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The Rise of China and the Fall of the ‘Free Trade’ Myth

91 points by montrose 9y ago

WalterBright 9y ago
I don't think the author understands what free trade is: "Regardless of the mystical properties claimed for it, the invisible hand of self-interest depends on the visible and often heavy hand of government. To take only one instance, British gunboats helped impose free trade on 19th-century China — a lesson not lost on the Chinese." I.e. the gunboats removed the Chinese heavy hand on trade. The "invisible hand" cannot operate when the government restricts it. The role of government in free trade is to prevent forcible interference with it. "It was Hamilton’s formula, rather than free trade, that made the United States the world’s fastest-growing economy in the 19th century and into the 1920s." That's quite a reach. The US's biggest market at the time was itself, and the Constitution ensured free trade between the states. It was the world's biggest free trade zone. "World War II proved only a brief interruption in Japan’s policy of protection." Japan was not an economic powerhouse before WW2. It was massively unable to compete with the US economically. It could not replace the combat losses of equipment. Etc.
- twelvechairs 9y ago
  It doesn't help these days that when you hear a 'free trade agreement' being signed between countries its usually not actual 'free trade'but highly regulated for mutual self interest.
  - ggm 9y ago
    highly regulated for mutual self interest This, except in reality, the TPP was highly regulated trade for US self interest, the mutuality was almost completely lost. The economic analysis of the last trade round showed a huge disadvantage to Australia, and I suspect the other participants by structural trade imbalances, and the TPP looked to repeat the outcomes. We have a Pharma Benefits scheme, which excludes US drug companies because they have to stop raping patients with the price model. The TPP planned to lower the wall, for specious "left hand isomer" alternate drugs of no clear benefit, to favour the US view on drug sales: buy our pharma, because we want you to. This is a shallow analysis statement of the position, but a very real view of the outcome: its not free trade, when you bully us over social policy to sell things. The North atlantic trade treaty outcomes the UK will face in brexit will go there too. No british person wants to eat ammonia soaked chicken. The Americans want to sell the british Chicken and other meat loaded with antibiotics which is excluded from the EU. The british want a trade deal more than anything else, and will cave on food standards regarding excess antibiotics and washed chicken meat (the US production methods are so disgusting they can't exclude systematic salmonella risks) for cheap meat, to make brexit "work" and as a result, will lose food security and safety. For what? for the chimera of "free trade"
    - emodendroket 9y ago
      I'm not sure I'm following this conversation correctly, but in a sort of Platonic extreme-libertarian understanding of free trade, allowing the sale of this American meat makes sense, because the market is supposed to then decide to avoid American meat. I, personally, certainly do not believe that's the case, but, still, I don't see how this really ties in with the OP's idea that "free trade agreements" aren't really free enough.
      - ggm 9y ago
        Yes, I suspect that an objectively open, but clearly fictive (the basic information asymmetries here aren't going away because US strategic interest is not actually to have a free market) food market, cheap US chicken which might kill you should have some alternates which wind up being a good choice. But, since we won't all have infinite money, or brainpower, or patience, or jobs, we're going to buy that cheap US chicken and hope some other sucker dies. We are going to be told to buy the chicken, and we're going to be told to remove biosecurity laws which limit the sale of tainted chicken, in "the wider public interest" Its not a choice between a mythically fully free market and protectionism: its a choice between a US centric distorted market model, and another economies centric but distorted market model.
        emodendroket 9y ago
        Yes, that's a fair argument. I think the guy you're replying to is arguing more for the no-regulation utopia you and I both agree is fictive, though.
  - emodendroket 9y ago
    That doesn't seem to really clash with the author's thesis that "free trade" advocates are not taking their own medicine.
    - WalterBright 9y ago
      That's true, but the author's other thesis was that free trade doesn't work. One could also say that no ruler is exactly 12 inches long, but that doesn't prevent them from being useful.
    - rvern 9y ago
