Free markets are essential to the technological innovations that underpin rising levels of prosperity. In this sobering interview, though, economist Reuven Brenner expresses his concern for the future of free markets, at least in the near term.
A handful of countries—Canada, the US, Australia, Japan, and the nations of Western Europe—have some history of enjoying the benefits of relatively free markets, says Brenner. “What distinguishes the 12 western democracies is that they found ways—political institutions and the way the law was applied by the courts—to diminish the transaction costs needed for what we call ‘free markets’ to operate.” While the collapse of communism was followed by a certain amount of opening up in countries like Russia, China, India, and some Eastern European and Latin American countries, these have not been quick enough to adopt the institutions of freedom.
What is needed is political leadership from the western democracies, to explain free market institutions to their new partners in globalization and also to lead by example. Instead, western nations have lost their way, both by contributing to the recent and ongoing crises and in their misguided responses to them. According to Brenner, “Everybody, under different names, is playing a kind of devaluation game because they think that this is what will restore their competitive advantage rather than dealing with the fundamentals.” The end result may well be a costly trade war.
Viewers will also hear the economist explain why pouring money into banks does not help entrepreneurs and why the next bubble in the US is higher education. Things will get better, but without leaders willing to make tough choices, Reuven Brenner does not believe they will get better anytime soon.