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But those economies that did well were ones which moved in the direction of freer trade/economies. This is not to say that they had perfectly free trade or didn

But those economies that did well were ones which moved in the direction of freer trade/economies. This is not to say that they had perfectly free trade or didn't pick winners with industrial policy - it's just that they started having freer trade and less industrial policy. And of course you'd expect them to develop a few large and particularly successful industries - but they developed on all fronts simultaneously, in some areas slightly faster than others. And I mean, the most successful "Asian tigers" were Hong Kong and Singapore - with the most open, least "state chosen" economies.

crdoconnor 10y ago
They really didn't. Most of the tigers used tariffs and subsidies to target key industries and loaded up on US treasuries to reduce the value of their currencies and make their exports more competitive. Hong Kong and Singapore very much followed stated directed investment. Singapore went out of its way to court large multinationals (Philips and Shell were among the first lured over), for instance, built 90% of the housing stock in the country and even today gives out a multitude of grants to new businesses in 'key' industries.
- snrplfth 10y ago
  Sure, they targeted key industries and sometimes "got them". But so did a lot of other countries try the same thing, and they didn't get them. I'll note also that throughout most of their boom periods, both Singapore and Hong Kong had very small or no tariffs on almost all goods - when the other Asian Tigers did tend to have protective tariffs on various goods. Also, that housing, the most government-controlled sector in both countries, is notably very expensive - not a particular success story. I'm not saying that any tariffs and subsidies will halt growth, or that industrial policy will always fail. What I am asserting as the general trend is that moving towards a freer economy pretty typically helps - and moving towards a dirigiste economy usually doesn't do much good. If anything Asia should be a demonstration of this - China before and after the 1978 reform process, Vietnam before and after the 1986 Doi Moi reforms, India's 1991 Rao-Singh reforms, among others. These didn't mark an increase in state intervention/ownership, tariffs and subsidies, but rather a decrease.
  - crdoconnor 10y ago
    >Sure, they targeted key industries and sometimes "got them". But so did a lot of other countries try the same thing, and they didn't get them. Which countries are you talking about specifically? >I'll note also that throughout most of their boom periods, both Singapore and Hong Kong had very small or no tariffs on almost all goods They tended to suppress the value of their currency by buying treasuries, rendering their exports more competitive. This acted as an implicit subsidy on all exports. Also, while they tended not to put tariffs in place, they did directly subsidize - the flip side of the same coin. "Free" that was not. >Also, that housing, the most government-controlled sector in both countries, is notably very expensive - not a particular success story. That's a global phenomenon. After the US plunged interest rates to zero everybody else had to follow suit or watch their exports drop off a cliff. It used to be much cheaper before that happened. >not a particular success story. Whether you call it a success or not it is the direct opposite of what you claimed: it is interventionist. The housing is all excellent quality and it forced the private sector housing to be even higher quality still in order to be able to compete. I'd say it was a policy that we should probably copy. >China before and after the 1978 reform process China didn't fully open up after the 1978 reforms and still hasn't. The investment in the country is largely state directed even today. It's a counterpoint to your argument, not proof of it. They also loaded up on treasuries and put in place covert and not so covert subsidies/tariffs. >Vietnam before and after the 1986 Doi Moi reforms, India's 1991 Rao-Singh reforms, among others Hardly great success stories. Considering that Taiwan and South Korea, for instance, started off from pretty much the same place and reached first world status.
    - snrplfth 10y ago
