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There are many who say protectionism hurts a country, yet here we see India's protectionist legislation leading to a lot of new, local jobs. Why wouldn't that w

There are many who say protectionism hurts a country, yet here we see India's protectionist legislation leading to a lot of new, local jobs. Why wouldn't that work in the US? Edit: to those downvoting me, I'd like to remind you that the downvote button is not the disagree button. I am trying to add to the discussion with this question, not argue for no reason.

camillomiller 10y ago
Because you need to have something to give back to the companies investing, like for example the world's highest smartphone adoption growth rate. Also tax exemption, special deals on many issues, but mostly the growth rate :)
- preordained 10y ago
  Profits aren't enough? Often the notion that the company would be "forced" to sell at a higher price when they produce local is baloney. Like the Sears wrench fiasco, where they claimed producing a certain wrench locally would raise prices too much, then started make a knockoff in China which they sold at the exact same price point. The point is, too often the savings from outsourcing are passed onto neither the consumer or the employee, so there is definitely question as to who is "really" hurt by protectionist policies.
homero 10y ago
They give back with pollution and poverty
sofon 10y ago
It helps that employee costs in India are competitive with China... (92¢, compared with $3.52 in China) https://www.bloomberg.com/amp/news/articles/2014-11-06/india-vs-dot-china-the-battle-for-global-manufacturing?client=safari https://www.bloomberg.com/amp/news/articles/2014-11-06/india...
edge17 10y ago
Protectionism also caused India to fall behind in most major sectors for the 60 years after independence. Protectionism generally juices an economy in the short term but leaves it behind in the long term when the trade barriers make it costly to import innovation. Trade barriers are a tool, protectionism is an ideology.
- codegeek 10y ago
  Exactly. India did not have any economic reforms until the 90s which is when industries such as telecom etc exploded. If you compare the economies of China vs India (I know it is a sensitive topic), they were very similar until the 80s. But India did not have "open" trade policies until the 90s which really hurt the overall economic growth. Look at India's growth after the 90s economic reforms and you can see the story.China took off and India has been far behind. I really think a country like india needs to open up to encourage foreign investments which will drive improvements in infrastructure which India severely lacks compared to other developing economies. TL;Dr: In case of India, protectionism has hurt it more than it helped. https://en.wikipedia.org/wiki/Economic_liberalisation_in_India https://en.wikipedia.org/wiki/Economic_liberalisation_in_Ind... Look at the graph below and pay special attention to the GDP growth comparison. Notice the huge spike for India beginning the 90s. http://statisticstimes.com/economy/china-vs-india-gdp.php http://statisticstimes.com/economy/china-vs-india-gdp.php
  - unexpected 10y ago
    Adding to your point, something I have thought about India: India really exploded after the development of new industries that basically moved too fast to fall under the "License Raj" mentality that exists. Infosys, Wipro, TCS, Flipkart - these companies simply would not exist if they had to go through the struggles that other companies have to go through.
- dominotw 10y ago
  >Protectionism also caused India to fall behind in most major sectors for the 60 years after independence. If they had an open economy right after the independence, wouldn't multinationals have completely taken over the industry given almost everyone in India was too poor to start their own business? Wouldn't this basically be "re-occupation " by the west in different garb. Is it fair to blame India's failure on 'protectionism' when it might as well have been rampant corruption, people divided into caste lines, choosing democracy for a poorly educated/unsophisticated/caste corrupted population? How do you explain china if protectionism is root of all evil. What about Hindu attitudes of meekness, non-violence that are contrary to aggression of capitalism .
tsunamifury 10y ago
Intelligent and nuanced import regulations and taxes are of course good for a nation. Radicalized ideological import regulations and taxes are likely to disrupt healthy trade. If you've ever been to India, you'd understand why their decisions and ours are and should be very different due to radically different circumstances.
MarkMc 10y ago
If India were to ban the use of microchips wouldn't that create "a lot of new, local jobs"? It seems to me that technology and free trade have similar effects. If you like one you should like the other.
- preordained 10y ago
  So if you outsource your labor to an Indian sweatshop, that's the progressive "global economy", but if you wanted to do run the same operation locally you are a Luddite. Hmmm...
  - MarkMc 10y ago
    Basically, yes. What is the counterargument? Note also that there are plenty of tariffs on goods from rich countries to poor countries. For example, India's tax on vehicle imports means cars are manufactured in labour-intensive Indian 'sweatshops' instead of efficient, automated Japanese factories.
oblio 10y ago
Cause salaries in the US are 10x of those in India? Do you think US protectionism would bring even those jobs back?
- preordained 10y ago
  If the jobs _couldn't_ be outsourced, wouldn't _somebody_ local have to do them? Even if automation was fast-tracked to swallow those jobs, if the manufacture and operations management of automation solutions also could not be outsourced, wouldn't that at least bring more jobs to the market?