      Many are not, indeed. But if you care about the truth, you should argue against the best arguments of the strongest advocates. You have to challenge the arguments in the chapter on international trade of Tyler Cowen and Alex Tabarrok’s Modern Principles of Economics, and you have to refute the central point. The New York Times and Hacker News do not require that much.
- emodendroket 9y ago
  I don't think you've read so closely. What he claims here is that Britain developed its economy using a protectionist scheme and then, in a predatory fashion, imposed "free trade" (specifically the "right" of the British to sell opium) on the Chinese. This had disastrous effects on them (opium addiction is the most obvious, I suppose). Chinese people are not thankful to the British for liberating them from restraints on the free market in the opium wars.
  - emodendroket 9y ago
    While I am quibbling, the idea that "Japan was not an economic powerhouse" before the Pacific War because they struggled to keep up with production of materiel is not a good one. In the Meiji Restoration Japan went from, in less than 50 years, a backwater to an imperial power in its own right that was able to win the Sino-Japanese War and the Russo-Japanese War (the latter stunned Europeans at the time). They were the strongest and richest of the various East Asian powers and were able to colonize large parts of Asia and, as the article mentions, the Europeans never did get all their Asian colonies back after Japan lost the war. Japan's real problem in the war was its lack of natural resources. It was highly dependent on imports -- in particular it was highly dependent on American oil, an obvious problem if you're planning to go to war with America. That's why the Dutch East Indies were important and they moved to capture them early (to some extent the paucity of natural resources in Japan is what motivated the project of becoming a colonist in the first place). It's really hard to see how more trade liberalization would have helped. Besides that, the productive capacity of the United States, and its insulation from attack, was exceptional among all of the powers in World War II, even the UK. I think we can still acknowledge Japan had significant industry, even if it couldn't keep up with the world's best.
    - WalterBright 9y ago
      Yes, we can acknowledge that Japan had significant industry. It did well compared with the other East Asian economies which were very un-free at the time. It did poorly compared with the US free trade economy. Even at the outset of WW2, their military equipment was inferior to the US, except in a few places (the Zero, the Yamato). Japan was economically defeated long before the bombing of Japan got in gear. Early battles inflicted disproportionate losses on the Japanese military due to inadequate equipment and supply. Japan knew their only hope was a quick, devastating surprise attack followed by a peace agreement.
- deleted 9y ago
  [deleted]
- yongjik 9y ago
  > Japan was not an economic powerhouse before WW2. It was massively unable to compete with the US economically. It could not replace the combat losses of equipment. Etc. At that time there wasn't any nation in the world that could compete with the US in war production mode. (Well, maybe the Soviet, and that's it.) You might as well say that Germany and Britain weren't economic powerhouses.
  - WalterBright 9y ago
    > At that time there wasn't any nation in the world that could compete with the US in war production mode. That's right. Aren't free markets and free trade amazing? :-) The Soviet Union in WW2 was heavily supplied by the US.
    - yongjik 9y ago
      Well, being the single industrialized country in the world whose soil is not constantly being bombarded by enemy force should be pretty amazing (compared to the alternatives), but I'm not sure what that has to do with free markets.
      - WalterBright 9y ago
        The US was effective at preventing other countries from bombing it, and was effective at bombing other countries, ocean or no ocean. To what do you attribute that? The US was able to sustain a crushing advantage against multiple enemies across two oceans, plus sustain all of its allies with desperately needed arms, fuel, food, and support. The US soldiers were the best equipped, best fed, and best supported.
    - emodendroket 9y ago
      In the inter-war period the United States passed massive tariffs on foreign goods (and they had substantial ones before that too). The zenith of that was the Smoot-Hawley tariffs of 1930. Also, one reason the US was easily able to go on a war footing was that its grinding depression meant a lot of productive capacity was idle. And once the war started there was much more, not less, government intervention in the economy (introducing price controls and the like and obviously tremendously increasing government spending).