      >Which countries are you talking about specifically? I'm talking about countries across the world in Africa and South America, as well as in Asia such as Indonesia, and the countries I mentioned before their reforms - India and China. These policies (acquire key heavy industry, support exports, replace imports with domestic production, have government plan the economy) were extremely common - almost ubiquitous - all over the postwar world, especially before the 1990s, yet didn't deliver high rates of growth to most of the countries where they were tried. So what was the spark of growth? > They tended to suppress the value of their currency by buying treasuries, rendering their exports more competitive. This acted as an implicit subsidy on all exports. Also, while they tended not to put tariffs in place, they did directly subsidize - the flip side of the same coin. Sure, you can suppress the value of your currency - that just makes imports more expensive and suppresses domestic consumption. Which has a negative impact on real domestic incomes. It's a costly "trick". And export subsidies are different from tariffs - they do not directly make domestic production, for domestic consumption, more competitive against imports. So if I had to pick a "least-bad" option between a tariff and an equivalent export subsidy, I'd pick the latter, since it at least exposes domestic producers to foreign competition, and therefore doesn't drive up domestic prices. (Though it does subsidize foreigners. Ah well.) Again, I'll note that the countries which did this the least did as well, and usually better, than the countries which did it more. It's about magnitudes. > Whether you call it a success or not it is the direct opposite of what you claimed: it is interventionist. Sure, it's highly interventionist. So going by your rubric, you'd expect it to outperform the rest of the economy in price or quality. But it generally doesn't - and housing in more liberalized housing markets, like in Japan and South Korea (even in the megacities!) is more affordable compared to incomes, taking quality into account. > China didn't fully open up after the 1978 reforms and still hasn't. The investment in the country is largely state directed even today. It's a counterpoint to your argument, not proof of it. China didn't fully open up, that's true. But it did open up massively compared to before, and this succeeded in boosting growth considerably. I don't see how a country going from, say, 90% state directed investment to, let's say, 50% state directed investment, and succeeding, is an argument in favour of interventionism. Did they engage in tariff/subsidy measures? Sure, but those barriers to trade were even stronger during the pre-reform Maoist era. > Hardly great success stories. Considering that Taiwan and South Korea, for instance, started off from pretty much the same place and reached first world status. Well, note the chronology. Taiwan and South Korea had completed most of the same reforms (considerable liberalization of trade, ownership, investment) in the 1950s and 1960s! So they had a 25-35 year "head start". Also, in the era immediately after these reforms, growth in India and Vietnam roughly doubled compared to their pre-reform eras. And they've kept or expanded these reform policies and continued to see strong growth. As far as I can tell from your examples, you're arguing for roughly a Ha-Joon Chang-ist position - that whatever intervention exists in a country, no matter how much reduced from its previous level, is to credit for its growth - and no matter how much liberalization has occurred, even when a sudden liberalization coincided with a sharp takeoff in growth, liberalization can apparently not be credited with that growth. And I do not think you are so absolutist - but neither am I. I'm not arguing that intervention leads to increased growth 0% of the time, just as I'm not arguing that liberalization leads to increased growth 100% of the time. I'm only saying that, in most places, especially pre-1990, there was/is too much intervention and not enough liberalization. And I think that people arguing for some sort of neo-mercantilist Trumponomics have at least as high a burden of proof to explain why, when moves towards liberalization usually coincide with increased growth and moves away usually coincide with low or reduced growth, that somehow this is an argument for moar government economic planning. It's like arguing that because I can still drive fine with one beer in me, then three or four more won't hurt. Anyways. I think I've made my point as long-windedly as I need to here - I'm not taking an absolutist position, just an "it tends to be this way, generally" one - which is only sensible in a fuzzy realm like macroeconomics.