  - mattnewton 10y ago
    They goods would have to be tarrifed to the point where making them locally made sense. Its possible they jack up prices in the medium term and instead of retooling an equivalent American team spend that time on automating with a much smaller specialized american team.
  - dmode 10y ago
    Here's how it plays out in a protectionist world. Let's say the US government bans smartphone imports and forces manufacturers to set-up shop in the US. What Apple would do then, they would heavily invest in automation. So the number of jobs it could create here won't be at the same scale as in India. Then to maintain the same margins as the current iPhone, Apple will raise their prices. Consumers would probably still buy those phones, but the rates of upgrades and new phone purchase would dramatically reduce. That will mean Apple will not require all the retail locations they have now or the exhaustive supply chain and shipping network. Leading to loss of jobs in those areas. In addition, not all manufacturers can compete at that price point, as consumers are simply not ready to pay that much money for HTC. Which means there will be a gradual move towards monopoly and ultimately Apple and Samsung will be the only players left in the smartphone market with no incentive to innovate but all the incentives to bring their cost down. This is exactly how it played out in India with Hindustan Motors and Maruti being the only two car manufacturers.
    - 10y ago
alistairSH 10y ago
The "Cliff Notes" version is... We (Americans) expect certain wages. Producing most consumer goods is a low-wage endeavor. Bringing production back to the US leads to an increase in price and lower sales. We can force the issue with protectionist policy, but that doesn't change the underlying economic realities. Bringing production of cheap consumer goods back to the US would increase prices for everybody else. In the long run, we are better off with free trade. We get the low prices we desire. The foreign country gets to develop an industrial base on which to build a large, prosperous economy. China over the last 20 years or so is a prime example - we get $1 t-shirts, they get factory jobs that increase their standard of living.
- toomuchtodo 10y ago
  > Bringing production back to the US leads to an increase in price and lower sales. > In the long run, we are better off with free trade. We get the low prices we desire. "I want my consumer excess, f*ck the middle class" I prefer higher prices and protectionism. Cheap goods are not a right.
  - tonyedgecombe 10y ago
    Protectionism won't bring back the middle class jobs. There has been a fundamental shift from labour to capital in recent decades, this is what has made life difficult for the middle and lower classes.
    - toomuchtodo 10y ago
      Protectionism will push wages up, which helps those who are participating in the labor force (since Congress won't act and trickle down is a farce). Have to hold capital hostage. That's the way to success for labor, and regulation is the way to do it.
      - dukeluke 10y ago
        This. Lower and middle class wages have been stagnant for way too long. If protectionism isn't a good way to realistically raise lower and middle class wages in America, then what is? (Keyword: realistically. Universal basic income is impossible in our current political climate.)
mikeash 10y ago
It would work for some things, and cause problems for other things. The question is not whether it would bring benefits, the question is whether the benefits would outweigh the costs. Pointing to a benefit doesn't answer that question.
dmode 10y ago
India was (and still is to a large extent) a very protectionist country. When I grew up, you can only buy between 2 or 3 car models, all built by Indian companies and some with a government partnership. It held back the country severely and expanded poverty. Due to dire financial outlook of the country, India was forced to liberalize it's economy in the 90s. And since then there has been no looking back. But many years of protectionism meant that India continues to lag behind China in most key indicators. India lost out on the manufacturing boom and an opportunity to lift millions out of poverty. India provides a perfect example of pitfalls of a protectionist economy.
- saycheese 10y ago
  Why was having only a few options for cars an economic barrier to growth?
  - codegeek 10y ago
    Many reasons in a country like India. Again, we are talking about India here. Huge country with terrible infrastructure but a very young population with hunger for success. If there are more car companies, it means more businesses who will need to hire more people. More jobs right there. Then, with more competition, prices stay reasonable and more people can afford a car. It means more people can get a job to commute further and perhaps be able to work at places they could not before. They will spend more money on consumption of food, fuel, insurance. It all goes to the economy. With very few choices, it almost becomes a monopoly and then you can only do so much as a consumer. With more choices, you have more consumers and more producers. Consumers spending money injects growth in the economy. Producers create jobs and indirectly create further growth in a growing economy like India's. Wait, did I just describe Capitalism ? :)
  - dmode 10y ago
    Car was just an example. It was true in all facets of like - TVs, toothbrush, soap, shampoo etc. etc. Why was it a barrier ? Because these were monopolies (or duopolies) with no incentive to innovate and invest capital. They did not have exports so they had no reason to expand manufacturing. They had no way to lower prices as they had to manufacture all the parts that went on to the car due to import restrictions. Resulting in high car prices that only the very rich can afford. Which in turn resulted in a small car market without the incentive to expand their capacity. If no business is expanding, there are no jobs to be had.
