4 ms·

I keep hearing that protectionism doesn't benefit the people of a country, but China and now this feel like counterexamples. Am I misreading?

msoad 9y ago
Actually this is the perfect example of why protectionism doesn't work. Manufacturing is such an iconic aspect of the economy that every government or policy maker loves to talk about it and show progress in it. India has unnecessary incentives put in place for manufacturing and Apple is taking advantage of it. But overall it's a bad deal for India.
- thisisananth 9y ago
  Hi, can you please clarify what the unnecessary incentives are and how it is a bad deal for India?
- dexterp 9y ago
  I'm not seeing how this is a bad deal for India. India get's more factories setting up shop there to produce products; more jobs, more money staying in the country.
  - toisanji 9y ago
    and more pollution :(
  - accountyaccount 9y ago
    If it's not sustainable for their economy those companies will pick up and move once the market demands higher wages and better worker protections (or just can't afford the subsidies anymore). The clothing industry does this all the time — they'll build up a local economy until it's too expensive, and then move on to the next desperate area. If you're trying to be appealing to industry by racing to the bottom you're essentially fighting an extended battle for last place.
    - improbable22 9y ago
      But protectionism doesn't have to be "a battle for last place". It often is, I agree, but is also one of the levers used by Korea (etc.) to develop. The book which changed my mind about this, which I highly recommend, is Joe Studwell, "How Asia Works", https://howasiaworks.wordpress.com https://howasiaworks.wordpress.com . India, unfortunately, has a long record of getting this exactly wrong.
      - accountyaccount 9y ago
        Thanks for the recommendation, I'll check it out.
    - pm90 9y ago
      > they'll build up a local economy until it's too expensive, and then move on to the next desperate area. Wait, uh, why is this a bad thing? Isn't that what we want, to build up a local economy, to build up local capital which if the local populace invests wisely would allow their labor force to be eligible for more skilled jobs etc.
      - accountyaccount 9y ago
        The economy collapses when they leave. The clothing industry is basically creating a bunch of short-term Detroits.
        blackoil 9y ago
        So, the industry will move back because collapsed economy has driven down costs? I think more likely is that more complex manufacturing will come in as infrastructure and skill set is more in place. Also improved economy leads to better education, supporting service industry. Clothing industry may have left India and China, but both are better off now.
        accountyaccount 9y ago
cat199 9y ago
benefit' in this concept, is typically defined solely in terms of net short term financial impact to the parties involved things like self sufficiency, long-term strategic growth planning, etc. are not factored in. also: labor costs are huge in these scenarios.. if indian factory workers were paid what US auto workers are/were paid, I doubt apple would be taking the same strategy. same could be said for indian mfg in general and also china..
drzaiusapelord 9y ago
>but China and now this feel like counterexamples. You don't need to make 30% of something to sell it Chinese retail stores, so I don't think the two are comparable. India also has strict employment laws where once a company reaches a trivial size, it is illegal to fire anyone. The firing is then done by via government petition and you better have an airtight case to do so. So a lot of companies don't scale past x employees to avoid all the added regulation that would hurt them. That's a brake on their economy. China is almost the opposite of this. They have so few rules and regulations that western product manufacturing moved there to enjoy the low prices. This had a trickle down effect locally. All those jobs and cheap stuff meant that they could ride the coattails of these behemoth Western economies looking for the lowest cost of manufacture. Then the Chinese slowly turned that momentum into their own manufacturing with their own brands and added token protectionism at best to keep the Westerners at arm length, but not enough to chase them away like Brazil and India do with their strict protectionism. These two countries couldn't be more different. China has a $11T GDP while India has merely has $2T, even with similar populaions. China has literally 5x the economy India has due to market liberalization, low regulations, and embracing the world economy.
brbrodude 9y ago
because it's a lie
- SimbaOnSteroids 9y ago
  It only works if you're developing, and already have a low standard of living. Once you have living standards that require a relatively high level of income automation becomes a more economical alternative to human laborers. Moreover shipping costs already serve as a natural protectionist barrier, yet we still outsource manufacturing jobs.
  - brbrodude 9y ago
    The developed countries developed their industries in isolation and with protectionism, now economics says to other countries that they should focus on other stuff and let some piece of industry be dependent on other countries industries. It may work sometimes, say if you're developing other stuff that is equally valuable, if you're not then it seems like a better deal for the one who got to develop their industry. Brazil is a very good example of this, we mostly sell low value products and consume high value products from other nations, doesn't seem like a recipe for development.
throwaway32189 9y ago
India setup the "protectionist" license raj to protect a few reigning industrial houses for "nationalistic" purposes [1]. The predatory state made it difficult not only for offshore companies, but practically impossible for domestic upstarts (without political arm-wringing). No doubt, it protected the folk it was meant to protect. In a "history-repeats-itself" moment Indian unicorns like Ola/Flipkart are seeking similar "nationalistic" laws today, seeking "protection" from "foreign capital" when it comes via Amazon and Uber - but not via VCs investing in Indian startups. Of course, all this was dressed up in "nationalistic" and "socialistic" costumes, with the media playing the tune. China on the other hand went full Leninism and destroyed the elite (which TBH might have been more suited in India's case after Independence), so when Deng Xiaoping opened up, there were few "special interest groups" to guide things in their favor. Things today are different. China appears to me to be increasingly taking the old (crony-)capitalist route (is there any other ?). China does exactly what Ola/Flipkart want. Let's be clear as to who this benefits. One moral is that systems can't compensate for a systematic destruction of social ethics. The other probably is to not fall into the word trap. Things meaning vastly different things are "PR-ed" with similar names to attain semantic advantages over the plebs. [1]. Amusingly, many of these houses were built in collusion with the British Empire, and some even had their origins in the Opium trade with the Qing.