- Spooky23 9y ago
  The gunboats didn’t create a free trade scenario. They created merchantilist, extraterritorial trade zones. They bought Chinese goods with opium, not because they were fighting for liberty and free trade, but because they didn’t want to buy silk and other goods with silver. The hard currency was needed to hire the mercenaries (who are all about cash and carry) that kept Indian peasants growing poppies. The result of this forced trade and loss of control was devastating inflation and collapse of governance within China and the circumstances that led to to horrors of the 20th century.
  - WalterBright 9y ago
    > forced trade Nobody was forced to buy opium. The force was in removal of the force preventing people from buying opium.
    - emodendroket 9y ago
      The "force" in question was forcing China to allow the sale of opium, rather than their preferred policy of not allowing anyone, British or Chinese, to sell opium and create opium addicts. Incidentally, while flying the banner of "free trade" in the two Opium Wars, the British also took Chinese territory (most significantly Hong Kong), secured rights to extraterritoriality for themselves, and expanded the "coolie" system of indentured servitude. Frankly, it's astonishing to me that anybody could try to cast the Opium Wars as the selfless British removing barriers to liberty.
      - WalterBright 9y ago
        > it's astonishing to me that anybody could try to cast the Opium Wars as the selfless British removing barriers to liberty. I'm not pretending it as selfless. Free trade benefits both parties. Nor am I claiming other things the British did are free market. I'm only talking about removal of the barriers to the opium trade.
        emodendroket 9y ago
- coldtea 9y ago
  >I.e. the gunboats removed the Chinese heavy hand on trade. The "invisible hand" cannot operate when the government restricts it. In other words, there was no free choice or democracy about it, and what the people want (which can very well be protectionism, or at least, not to allow opium sales in their country) didn't matter.
ggm 9y ago
I feel the article speaks to my own cultural bias, and I liked it but now I'm suspicious I liked it because I agreed with so much it said. The last comment, about re-joining the TPP: It is unstated but I feel true (none the less) that if the US rejoins the TPP it will be a vastly different outcome to a US led TPP. Australia was screwed over by the last trade round, and significant economic disadvantage lay in the major US ally in the region (Australia is one of "five eyes" in the secrets sharing intelligence circuit) agreeing to roll over on trade for sectional US interests. The current TPP may suck, but it sucks a lot less regarding US demands on IPR, and other US favouring trade positions. If the US rejoins, these will not be core issues for the current participants. If they negotiate a China facing TPP you can be sure its both favouring China, and very probably more equitable to the other participants than a US cast one, for clear reasons: It helps China in the long term, to the be the centre of the trading nexus.
andrenth 9y ago
People complain about fake news on Facebook but are ok with this?
emodendroket 9y ago
I more or less agreed with the thesis before reading the piece, but I found this piece quite interesting. I usually like Pankaj Mishra (and have since I read his stinging takedown of Niall Ferguson's work). Thank you for sharing this.
rukittenme 9y ago
This article makes me sad. Not because I believe its true but because other people will. I really don't want to write a 3000 word comment in response to this article. After all, only a few people will read it and those that do will not read it with the seriousness of a New York Times article. I'm very disappointed in this piece. Half truths, omitted details, and bad history all rolled into Communist apologia. For those who do not have time to read paste the headline: one sided "free" trade agreements benefit one side. Who would have thought? All other "conclusions" the author draws from this fact have no bearing on reality.
- HumanDrivenDev 9y ago
  read it with the seriousness of a New York Times article Maybe it's time we all stopped taking New York Times seriously. They do not have a fantastic track record.
- emodendroket 9y ago
  I don't really care for commentary like this. Either argue with the piece or don't; don't bore us with how you're sad that people will find it persuasive without bothering to refute any of its ideas.
  - rukittenme 9y ago