whyileft 10y ago
On HN the downvote button is definitely considered the disagree button. Downvotes are private whereas comments are public so it ends up actually being the most common action for disagreement. Also, you must have over 500 karma so it is typically older more conservative viewpoints that downvote. EDIT: One thing I neglected to mention. You can probably tell based upon my comment being downvoted, you are not actually allowed to talk about downvoting. Its kind of like fight club.
- dukeluke 10y ago
  I mentioned downvoting and wasn't downvoted. I think that's just the community telling you that they think you're wrong.
  - whyileft 10y ago
    For historical context https://news.ycombinator.com/item?id=117171 https://news.ycombinator.com/item?id=117171 Based on your green colored name, you may not know that pg is Paul Graham http://www.paulgraham.com/ http://www.paulgraham.com/
    - grzm 10y ago
      From what I've gathered, there have been some substantial (but by no means wholesale) changes to HN behavior since then. There is a tension between how up and down work. I can't imagine we want a bunch of "me, too" comments to show agreement, so upvotes are a way to express that. It would makes sense to consider downvotes similarly, however they also grey out the comment, so they aren't symmetrical actions. I've pointed out 'pg's comment myself in the past, but don't consider it a great practice now. As you note, it's useful for historical context.
- grzm 10y ago
  Some people do use downvotes for disagreement. I don't think that's particularly productive. Members use downvotes more frequently for comments that are gratuitously negative, snarky, unsubstantive, uncivil, inflammatory, or violate the guidelines. I've seen a lot of well-balanced, reasoned comments on contentious topics that don't get downvoted (from what I can tell from the color of the text. And yeah, there is are guidelines specifically related to downvotes. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html If you're wading into contentious discussions, be prepared for them. Take extra care to be considered and civil. If you do receive downvotes, consider them as feedback that you could do more to better express yourself. There's nothing you can really do about those who downvoted for disagreement. Commenting on that will definitely result in more downvotes, from what I've observed.
notatoad 10y ago
if you want to see an example of what this looks like, check out brazil - they have very steep import taxes on foreign produced goods, and the result is that yes, they do manage to attract some local manufacturing, but whether things are made locally or they pay the import tax the result is the same: consumer goods cost 3-4x what they do in the rest of the world.
- Jtsummers 10y ago
  See also Argentina. They've brought in lots of manufacturing to their country, but the high costs on imports has a significant and negative impact on the people. This is also why many middle class Argentines do a lot of shopping abroad, now that the taxing on bringing things back through customs have been relaxed. Which, in turn, will have a negative impact on the economy: less local shopping means local retail (local to the nation, not necessarily "local") will be hurt.
- jlarocco 10y ago
  There's more to life than cheap consumer goods, though. Brazil isn't doing too bad, and they have the 7th largest economy in the world, and perks like universal free healthcare. Hard to say for sure if import taxes and more expensive consumer goods are hurting more than the increased number of jobs are helping.
Manishearth 10y ago
The larger context is that India was a very protectionist economy for many years and that led to economic stagnation. It's called the "License Raj". A more derogatory term that you'll more commonly find in older material is "Hindu rate of growth".
drzaiusapelord 10y ago
You can't just cherry pick one example and say everything is fine under a protectionist system. India: GDP per capita: 1,498.87 USD (China is 6,807.43 USD) GDP: 2.3 trillion USD. (China is at 11T) The World Bank, in 2011 based on 2005's PPPs International Comparison Program, estimated 23.6% of Indian population, or about 276 million people, lived below $1.25 per day on purchasing power parity. 194 Million People Starved for Food in India in 2014-2015, Maximum in the World According to UN Report. India is home to the highest number of hungry people in the world, at 194 million, surpassing China, according to United Nations annual hunger report. According to the World Bank, India's under-5 child mortality rate in 2012 was 56 deaths per 1,000, far short of the country's goal of reducing child mortality to 39 per 1,000 by 2015. By comparison, the child mortality rate in 2012 in Bangladesh was 41; in Brazil, 14; and in the United States, 7. Infant mortality rate: total: 40.5 deaths/1,000 live births. This is some of the worst in the world and its only 15 in China. 4.2 in EU nations. As of Nov 2016, India is the second-most unequal country in the world .[1] The richest 1% of Indians own 58.4% of wealth. The richest 10 % of the Indians own 80.7 % of the wealth. This trend is going in the upward direction every year, which means the rich are getting richer and the poor are getting poorer [2] -- So no, things are clearly not fine under a protectionist system that damns so many to poverty and inequality. Also, the only reason Apple is coming to India is because rural Chinese labor costs more than Indian labor. That's not a good sign for India's economy.
tim333 10y ago