msoad 9y ago

Actually this is the perfect example of why protectionism doesn't work. Manufacturing is such an iconic aspect of the economy that every government or policy maker loves to talk about it and show progress in it. India has unnecessary incentives put in place for manufacturing and Apple is taking advantage of it. But overall it's a bad deal for India.

thisisananth 9y ago
Hi, can you please clarify what the unnecessary incentives are and how it is a bad deal for India?
dexterp 9y ago
I'm not seeing how this is a bad deal for India. India get's more factories setting up shop there to produce products; more jobs, more money staying in the country.
- toisanji 9y ago
  and more pollution :(
- accountyaccount 9y ago
  If it's not sustainable for their economy those companies will pick up and move once the market demands higher wages and better worker protections (or just can't afford the subsidies anymore). The clothing industry does this all the time — they'll build up a local economy until it's too expensive, and then move on to the next desperate area. If you're trying to be appealing to industry by racing to the bottom you're essentially fighting an extended battle for last place.
  - improbable22 9y ago
    But protectionism doesn't have to be "a battle for last place". It often is, I agree, but is also one of the levers used by Korea (etc.) to develop. The book which changed my mind about this, which I highly recommend, is Joe Studwell, "How Asia Works", https://howasiaworks.wordpress.com https://howasiaworks.wordpress.com . India, unfortunately, has a long record of getting this exactly wrong.
    - accountyaccount 9y ago
      Thanks for the recommendation, I'll check it out.
  - pm90 9y ago
    > they'll build up a local economy until it's too expensive, and then move on to the next desperate area. Wait, uh, why is this a bad thing? Isn't that what we want, to build up a local economy, to build up local capital which if the local populace invests wisely would allow their labor force to be eligible for more skilled jobs etc.
    - accountyaccount 9y ago
      The economy collapses when they leave. The clothing industry is basically creating a bunch of short-term Detroits.
      - blackoil 9y ago
        So, the industry will move back because collapsed economy has driven down costs? I think more likely is that more complex manufacturing will come in as infrastructure and skill set is more in place. Also improved economy leads to better education, supporting service industry. Clothing industry may have left India and China, but both are better off now.
        accountyaccount 9y ago

cat199 9y ago

benefit' in this concept, is typically defined solely in terms of net short term financial impact to the parties involved things like self sufficiency, long-term strategic growth planning, etc. are not factored in. also: labor costs are huge in these scenarios.. if indian factory workers were paid what US auto workers are/were paid, I doubt apple would be taking the same strategy. same could be said for indian mfg in general and also china..

drzaiusapelord 9y ago

>but China and now this feel like counterexamples. You don't need to make 30% of something to sell it Chinese retail stores, so I don't think the two are comparable. India also has strict employment laws where once a company reaches a trivial size, it is illegal to fire anyone. The firing is then done by via government petition and you better have an airtight case to do so. So a lot of companies don't scale past x employees to avoid all the added regulation that would hurt them. That's a brake on their economy. China is almost the opposite of this. They have so few rules and regulations that western product manufacturing moved there to enjoy the low prices. This had a trickle down effect locally. All those jobs and cheap stuff meant that they could ride the coattails of these behemoth Western economies looking for the lowest cost of manufacture. Then the Chinese slowly turned that momentum into their own manufacturing with their own brands and added token protectionism at best to keep the Westerners at arm length, but not enough to chase them away like Brazil and India do with their strict protectionism. These two countries couldn't be more different. China has a $11T GDP while India has merely has $2T, even with similar populaions. China has literally 5x the economy India has due to market liberalization, low regulations, and embracing the world economy.

brbrodude 9y ago

because it's a lie

SimbaOnSteroids 9y ago
It only works if you're developing, and already have a low standard of living. Once you have living standards that require a relatively high level of income automation becomes a more economical alternative to human laborers. Moreover shipping costs already serve as a natural protectionist barrier, yet we still outsource manufacturing jobs.
- brbrodude 9y ago
  The developed countries developed their industries in isolation and with protectionism, now economics says to other countries that they should focus on other stuff and let some piece of industry be dependent on other countries industries. It may work sometimes, say if you're developing other stuff that is equally valuable, if you're not then it seems like a better deal for the one who got to develop their industry. Brazil is a very good example of this, we mostly sell low value products and consume high value products from other nations, doesn't seem like a recipe for development.

throwaway32189 9y ago

India setup the "protectionist" license raj to protect a few reigning industrial houses for "nationalistic" purposes [1]. The predatory state made it difficult not only for offshore companies, but practically impossible for domestic upstarts (without political arm-wringing). No doubt, it protected the folk it was meant to protect. In a "history-repeats-itself" moment Indian unicorns like Ola/Flipkart are seeking similar "nationalistic" laws today, seeking "protection" from "foreign capital" when it comes via Amazon and Uber - but not via VCs investing in Indian startups. Of course, all this was dressed up in "nationalistic" and "socialistic" costumes, with the media playing the tune. China on the other hand went full Leninism and destroyed the elite (which TBH might have been more suited in India's case after Independence), so when Deng Xiaoping opened up, there were few "special interest groups" to guide things in their favor. Things today are different. China appears to me to be increasingly taking the old (crony-)capitalist route (is there any other ?). China does exactly what Ola/Flipkart want. Let's be clear as to who this benefits. One moral is that systems can't compensate for a systematic destruction of social ethics. The other probably is to not fall into the word trap. Things meaning vastly different things are "PR-ed" with similar names to attain semantic advantages over the plebs. [1]. Amusingly, many of these houses were built in collusion with the British Empire, and some even had their origins in the Opium trade with the Qing.