    > Either argue with the piece or don't There are more options than A or B. By expressing displeasure with the article I can at the least demonstrate there are other viewpoints. There is a large wealth of knowledge and information out there. All of it detailing how China owes its economic success to economic liberalization. This article stands out for its contrarianism. That's why it will get some many clicks and comments as opposed to yet another study proving what we already know. If anything I should be lamenting the "death" of "popular knowledge". If knowledge isn't constantly in flux its "boring" and not worth reading. Thus knowledge must constantly change for papers like the NYTimes to continue to exist. Imagine if a Creationist wrote an article in "Nature" (the scientific journal). What would you say in response? What would you say if it was well received? Would you rebut the same old lies over and over and over again or would you just be sad that the world never seems to learn?
jvm 9y ago
I sense a lot of mood affiliation in the title that I'm sure will earn the New York Times a lot of clicks. China is the biggest success story of free trade in the history of the world, and the contrarian take presented here is absurd to the point of silly. Liberalization is a matter of degree. You can't cherry pick a particular protectionist policy South Korea had and then say, "Oh look see they used import substitution and still had a good outcome." You have to also explain why that import substitution policy didn't ruin the Korean economy the way it did Argentina, or in an extreme example, Maoist China. And what you'll find is that they became much more liberal in other ways. If you're going to claim that liberalism doesn't matter you need to show your work. You need to show that in aggregate, countries that liberalize their economies do less well than countries with less liberal economies. But when you look at the data, you will find just the opposite: Countries that move in a liberal direction, like China, South Korea, and Chile, tend to improve their outcomes, while those that do not, like Argentina or Zimbabwe, tend to stagnate. And almost every wealthy country in the world is either highly liberalized or sitting on an ocean of crude oil. The fact that even liberal countries have illiberal policies doesn't disprove the benefits of liberalization. Most likely, Asia succeeded in spite of protectionism, not because of it.
- FelixP 9y ago
  I would also point out that the author conflate two tightly-coupled but distinct spheres - the political and the economic. China, Japan, South Korea, and Singapore have all been massively successful because they acted aggressively in the political realm to foster growth and development (with little to no regard for Democratic norms). Conversely, their economic systems were and are fairly liberal (China being both the least developed of these as well as the biggest laggard on this front). Chinese citizens may not be politically empowered, but it is far easier to set up a company, hire and fire, etc. in Shanghai than in New York.
  - ahartmetz 9y ago
    Japan and South Korea fostered growth and development with little to no regard for democratic norms? I mean yeah, their democracies look a bit strange to Westerners, what with Japan being governed by mostly one party and South Korea being a fairly new democracy... But what specifically do you mean?
intended 9y ago
The most recent thing I have heard about china, repeated by people who man editorial positions in news papers you read, is that China is now the dominant super power. America just doesn't know it yet. I suspect this is entirely true. And as added ammunition for this article - the poor prime minister, but excellent finance minister of India - Manmohan Singh, focused on the Korean Model a lot earlier on. It influenced the way the Indian markets opened. There's only 1 book written about MMS, and in that book theres a telling interaction, where Manmohan (Much before his days as PM) was upset that the author (then a reporter), didn't mention Manmohan's stance on the Korean model in an article.
- candiodari 9y ago
  True, but China is also at the very top of it's game, and it's success came at a rather extreme cost. Mind-boggling debt, smog in all the major cities up to LETHAL levels at times (and something like 80% of the time above cancer-in-10-years levels), no army to speak of, legendary levels of corruption (and centuries of history of corruption). And to top it all off, China's labor market is currently the highest it'll be for the next century or so. It's all downhill from here. China's economic dominance through cheap labor is under severe threat, and they're losing. That loss is causing economic unreast (tens of millions of job losses) in the China. China also legendary when it comes to outright lying about their accomplishments. From scientific advancements in Fusion energy to amounts of iron ore in ports, China has been caught lying so often that economists seriously think 80%-90% of government statistics are outright falsified, with often strong arguments about the remaining 10%. Unfortunately, their leadership is equally famous for believing the lies, right up to the point that they marched a fleet of ships under British cannons, with substandard hulls and without ammunition. You see, the general of that fleet had assured them the ammunition was there, several of his officers had written the central government that he was lying. Whichever was the truth, the fleet was devastated, the general survived and wasn't even fired. Thousands of soldiers and something like 40% of the total Chinese navy was lost. Legendary. There are so many things that could go incredibly wrong here. Economists aren't kidding when they say China might start WW3. They might have to.