Protectionism can hurt a country as well as lead to new local jobs. It depends what sort of jobs you want. Here's a random one in India for a graduate web dev with > 2 years experience https://www.saralrozgar.com/index.php?route=seeker/jobDetails&jobId=348951&ID=348951&utm_source=Indeed&utm_medium=organic&utm_campaign=Indeed https://www.saralrozgar.com/index.php?route=seeker/jobDetail... $233/ month. I don't know if bringing in protectionism in the US when unemployment is under 5% makes much sense.
simonh 10y ago
You've already had a lot of replies but I'll try to add some value. Many people seem to imagine 'Made in China' means that the iPhones were shaped into complete products from unformed raw materials entirely in China. In fact China mainly just does the final assembly of components which (apart from some very low value components) are mainly made elsewhere. For example did you know that many of the Ax CPUs designed by Apple in California were actually manufactured at a Samsung foundry in Texas and shipped to China for integration into the phones? The same goes for several iterations of the Gorilla Glass. Historically the US has actually captured a sizable chunk of the value in iPhone manufacturing (though it varies by model). Assembling iPhones in India is about very low wage jobs for unskilled labour in order to avoid punitive local market intervention by the government. India's economy is hamstrung by a highly interventionist economic policy which triggers equally punitive economic sanctions from other countries against Indian exports. Raise an import tax (or other barriers such as subsidies) on phones made elsewhere? Ok, but you'll get hit by retaliatory market interventions when you try to export phone made in India. It's issues like this that's why iPhones for the global market are manufactured in China, not India. If the US starts interfering in trade that way they might win back some low wage assembly jobs in the US, but at the cost of risking retaliatory trade barriers against their own exports such as the high value components in the phones that are made in America, and the high paying skilled jobs that supports.
badsock 10y ago
I see it as a variation of the Broken Window Fallacy. In both cases economic activity has been created (America will have to build it's own supply chains internally), but in both cases it's the opportunity cost that gets overlooked. Everything at every step of the supply chain will be more expensive. The combination of more expensive goods and a fixed amount of capital means less stuff gets made. And the amount of stuff being made is practically the definition of economic strength. So in the same manner as the window repair person in the fallacy getting work, local jobs get created in the short term, but at a net negative to the overall system. Ultimately, it's better for everyone if things are efficient (with the GIANT caveat that those economic gains benefit everyone who is in that economy, which clearly hasn't happened in the US since around Reagan's tenure). To answer your question directly, as just a job creation tactic, I don't think it will work in the medium-to-long term in either India or the US.
- dukeluke 10y ago
  Your caveat is key in my opinion. The amount of wealth in America is inarguably larger than ever before, but many aren't benefiting from it. The real problem is wealth inequality. So the question is: what can we do to redistribute wealth in our political climate without a revolution? UBI would never pass here, but protectionism MIGHT works as a band-aid.
sfifs 10y ago
It might but protectionism alone can't make it work. Essentially there still needs to be enough money on the table structurally to make it worth manufacturing even with protection vs. alternative ways to deploy capital. If wages and expenses for instance are so high that you can't make an attractive profit, even protectionism won't bring back jobs.
yummyfajitas 10y ago
Here's how protectionism hurts. Last month I wanted to buy protein powder. It cost about $80/tub, as compared to $35 in the US. In the US I drink 3 scoops/day - my (much poorer) Indian workout partner is losing gains because that's too expensive. I would also enjoy drinking a can of Guinness at my local pub. Unfortunately Guinness is insanely expensive and mostly unavailable. In India I just drink swill - domestically produced Fosters and Kingfisher. Thanks to protectionism, the only good drink available in India is Old Monk, and even that is threatened [1]. (The situation is improving a bit - Birra is new and pretty ok and local breweries are sprouting up for rich people.) I'm regularly asked to bring various products into the country - a new phone, a laptop, etc, because they are too expensive or just unavailable locally. I wanted to cook some non-Indian foods for one of my friends. But many of the things I wanted to cook for her were impossible due to lack of ingredients - the import duties make them too expensive, and no local market exists. Another friend of mine is begging for me to bring her a bagel and a bunch of philadelphia cheese next time I come. Protectionism hurts because we are all consumers. [1] Something bad happened and now Old Monk tastes bad. It's truly sad - Old Monk used to be a world class liquor.
- Clubber 10y ago
  Sounds like the companies you mentioned used protectionism as a crutch rather than an opportunity to catch up. I can see where that would be frustrating.
karthkk 10y ago
Protectionism hurts innovation. If iPhones had been cheaper and easily available in India in the last decade, there probably would have been more software engineers in India building apps and creating new higher paying jobs than manufacturing.
- guitarbill 10y ago
  They had smartphones, just not iPhones. I don't see what's special about iPhones that Android phones shouldn't have caused what you said to happen. Besides, no matter how cheap iPhones, you still need a Mac to make the apps.