crdoconnor 10y ago

They really didn't. Most of the tigers used tariffs and subsidies to target key industries and loaded up on US treasuries to reduce the value of their currencies and make their exports more competitive. Hong Kong and Singapore very much followed stated directed investment. Singapore went out of its way to court large multinationals (Philips and Shell were among the first lured over), for instance, built 90% of the housing stock in the country and even today gives out a multitude of grants to new businesses in 'key' industries.

snrplfth 10y ago
Sure, they targeted key industries and sometimes "got them". But so did a lot of other countries try the same thing, and they didn't get them. I'll note also that throughout most of their boom periods, both Singapore and Hong Kong had very small or no tariffs on almost all goods - when the other Asian Tigers did tend to have protective tariffs on various goods. Also, that housing, the most government-controlled sector in both countries, is notably very expensive - not a particular success story. I'm not saying that any tariffs and subsidies will halt growth, or that industrial policy will always fail. What I am asserting as the general trend is that moving towards a freer economy pretty typically helps - and moving towards a dirigiste economy usually doesn't do much good. If anything Asia should be a demonstration of this - China before and after the 1978 reform process, Vietnam before and after the 1986 Doi Moi reforms, India's 1991 Rao-Singh reforms, among others. These didn't mark an increase in state intervention/ownership, tariffs and subsidies, but rather a decrease.
- crdoconnor 10y ago
  >Sure, they targeted key industries and sometimes "got them". But so did a lot of other countries try the same thing, and they didn't get them. Which countries are you talking about specifically? >I'll note also that throughout most of their boom periods, both Singapore and Hong Kong had very small or no tariffs on almost all goods They tended to suppress the value of their currency by buying treasuries, rendering their exports more competitive. This acted as an implicit subsidy on all exports. Also, while they tended not to put tariffs in place, they did directly subsidize - the flip side of the same coin. "Free" that was not. >Also, that housing, the most government-controlled sector in both countries, is notably very expensive - not a particular success story. That's a global phenomenon. After the US plunged interest rates to zero everybody else had to follow suit or watch their exports drop off a cliff. It used to be much cheaper before that happened. >not a particular success story. Whether you call it a success or not it is the direct opposite of what you claimed: it is interventionist. The housing is all excellent quality and it forced the private sector housing to be even higher quality still in order to be able to compete. I'd say it was a policy that we should probably copy. >China before and after the 1978 reform process China didn't fully open up after the 1978 reforms and still hasn't. The investment in the country is largely state directed even today. It's a counterpoint to your argument, not proof of it. They also loaded up on treasuries and put in place covert and not so covert subsidies/tariffs. >Vietnam before and after the 1986 Doi Moi reforms, India's 1991 Rao-Singh reforms, among others Hardly great success stories. Considering that Taiwan and South Korea, for instance, started off from pretty much the same place and reached first world status.
  - snrplfth 10y ago
    >Which countries are you talking about specifically? I'm talking about countries across the world in Africa and South America, as well as in Asia such as Indonesia, and the countries I mentioned before their reforms - India and China. These policies (acquire key heavy industry, support exports, replace imports with domestic production, have government plan the economy) were extremely common - almost ubiquitous - all over the postwar world, especially before the 1990s, yet didn't deliver high rates of growth to most of the countries where they were tried. So what was the spark of growth? > They tended to suppress the value of their currency by buying treasuries, rendering their exports more competitive. This acted as an implicit subsidy on all exports. Also, while they tended not to put tariffs in place, they did directly subsidize - the flip side of the same coin. Sure, you can suppress the value of your currency - that just makes imports more expensive and suppresses domestic consumption. Which has a negative impact on real domestic incomes. It's a costly "trick". And export subsidies are different from tariffs - they do not directly make domestic production, for domestic consumption, more competitive against imports. So if I had to pick a "least-bad" option between a tariff and an equivalent export subsidy, I'd pick the latter, since it at least exposes domestic producers to foreign competition, and therefore doesn't drive up domestic prices. (Though it does subsidize foreigners. Ah well.) Again, I'll note that the countries which did this the least did as well, and usually better, than the countries which did it more. It's about magnitudes. > Whether you call it a success or not it is the direct opposite of what you claimed: it is interventionist. Sure, it's highly interventionist. So going by your rubric, you'd expect it to outperform the rest of the economy in price or quality. But it generally doesn't - and housing in more liberalized housing markets, like in Japan and South Korea (even in the megacities!) is more affordable compared to incomes, taking quality into account. > China didn't fully open up after the 1978 reforms and still hasn't. The investment in the country is largely state directed even today. It's a counterpoint to your argument, not proof of it. China didn't fully open up, that's true. But it did open up massively compared to before, and this succeeded in boosting growth considerably. I don't see how a country going from, say, 90% state directed investment to, let's say, 50% state directed investment, and succeeding, is an argument in favour of interventionism. Did they engage in tariff/subsidy measures? Sure, but those barriers to trade were even stronger during the pre-reform Maoist era. > Hardly great success stories. Considering that Taiwan and South Korea, for instance, started off from pretty much the same place and reached first world status. Well, note the chronology. Taiwan and South Korea had completed most of the same reforms (considerable liberalization of trade, ownership, investment) in the 1950s and 1960s! So they had a 25-35 year "head start". Also, in the era immediately after these reforms, growth in India and Vietnam roughly doubled compared to their pre-reform eras. And they've kept or expanded these reform policies and continued to see strong growth. As far as I can tell from your examples, you're arguing for roughly a Ha-Joon Chang-ist position - that whatever intervention exists in a country, no matter how much reduced from its previous level, is to credit for its growth - and no matter how much liberalization has occurred, even when a sudden liberalization coincided with a sharp takeoff in growth, liberalization can apparently not be credited with that growth. And I do not think you are so absolutist - but neither am I. I'm not arguing that intervention leads to increased growth 0% of the time, just as I'm not arguing that liberalization leads to increased growth 100% of the time. I'm only saying that, in most places, especially pre-1990, there was/is too much intervention and not enough liberalization. And I think that people arguing for some sort of neo-mercantilist Trumponomics have at least as high a burden of proof to explain why, when moves towards liberalization usually coincide with increased growth and moves away usually coincide with low or reduced growth, that somehow this is an argument for moar government economic planning. It's like arguing that because I can still drive fine with one beer in me, then three or four more won't hurt. Anyways. I think I've made my point as long-windedly as I need to here - I'm not taking an absolutist position, just an "it tends to be this way, generally" one - which is only sensible in a fuzzy realm like macroeconomics.