  - Bucephalus355 9y ago
evadne 9y ago
Very relevant book, http://www.anthempress.com/kicking-away-the-ladder http://www.anthempress.com/kicking-away-the-ladder
gonvaled 9y ago
The US has been the champion of free trade assuming that it was win-win or that if would win when others loose. As soon as it looses while others are winning (in some areas) they are trying to bend (again) the rules on their favor. The American era has been a waste: one country trying by all means to impose its agenda, to claim its divine right to progress and dominance, to unfairly try to control the rest of the economic actors. Let's hope the Chinese era is more fair and balanced.
- rm_-rf_slash 9y ago
  Ha! Chinese economic policy is proudly mercantilistic. They have no pretentions towards a balanced playing field. China will do what is best for China.
  - gonvaled 9y ago
    As has the US, to the point (just one example) of lying on the Security Council to justify taking control of relevant geopolitical resources. It didnt even work. Not only covertly America First, but also incompetent.
- baq 9y ago
  China has no reason to be better than the US. Why would it if it worked for the states after all?
  - gonvaled 9y ago
    I do not know, maybe their ideology is more fair?
    - refurb 9y ago
      Fair in the sense that as long as you agree with it? If you don't you'll be silenced?
      - gonvaled 9y ago
mirimir 9y ago
I wonder about this: > But to grasp China’s economic achievement, and its ramifications, it is imperative to ask: Why has a market economy directed by a Communist state become the world’s second-largest? Was China ever really a communist state? They've said so, of course, and talked the talk. But maybe it's more accurate to say the China remains a Confucian state. With an overlay that looks a lot more like fascism / national socialism than communism.
- jonathanyc 9y ago
  Come on. China is no utopia—it isn’t even a country I would want to live in—but equating them to Nazis instantly discredits your arguments. The Chinese model is unique, and why shouldn’t it be? They are the first country in history of their size to industrialize and become a world power. Let’s stop making cute generalizations that only serve to make ourselves feel better and think of what we actually don’t like about their system of government so we can fix it in our own. “The Chinese are Nazis!!” doesn’t help anyone.
  - HumanDrivenDev 9y ago
    > They are the first country in history of their size to industrialize and become a world power. Are you implying that a very large country becoming a world power is somehow an impressive achievement?
  - mirimir 9y ago
    I never said Nazi. What I'm getting at is the emphasis on strong leadership, and the belief that businesses should serve the national interest.
    - emodendroket 9y ago
      You said "national socialism," which is, quite literally, the ideology that "Nazi" is shorthand for.
      - mirimir 9y ago
cheriot 9y ago
Free trade vs protectionism is not a one dimensional spectrum. I can't recommend How Asia Works highly enough as a source of nuance in why protectionism has worked for some and not others. https://www.amazon.com/How-Asia-Works-Joe-Studwell/dp/0802121322 https://www.amazon.com/How-Asia-Works-Joe-Studwell/dp/080212...
vfulco 9y ago
Finally after the middle class in US has been hollowed out and everything that could be shipped over there was, we get the real story. There are scoundrels in (former) US government and industry who sold out this country lock, stock, barrel for their own greed.
chj 9y ago
I don't think China is the only winner of Free Trade here. China did have a large surplus, but isn't that most of the profits go to American and European companies? Why that money wasn't going back to America is a myth itself. After three decades of industrialization, China's environment undergoes tragic damage, and the country gradually loses the ability to feed itself. Today China imports more than 20% of its food supply. As the aging workforce retires, China's future outlook is not very bright. I hope you understand, not all the grass is green in China.

