another benefit of such competition, too: A diverse world economy has more flexibility and resilience to withstand any challenges that come along!

    If President Obama and other leaders of the G20 are genuinely serious about restoring economic growth during the upcoming Toronto summit, they should seize the summit as a renewal of their commitment to economic freedom and promote a diverse policy mix that encourages competition. We don’t need one world economic policy.  If that’s the goal of some of the leaders, we should hope this session of the G-20, like so many of its predecessors, provides little more than the usual photo op.

    Posted in International [slideshow_deploy]

    6 Responses to G-20 Needs to Emphasize Competition, Not Harmonization

    1. Pingback: » Financial News Update – 06/21/10 NoisyRoom.net: The Progressive Hunter

    2. Billie says:

      Competition, is rules equally applied. This is how the human mind reasons, "can I play or can't I?"

    3. Ken in Oregon says:

      "While cooperation can be a healthy thing, we need to remember that it is competition, not cooperation, that is the primary driver of economic growth and progress. That’s true when we are talking about competition among firms, and equally true when we are talking about competition among countries."

      Agreed! Know, if you had just added "individuals" you would have completed what is necessary for any country to have economic growth!

    4. Jacques, Canada says:

      From within human nature, yes competition is more likely to govern economic issues but in today’s overall situation, environmental and social issues are as important and asking for more collaboration. This is not an opinion but a fact. Without complicating regulations, the globalization of business and democracy should first uniformed environmental respect and care. Otherwise, there won’t be anymore world to make competitive business. Free world has only a philosophic statue. All acts have consequences that oblige human collaboration for world harmonization into decent competition! Complete freedom of business opens the door to anarchy and holds the citizens responsible for what they did not do. In final, it is not that simple to find the way to go without collaboration of all G20 participants. The citizen’s interest is the democratic substance that can obviously lead to a solution. Will that be central of the negotiations? Lets us all hope for the best.

    5. WY, China says:

      Competition mostly is the impetus, but in order to harness the vehement competition, for example, transparent and effective law system should be grounded first. Or the competition will only favor the few.

      So emphasizing competition regardless of its background might be detrimental rather than helpful.

    6. Seungsik Kim, South says:

      Good point of view and explanation!

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