camillomiller 10y ago

Because you need to have something to give back to the companies investing, like for example the world's highest smartphone adoption growth rate. Also tax exemption, special deals on many issues, but mostly the growth rate :)

preordained 10y ago
Profits aren't enough? Often the notion that the company would be "forced" to sell at a higher price when they produce local is baloney. Like the Sears wrench fiasco, where they claimed producing a certain wrench locally would raise prices too much, then started make a knockoff in China which they sold at the exact same price point. The point is, too often the savings from outsourcing are passed onto neither the consumer or the employee, so there is definitely question as to who is "really" hurt by protectionist policies.

homero 10y ago

They give back with pollution and poverty

sofon 10y ago

It helps that employee costs in India are competitive with China... (92¢, compared with $3.52 in China) https://www.bloomberg.com/amp/news/articles/2014-11-06/india-vs-dot-china-the-battle-for-global-manufacturing?client=safari https://www.bloomberg.com/amp/news/articles/2014-11-06/india...

edge17 10y ago

Protectionism also caused India to fall behind in most major sectors for the 60 years after independence. Protectionism generally juices an economy in the short term but leaves it behind in the long term when the trade barriers make it costly to import innovation. Trade barriers are a tool, protectionism is an ideology.

codegeek 10y ago
Exactly. India did not have any economic reforms until the 90s which is when industries such as telecom etc exploded. If you compare the economies of China vs India (I know it is a sensitive topic), they were very similar until the 80s. But India did not have "open" trade policies until the 90s which really hurt the overall economic growth. Look at India's growth after the 90s economic reforms and you can see the story.China took off and India has been far behind. I really think a country like india needs to open up to encourage foreign investments which will drive improvements in infrastructure which India severely lacks compared to other developing economies. TL;Dr: In case of India, protectionism has hurt it more than it helped. https://en.wikipedia.org/wiki/Economic_liberalisation_in_India https://en.wikipedia.org/wiki/Economic_liberalisation_in_Ind... Look at the graph below and pay special attention to the GDP growth comparison. Notice the huge spike for India beginning the 90s. http://statisticstimes.com/economy/china-vs-india-gdp.php http://statisticstimes.com/economy/china-vs-india-gdp.php
- unexpected 10y ago
  Adding to your point, something I have thought about India: India really exploded after the development of new industries that basically moved too fast to fall under the "License Raj" mentality that exists. Infosys, Wipro, TCS, Flipkart - these companies simply would not exist if they had to go through the struggles that other companies have to go through.
dominotw 10y ago
>Protectionism also caused India to fall behind in most major sectors for the 60 years after independence. If they had an open economy right after the independence, wouldn't multinationals have completely taken over the industry given almost everyone in India was too poor to start their own business? Wouldn't this basically be "re-occupation " by the west in different garb. Is it fair to blame India's failure on 'protectionism' when it might as well have been rampant corruption, people divided into caste lines, choosing democracy for a poorly educated/unsophisticated/caste corrupted population? How do you explain china if protectionism is root of all evil. What about Hindu attitudes of meekness, non-violence that are contrary to aggression of capitalism .

tsunamifury 10y ago

Intelligent and nuanced import regulations and taxes are of course good for a nation. Radicalized ideological import regulations and taxes are likely to disrupt healthy trade. If you've ever been to India, you'd understand why their decisions and ours are and should be very different due to radically different circumstances.

MarkMc 10y ago

If India were to ban the use of microchips wouldn't that create "a lot of new, local jobs"? It seems to me that technology and free trade have similar effects. If you like one you should like the other.

preordained 10y ago
So if you outsource your labor to an Indian sweatshop, that's the progressive "global economy", but if you wanted to do run the same operation locally you are a Luddite. Hmmm...
- MarkMc 10y ago
  Basically, yes. What is the counterargument? Note also that there are plenty of tariffs on goods from rich countries to poor countries. For example, India's tax on vehicle imports means cars are manufactured in labour-intensive Indian 'sweatshops' instead of efficient, automated Japanese factories.

oblio 10y ago

Cause salaries in the US are 10x of those in India? Do you think US protectionism would bring even those jobs back?