91 points by montrose 9y ago

I don't think the author understands what free trade is: "Regardless of the mystical properties claimed for it, the invisible hand of self-interest depends on the visible and often heavy hand of government. To take only one instance, British gunboats helped impose free trade on 19th-century China — a lesson not lost on the Chinese." I.e. the gunboats removed the Chinese heavy hand on trade. The "invisible hand" cannot operate when the government restricts it. The role of government in free trade is to prevent forcible interference with it. "It was Hamilton’s formula, rather than free trade, that made the United States the world’s fastest-growing economy in the 19th century and into the 1920s." That's quite a reach. The US's biggest market at the time was itself, and the Constitution ensured free trade between the states. It was the world's biggest free trade zone. "World War II proved only a brief interruption in Japan’s policy of protection." Japan was not an economic powerhouse before WW2. It was massively unable to compete with the US economically. It could not replace the combat losses of equipment. Etc.

twelvechairs 9y ago
It doesn't help these days that when you hear a 'free trade agreement' being signed between countries its usually not actual 'free trade'but highly regulated for mutual self interest.
- ggm 9y ago
  highly regulated for mutual self interest This, except in reality, the TPP was highly regulated trade for US self interest, the mutuality was almost completely lost. The economic analysis of the last trade round showed a huge disadvantage to Australia, and I suspect the other participants by structural trade imbalances, and the TPP looked to repeat the outcomes. We have a Pharma Benefits scheme, which excludes US drug companies because they have to stop raping patients with the price model. The TPP planned to lower the wall, for specious "left hand isomer" alternate drugs of no clear benefit, to favour the US view on drug sales: buy our pharma, because we want you to. This is a shallow analysis statement of the position, but a very real view of the outcome: its not free trade, when you bully us over social policy to sell things. The North atlantic trade treaty outcomes the UK will face in brexit will go there too. No british person wants to eat ammonia soaked chicken. The Americans want to sell the british Chicken and other meat loaded with antibiotics which is excluded from the EU. The british want a trade deal more than anything else, and will cave on food standards regarding excess antibiotics and washed chicken meat (the US production methods are so disgusting they can't exclude systematic salmonella risks) for cheap meat, to make brexit "work" and as a result, will lose food security and safety. For what? for the chimera of "free trade"
  - emodendroket 9y ago
    I'm not sure I'm following this conversation correctly, but in a sort of Platonic extreme-libertarian understanding of free trade, allowing the sale of this American meat makes sense, because the market is supposed to then decide to avoid American meat. I, personally, certainly do not believe that's the case, but, still, I don't see how this really ties in with the OP's idea that "free trade agreements" aren't really free enough.
    - ggm 9y ago
      Yes, I suspect that an objectively open, but clearly fictive (the basic information asymmetries here aren't going away because US strategic interest is not actually to have a free market) food market, cheap US chicken which might kill you should have some alternates which wind up being a good choice. But, since we won't all have infinite money, or brainpower, or patience, or jobs, we're going to buy that cheap US chicken and hope some other sucker dies. We are going to be told to buy the chicken, and we're going to be told to remove biosecurity laws which limit the sale of tainted chicken, in "the wider public interest" Its not a choice between a mythically fully free market and protectionism: its a choice between a US centric distorted market model, and another economies centric but distorted market model.
      - emodendroket 9y ago
        Yes, that's a fair argument. I think the guy you're replying to is arguing more for the no-regulation utopia you and I both agree is fictive, though.
- emodendroket 9y ago
  That doesn't seem to really clash with the author's thesis that "free trade" advocates are not taking their own medicine.
  - WalterBright 9y ago
    That's true, but the author's other thesis was that free trade doesn't work. One could also say that no ruler is exactly 12 inches long, but that doesn't prevent them from being useful.
  - rvern 9y ago
    Many are not, indeed. But if you care about the truth, you should argue against the best arguments of the strongest advocates. You have to challenge the arguments in the chapter on international trade of Tyler Cowen and Alex Tabarrok’s Modern Principles of Economics, and you have to refute the central point. The New York Times and Hacker News do not require that much.
emodendroket 9y ago
I don't think you've read so closely. What he claims here is that Britain developed its economy using a protectionist scheme and then, in a predatory fashion, imposed "free trade" (specifically the "right" of the British to sell opium) on the Chinese. This had disastrous effects on them (opium addiction is the most obvious, I suppose). Chinese people are not thankful to the British for liberating them from restraints on the free market in the opium wars.
- emodendroket 9y ago
