Matt Asay: “Open source is all about free markets.”
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on Tuesday, January 16th, 2007 at 8:53pm and is filed under Open source and open standards.
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Not necessarily. Open source is compatible with any number of economic arrangements: free market, mixed market/socialist approaches, whatever.
You could make a stronger case that closed source, at least for infrastructure, is incompatible with free markets, because it creates a monopolist with the power to set the rules for everyone who uses that infrastructure, and nothing but a strong state can check that monopolist. So yes, if you want both free markets and a free society, you need open source at least for the software that people must use.
Sure, you can use open source in any context. The point Matt was making though is that open source is a great example of the free trade argument working, where the free trade argument says that artificial barriers (say, government regulation) create friction, and friction creates waste. Open source is all about removing artificial barriers in the software world, and you certainly can’t argue that open source hasn’t had an overwhelmingly positive impact on the software marketplace. On a related note, the opinion piece Matt references reports similarly positive impact for free trade:
[E]conomically free countries enjoy significantly greater prosperity than those burdened by heavy government intervention. The per capita GDP of the top quintile of countries, ranked according to economic freedom, is now almost $28,000 while the bottom quintile is less than $5,000. The associated higher GDP rates that come with economic freedom “seem to create a virtuous cycle, triggering further improvements in economic freedom. Our 13 years of Index data strongly suggest that countries that increase their levels of freedom experience faster growth rates.”
Mexico increased its degree of economic freedom when they signed NAFTA. The economy tanked. Argentina followed the GATT/IMF/WTO route to ruin, and only managed to rebound some by rejecting neoliberalism. None of the Asian tigers got rich by practicing “free trade”, and neither did the US or the UK; all protected their industries with high tariffs and followed a mercantilist policy, switching to free trade ideology only when they knew they could out-compete their rivals.
Precisely because it is to the advantage of a rich country to practice free trade, the study you quote suffers from selection bias. Poorer countries have to protect what remains of their economies to survive at all. They can follow the advice of the “free traders” and sell off their assets, making their elites rich, but there’s then nothing left for most people.
Latin America is experiencing a huge backlash against neoliberalism because it’s been a disaster for most people. That’s not to say that I’m necessarily happier with the Chavez model, but there’s a reason that people are voting for that, and the reason is that the NAFTA/GATT regime has brought poverty to most people, even when it has raised the per capita GDP, because the elites get all the money and the poor are left with declining wages and rising prices.
There are a lot of variables in the counterexamples you mention beyond free trade. For example, Mexico’s economic woes have more to do with the coincidental rise of China and India than with NAFTA (i.e., jobs that were formerly outsourced from the U.S. to Mexico are now outsourced to China and India—yes, that’s a result of free trade, but in the good sense, namely that China and India have competed effectively and won). And the rise of India and China are absolutely the result of free trade. India was socialist (and economically stagnant) until 1992. Everything that has happened there has happened as a result of opening up. China may not be free in the political sense, but it’s increasingly free in the economic sense (there’s a limit to how far they can go economically without political freedom though). Both have a long way to go, but they’ve also come a long way in the past decade. -ian
By the way, the WSJ article isn’t just about countries getting richer. It’s about the distribution of wealth getting more equitable or, as the article is titled, “the poor get[ting] richer”. And getting more equitable as a result of economic freedom rather than government intervention. Alas, it’s behind the WSJ paywall, but here’s the opening paragraph:
Here’s bad news for those who oppose global free trade: Not only did the world-wide trend toward greater economic liberty hold steady over the past year, but the incomes of poor individuals across the globe are rising as result. The world isn’t only growing richer. The gap between the per-capita income of have-not populations and that of the developed world is narrowing.
January 16th, 2007 at 9:50pm
Not necessarily. Open source is compatible with any number of economic arrangements: free market, mixed market/socialist approaches, whatever.
You could make a stronger case that closed source, at least for infrastructure, is incompatible with free markets, because it creates a monopolist with the power to set the rules for everyone who uses that infrastructure, and nothing but a strong state can check that monopolist. So yes, if you want both free markets and a free society, you need open source at least for the software that people must use.
January 16th, 2007 at 10:02pm
Sure, you can use open source in any context. The point Matt was making though is that open source is a great example of the free trade argument working, where the free trade argument says that artificial barriers (say, government regulation) create friction, and friction creates waste. Open source is all about removing artificial barriers in the software world, and you certainly can’t argue that open source hasn’t had an overwhelmingly positive impact on the software marketplace. On a related note, the opinion piece Matt references reports similarly positive impact for free trade:
In other words, free markets work.
-ian
January 17th, 2007 at 1:09am
Mexico increased its degree of economic freedom when they signed NAFTA. The economy tanked. Argentina followed the GATT/IMF/WTO route to ruin, and only managed to rebound some by rejecting neoliberalism. None of the Asian tigers got rich by practicing “free trade”, and neither did the US or the UK; all protected their industries with high tariffs and followed a mercantilist policy, switching to free trade ideology only when they knew they could out-compete their rivals.
Precisely because it is to the advantage of a rich country to practice free trade, the study you quote suffers from selection bias. Poorer countries have to protect what remains of their economies to survive at all. They can follow the advice of the “free traders” and sell off their assets, making their elites rich, but there’s then nothing left for most people.
Latin America is experiencing a huge backlash against neoliberalism because it’s been a disaster for most people. That’s not to say that I’m necessarily happier with the Chavez model, but there’s a reason that people are voting for that, and the reason is that the NAFTA/GATT regime has brought poverty to most people, even when it has raised the per capita GDP, because the elites get all the money and the poor are left with declining wages and rising prices.
January 17th, 2007 at 7:58am
There are a lot of variables in the counterexamples you mention beyond free trade. For example, Mexico’s economic woes have more to do with the coincidental rise of China and India than with NAFTA (i.e., jobs that were formerly outsourced from the U.S. to Mexico are now outsourced to China and India—yes, that’s a result of free trade, but in the good sense, namely that China and India have competed effectively and won). And the rise of India and China are absolutely the result of free trade. India was socialist (and economically stagnant) until 1992. Everything that has happened there has happened as a result of opening up. China may not be free in the political sense, but it’s increasingly free in the economic sense (there’s a limit to how far they can go economically without political freedom though). Both have a long way to go, but they’ve also come a long way in the past decade. -ian
January 17th, 2007 at 8:05am
By the way, the WSJ article isn’t just about countries getting richer. It’s about the distribution of wealth getting more equitable or, as the article is titled, “the poor get[ting] richer”. And getting more equitable as a result of economic freedom rather than government intervention. Alas, it’s behind the WSJ paywall, but here’s the opening paragraph:
-ian
January 18th, 2007 at 6:25am
Free Markets are the best you can have. In the end it’s up to everyone himself whether he wants to sell or buy.