preordained 10y ago
If the jobs _couldn't_ be outsourced, wouldn't _somebody_ local have to do them? Even if automation was fast-tracked to swallow those jobs, if the manufacture and operations management of automation solutions also could not be outsourced, wouldn't that at least bring more jobs to the market?
- mattnewton 10y ago
  They goods would have to be tarrifed to the point where making them locally made sense. Its possible they jack up prices in the medium term and instead of retooling an equivalent American team spend that time on automating with a much smaller specialized american team.
- dmode 10y ago
  Here's how it plays out in a protectionist world. Let's say the US government bans smartphone imports and forces manufacturers to set-up shop in the US. What Apple would do then, they would heavily invest in automation. So the number of jobs it could create here won't be at the same scale as in India. Then to maintain the same margins as the current iPhone, Apple will raise their prices. Consumers would probably still buy those phones, but the rates of upgrades and new phone purchase would dramatically reduce. That will mean Apple will not require all the retail locations they have now or the exhaustive supply chain and shipping network. Leading to loss of jobs in those areas. In addition, not all manufacturers can compete at that price point, as consumers are simply not ready to pay that much money for HTC. Which means there will be a gradual move towards monopoly and ultimately Apple and Samsung will be the only players left in the smartphone market with no incentive to innovate but all the incentives to bring their cost down. This is exactly how it played out in India with Hindustan Motors and Maruti being the only two car manufacturers.
  - 10y ago

alistairSH 10y ago

The "Cliff Notes" version is... We (Americans) expect certain wages. Producing most consumer goods is a low-wage endeavor. Bringing production back to the US leads to an increase in price and lower sales. We can force the issue with protectionist policy, but that doesn't change the underlying economic realities. Bringing production of cheap consumer goods back to the US would increase prices for everybody else. In the long run, we are better off with free trade. We get the low prices we desire. The foreign country gets to develop an industrial base on which to build a large, prosperous economy. China over the last 20 years or so is a prime example - we get $1 t-shirts, they get factory jobs that increase their standard of living.

toomuchtodo 10y ago
> Bringing production back to the US leads to an increase in price and lower sales. > In the long run, we are better off with free trade. We get the low prices we desire. "I want my consumer excess, f*ck the middle class" I prefer higher prices and protectionism. Cheap goods are not a right.
- tonyedgecombe 10y ago
  Protectionism won't bring back the middle class jobs. There has been a fundamental shift from labour to capital in recent decades, this is what has made life difficult for the middle and lower classes.
  - toomuchtodo 10y ago
    Protectionism will push wages up, which helps those who are participating in the labor force (since Congress won't act and trickle down is a farce). Have to hold capital hostage. That's the way to success for labor, and regulation is the way to do it.
    - dukeluke 10y ago
      This. Lower and middle class wages have been stagnant for way too long. If protectionism isn't a good way to realistically raise lower and middle class wages in America, then what is? (Keyword: realistically. Universal basic income is impossible in our current political climate.)

mikeash 10y ago

It would work for some things, and cause problems for other things. The question is not whether it would bring benefits, the question is whether the benefits would outweigh the costs. Pointing to a benefit doesn't answer that question.

dmode 10y ago

India was (and still is to a large extent) a very protectionist country. When I grew up, you can only buy between 2 or 3 car models, all built by Indian companies and some with a government partnership. It held back the country severely and expanded poverty. Due to dire financial outlook of the country, India was forced to liberalize it's economy in the 90s. And since then there has been no looking back. But many years of protectionism meant that India continues to lag behind China in most key indicators. India lost out on the manufacturing boom and an opportunity to lift millions out of poverty. India provides a perfect example of pitfalls of a protectionist economy.

saycheese 10y ago
Why was having only a few options for cars an economic barrier to growth?
- codegeek 10y ago
  Many reasons in a country like India. Again, we are talking about India here. Huge country with terrible infrastructure but a very young population with hunger for success. If there are more car companies, it means more businesses who will need to hire more people. More jobs right there. Then, with more competition, prices stay reasonable and more people can afford a car. It means more people can get a job to commute further and perhaps be able to work at places they could not before. They will spend more money on consumption of food, fuel, insurance. It all goes to the economy. With very few choices, it almost becomes a monopoly and then you can only do so much as a consumer. With more choices, you have more consumers and more producers. Consumers spending money injects growth in the economy. Producers create jobs and indirectly create further growth in a growing economy like India's. Wait, did I just describe Capitalism ? :)
- dmode 10y ago
  Car was just an example. It was true in all facets of like - TVs, toothbrush, soap, shampoo etc. etc. Why was it a barrier ? Because these were monopolies (or duopolies) with no incentive to innovate and invest capital. They did not have exports so they had no reason to expand manufacturing. They had no way to lower prices as they had to manufacture all the parts that went on to the car due to import restrictions. Resulting in high car prices that only the very rich can afford. Which in turn resulted in a small car market without the incentive to expand their capacity. If no business is expanding, there are no jobs to be had.