  While I am quibbling, the idea that "Japan was not an economic powerhouse" before the Pacific War because they struggled to keep up with production of materiel is not a good one. In the Meiji Restoration Japan went from, in less than 50 years, a backwater to an imperial power in its own right that was able to win the Sino-Japanese War and the Russo-Japanese War (the latter stunned Europeans at the time). They were the strongest and richest of the various East Asian powers and were able to colonize large parts of Asia and, as the article mentions, the Europeans never did get all their Asian colonies back after Japan lost the war. Japan's real problem in the war was its lack of natural resources. It was highly dependent on imports -- in particular it was highly dependent on American oil, an obvious problem if you're planning to go to war with America. That's why the Dutch East Indies were important and they moved to capture them early (to some extent the paucity of natural resources in Japan is what motivated the project of becoming a colonist in the first place). It's really hard to see how more trade liberalization would have helped. Besides that, the productive capacity of the United States, and its insulation from attack, was exceptional among all of the powers in World War II, even the UK. I think we can still acknowledge Japan had significant industry, even if it couldn't keep up with the world's best.
  - WalterBright 9y ago
    Yes, we can acknowledge that Japan had significant industry. It did well compared with the other East Asian economies which were very un-free at the time. It did poorly compared with the US free trade economy. Even at the outset of WW2, their military equipment was inferior to the US, except in a few places (the Zero, the Yamato). Japan was economically defeated long before the bombing of Japan got in gear. Early battles inflicted disproportionate losses on the Japanese military due to inadequate equipment and supply. Japan knew their only hope was a quick, devastating surprise attack followed by a peace agreement.
deleted 9y ago
[deleted]
yongjik 9y ago
> Japan was not an economic powerhouse before WW2. It was massively unable to compete with the US economically. It could not replace the combat losses of equipment. Etc. At that time there wasn't any nation in the world that could compete with the US in war production mode. (Well, maybe the Soviet, and that's it.) You might as well say that Germany and Britain weren't economic powerhouses.
- WalterBright 9y ago
  > At that time there wasn't any nation in the world that could compete with the US in war production mode. That's right. Aren't free markets and free trade amazing? :-) The Soviet Union in WW2 was heavily supplied by the US.
  - yongjik 9y ago
    Well, being the single industrialized country in the world whose soil is not constantly being bombarded by enemy force should be pretty amazing (compared to the alternatives), but I'm not sure what that has to do with free markets.
    - WalterBright 9y ago
      The US was effective at preventing other countries from bombing it, and was effective at bombing other countries, ocean or no ocean. To what do you attribute that? The US was able to sustain a crushing advantage against multiple enemies across two oceans, plus sustain all of its allies with desperately needed arms, fuel, food, and support. The US soldiers were the best equipped, best fed, and best supported.
  - emodendroket 9y ago
    In the inter-war period the United States passed massive tariffs on foreign goods (and they had substantial ones before that too). The zenith of that was the Smoot-Hawley tariffs of 1930. Also, one reason the US was easily able to go on a war footing was that its grinding depression meant a lot of productive capacity was idle. And once the war started there was much more, not less, government intervention in the economy (introducing price controls and the like and obviously tremendously increasing government spending).
Spooky23 9y ago
The gunboats didn’t create a free trade scenario. They created merchantilist, extraterritorial trade zones. They bought Chinese goods with opium, not because they were fighting for liberty and free trade, but because they didn’t want to buy silk and other goods with silver. The hard currency was needed to hire the mercenaries (who are all about cash and carry) that kept Indian peasants growing poppies. The result of this forced trade and loss of control was devastating inflation and collapse of governance within China and the circumstances that led to to horrors of the 20th century.
- WalterBright 9y ago
  > forced trade Nobody was forced to buy opium. The force was in removal of the force preventing people from buying opium.
  - emodendroket 9y ago
    The "force" in question was forcing China to allow the sale of opium, rather than their preferred policy of not allowing anyone, British or Chinese, to sell opium and create opium addicts. Incidentally, while flying the banner of "free trade" in the two Opium Wars, the British also took Chinese territory (most significantly Hong Kong), secured rights to extraterritoriality for themselves, and expanded the "coolie" system of indentured servitude. Frankly, it's astonishing to me that anybody could try to cast the Opium Wars as the selfless British removing barriers to liberty.
    - WalterBright 9y ago
      > it's astonishing to me that anybody could try to cast the Opium Wars as the selfless British removing barriers to liberty. I'm not pretending it as selfless. Free trade benefits both parties. Nor am I claiming other things the British did are free market. I'm only talking about removal of the barriers to the opium trade.
      - emodendroket 9y ago
coldtea 9y ago
>I.e. the gunboats removed the Chinese heavy hand on trade. The "invisible hand" cannot operate when the government restricts it. In other words, there was no free choice or democracy about it, and what the people want (which can very well be protectionism, or at least, not to allow opium sales in their country) didn't matter.