whyileft 10y ago

On HN the downvote button is definitely considered the disagree button. Downvotes are private whereas comments are public so it ends up actually being the most common action for disagreement. Also, you must have over 500 karma so it is typically older more conservative viewpoints that downvote. EDIT: One thing I neglected to mention. You can probably tell based upon my comment being downvoted, you are not actually allowed to talk about downvoting. Its kind of like fight club.

dukeluke 10y ago
I mentioned downvoting and wasn't downvoted. I think that's just the community telling you that they think you're wrong.
- whyileft 10y ago
  For historical context https://news.ycombinator.com/item?id=117171 https://news.ycombinator.com/item?id=117171 Based on your green colored name, you may not know that pg is Paul Graham http://www.paulgraham.com/ http://www.paulgraham.com/
  - grzm 10y ago
    From what I've gathered, there have been some substantial (but by no means wholesale) changes to HN behavior since then. There is a tension between how up and down work. I can't imagine we want a bunch of "me, too" comments to show agreement, so upvotes are a way to express that. It would makes sense to consider downvotes similarly, however they also grey out the comment, so they aren't symmetrical actions. I've pointed out 'pg's comment myself in the past, but don't consider it a great practice now. As you note, it's useful for historical context.
grzm 10y ago
Some people do use downvotes for disagreement. I don't think that's particularly productive. Members use downvotes more frequently for comments that are gratuitously negative, snarky, unsubstantive, uncivil, inflammatory, or violate the guidelines. I've seen a lot of well-balanced, reasoned comments on contentious topics that don't get downvoted (from what I can tell from the color of the text. And yeah, there is are guidelines specifically related to downvotes. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html If you're wading into contentious discussions, be prepared for them. Take extra care to be considered and civil. If you do receive downvotes, consider them as feedback that you could do more to better express yourself. There's nothing you can really do about those who downvoted for disagreement. Commenting on that will definitely result in more downvotes, from what I've observed.

notatoad 10y ago

if you want to see an example of what this looks like, check out brazil - they have very steep import taxes on foreign produced goods, and the result is that yes, they do manage to attract some local manufacturing, but whether things are made locally or they pay the import tax the result is the same: consumer goods cost 3-4x what they do in the rest of the world.

Jtsummers 10y ago
See also Argentina. They've brought in lots of manufacturing to their country, but the high costs on imports has a significant and negative impact on the people. This is also why many middle class Argentines do a lot of shopping abroad, now that the taxing on bringing things back through customs have been relaxed. Which, in turn, will have a negative impact on the economy: less local shopping means local retail (local to the nation, not necessarily "local") will be hurt.
jlarocco 10y ago
There's more to life than cheap consumer goods, though. Brazil isn't doing too bad, and they have the 7th largest economy in the world, and perks like universal free healthcare. Hard to say for sure if import taxes and more expensive consumer goods are hurting more than the increased number of jobs are helping.

Manishearth 10y ago

The larger context is that India was a very protectionist economy for many years and that led to economic stagnation. It's called the "License Raj". A more derogatory term that you'll more commonly find in older material is "Hindu rate of growth".

drzaiusapelord 10y ago

You can't just cherry pick one example and say everything is fine under a protectionist system. India: GDP per capita: 1,498.87 USD (China is 6,807.43 USD) GDP: 2.3 trillion USD. (China is at 11T) The World Bank, in 2011 based on 2005's PPPs International Comparison Program, estimated 23.6% of Indian population, or about 276 million people, lived below $1.25 per day on purchasing power parity. 194 Million People Starved for Food in India in 2014-2015, Maximum in the World According to UN Report. India is home to the highest number of hungry people in the world, at 194 million, surpassing China, according to United Nations annual hunger report. According to the World Bank, India's under-5 child mortality rate in 2012 was 56 deaths per 1,000, far short of the country's goal of reducing child mortality to 39 per 1,000 by 2015. By comparison, the child mortality rate in 2012 in Bangladesh was 41; in Brazil, 14; and in the United States, 7. Infant mortality rate: total: 40.5 deaths/1,000 live births. This is some of the worst in the world and its only 15 in China. 4.2 in EU nations. As of Nov 2016, India is the second-most unequal country in the world .[1] The richest 1% of Indians own 58.4% of wealth. The richest 10 % of the Indians own 80.7 % of the wealth. This trend is going in the upward direction every year, which means the rich are getting richer and the poor are getting poorer [2] -- So no, things are clearly not fine under a protectionist system that damns so many to poverty and inequality. Also, the only reason Apple is coming to India is because rural Chinese labor costs more than Indian labor. That's not a good sign for India's economy.

tim333 10y ago

Protectionism can hurt a country as well as lead to new local jobs. It depends what sort of jobs you want. Here's a random one in India for a graduate web dev with > 2 years experience https://www.saralrozgar.com/index.php?route=seeker/jobDetails&jobId=348951&ID=348951&utm_source=Indeed&utm_medium=organic&utm_campaign=Indeed https://www.saralrozgar.com/index.php?route=seeker/jobDetail... $233/ month. I don't know if bringing in protectionism in the US when unemployment is under 5% makes much sense.

simonh 10y ago

You've already had a lot of replies but I'll try to add some value. Many people seem to imagine 'Made in China' means that the iPhones were shaped into complete products from unformed raw materials entirely in China. In fact China mainly just does the final assembly of components which (apart from some very low value components) are mainly made elsewhere. For example did you know that many of the Ax CPUs designed by Apple in California were actually manufactured at a Samsung foundry in Texas and shipped to China for integration into the phones? The same goes for several iterations of the Gorilla Glass. Historically the US has actually captured a sizable chunk of the value in iPhone manufacturing (though it varies by model). Assembling iPhones in India is about very low wage jobs for unskilled labour in order to avoid punitive local market intervention by the government. India's economy is hamstrung by a highly interventionist economic policy which triggers equally punitive economic sanctions from other countries against Indian exports. Raise an import tax (or other barriers such as subsidies) on phones made elsewhere? Ok, but you'll get hit by retaliatory market interventions when you try to export phone made in India. It's issues like this that's why iPhones for the global market are manufactured in China, not India. If the US starts interfering in trade that way they might win back some low wage assembly jobs in the US, but at the cost of risking retaliatory trade barriers against their own exports such as the high value components in the phones that are made in America, and the high paying skilled jobs that supports.

badsock 10y ago

I see it as a variation of the Broken Window Fallacy. In both cases economic activity has been created (America will have to build it's own supply chains internally), but in both cases it's the opportunity cost that gets overlooked. Everything at every step of the supply chain will be more expensive. The combination of more expensive goods and a fixed amount of capital means less stuff gets made. And the amount of stuff being made is practically the definition of economic strength. So in the same manner as the window repair person in the fallacy getting work, local jobs get created in the short term, but at a net negative to the overall system. Ultimately, it's better for everyone if things are efficient (with the GIANT caveat that those economic gains benefit everyone who is in that economy, which clearly hasn't happened in the US since around Reagan's tenure). To answer your question directly, as just a job creation tactic, I don't think it will work in the medium-to-long term in either India or the US.

dukeluke 10y ago
Your caveat is key in my opinion. The amount of wealth in America is inarguably larger than ever before, but many aren't benefiting from it. The real problem is wealth inequality. So the question is: what can we do to redistribute wealth in our political climate without a revolution? UBI would never pass here, but protectionism MIGHT works as a band-aid.

sfifs 10y ago

It might but protectionism alone can't make it work. Essentially there still needs to be enough money on the table structurally to make it worth manufacturing even with protection vs. alternative ways to deploy capital. If wages and expenses for instance are so high that you can't make an attractive profit, even protectionism won't bring back jobs.

yummyfajitas 10y ago

Here's how protectionism hurts. Last month I wanted to buy protein powder. It cost about $80/tub, as compared to $35 in the US. In the US I drink 3 scoops/day - my (much poorer) Indian workout partner is losing gains because that's too expensive. I would also enjoy drinking a can of Guinness at my local pub. Unfortunately Guinness is insanely expensive and mostly unavailable. In India I just drink swill - domestically produced Fosters and Kingfisher. Thanks to protectionism, the only good drink available in India is Old Monk, and even that is threatened [1]. (The situation is improving a bit - Birra is new and pretty ok and local breweries are sprouting up for rich people.) I'm regularly asked to bring various products into the country - a new phone, a laptop, etc, because they are too expensive or just unavailable locally. I wanted to cook some non-Indian foods for one of my friends. But many of the things I wanted to cook for her were impossible due to lack of ingredients - the import duties make them too expensive, and no local market exists. Another friend of mine is begging for me to bring her a bagel and a bunch of philadelphia cheese next time I come. Protectionism hurts because we are all consumers. [1] Something bad happened and now Old Monk tastes bad. It's truly sad - Old Monk used to be a world class liquor.

Clubber 10y ago
Sounds like the companies you mentioned used protectionism as a crutch rather than an opportunity to catch up. I can see where that would be frustrating.

karthkk 10y ago

Protectionism hurts innovation. If iPhones had been cheaper and easily available in India in the last decade, there probably would have been more software engineers in India building apps and creating new higher paying jobs than manufacturing.

guitarbill 10y ago
They had smartphones, just not iPhones. I don't see what's special about iPhones that Android phones shouldn't have caused what you said to happen. Besides, no matter how cheap iPhones, you still need a Mac to make the apps.