ggm 9y ago

I feel the article speaks to my own cultural bias, and I liked it but now I'm suspicious I liked it because I agreed with so much it said. The last comment, about re-joining the TPP: It is unstated but I feel true (none the less) that if the US rejoins the TPP it will be a vastly different outcome to a US led TPP. Australia was screwed over by the last trade round, and significant economic disadvantage lay in the major US ally in the region (Australia is one of "five eyes" in the secrets sharing intelligence circuit) agreeing to roll over on trade for sectional US interests. The current TPP may suck, but it sucks a lot less regarding US demands on IPR, and other US favouring trade positions. If the US rejoins, these will not be core issues for the current participants. If they negotiate a China facing TPP you can be sure its both favouring China, and very probably more equitable to the other participants than a US cast one, for clear reasons: It helps China in the long term, to the be the centre of the trading nexus.

andrenth 9y ago

People complain about fake news on Facebook but are ok with this?

emodendroket 9y ago

I more or less agreed with the thesis before reading the piece, but I found this piece quite interesting. I usually like Pankaj Mishra (and have since I read his stinging takedown of Niall Ferguson's work). Thank you for sharing this.

rukittenme 9y ago

This article makes me sad. Not because I believe its true but because other people will. I really don't want to write a 3000 word comment in response to this article. After all, only a few people will read it and those that do will not read it with the seriousness of a New York Times article. I'm very disappointed in this piece. Half truths, omitted details, and bad history all rolled into Communist apologia. For those who do not have time to read paste the headline: one sided "free" trade agreements benefit one side. Who would have thought? All other "conclusions" the author draws from this fact have no bearing on reality.

HumanDrivenDev 9y ago
read it with the seriousness of a New York Times article Maybe it's time we all stopped taking New York Times seriously. They do not have a fantastic track record.
emodendroket 9y ago
I don't really care for commentary like this. Either argue with the piece or don't; don't bore us with how you're sad that people will find it persuasive without bothering to refute any of its ideas.
- rukittenme 9y ago
  > Either argue with the piece or don't There are more options than A or B. By expressing displeasure with the article I can at the least demonstrate there are other viewpoints. There is a large wealth of knowledge and information out there. All of it detailing how China owes its economic success to economic liberalization. This article stands out for its contrarianism. That's why it will get some many clicks and comments as opposed to yet another study proving what we already know. If anything I should be lamenting the "death" of "popular knowledge". If knowledge isn't constantly in flux its "boring" and not worth reading. Thus knowledge must constantly change for papers like the NYTimes to continue to exist. Imagine if a Creationist wrote an article in "Nature" (the scientific journal). What would you say in response? What would you say if it was well received? Would you rebut the same old lies over and over and over again or would you just be sad that the world never seems to learn?

jvm 9y ago

I sense a lot of mood affiliation in the title that I'm sure will earn the New York Times a lot of clicks. China is the biggest success story of free trade in the history of the world, and the contrarian take presented here is absurd to the point of silly. Liberalization is a matter of degree. You can't cherry pick a particular protectionist policy South Korea had and then say, "Oh look see they used import substitution and still had a good outcome." You have to also explain why that import substitution policy didn't ruin the Korean economy the way it did Argentina, or in an extreme example, Maoist China. And what you'll find is that they became much more liberal in other ways. If you're going to claim that liberalism doesn't matter you need to show your work. You need to show that in aggregate, countries that liberalize their economies do less well than countries with less liberal economies. But when you look at the data, you will find just the opposite: Countries that move in a liberal direction, like China, South Korea, and Chile, tend to improve their outcomes, while those that do not, like Argentina or Zimbabwe, tend to stagnate. And almost every wealthy country in the world is either highly liberalized or sitting on an ocean of crude oil. The fact that even liberal countries have illiberal policies doesn't disprove the benefits of liberalization. Most likely, Asia succeeded in spite of protectionism, not because of it.

FelixP 9y ago
I would also point out that the author conflate two tightly-coupled but distinct spheres - the political and the economic. China, Japan, South Korea, and Singapore have all been massively successful because they acted aggressively in the political realm to foster growth and development (with little to no regard for Democratic norms). Conversely, their economic systems were and are fairly liberal (China being both the least developed of these as well as the biggest laggard on this front). Chinese citizens may not be politically empowered, but it is far easier to set up a company, hire and fire, etc. in Shanghai than in New York.
- ahartmetz 9y ago
  Japan and South Korea fostered growth and development with little to no regard for democratic norms? I mean yeah, their democracies look a bit strange to Westerners, what with Japan being governed by mostly one party and South Korea being a fairly new democracy... But what specifically do you mean?

intended 9y ago

The most recent thing I have heard about china, repeated by people who man editorial positions in news papers you read, is that China is now the dominant super power. America just doesn't know it yet. I suspect this is entirely true. And as added ammunition for this article - the poor prime minister, but excellent finance minister of India - Manmohan Singh, focused on the Korean Model a lot earlier on. It influenced the way the Indian markets opened. There's only 1 book written about MMS, and in that book theres a telling interaction, where Manmohan (Much before his days as PM) was upset that the author (then a reporter), didn't mention Manmohan's stance on the Korean model in an article.

candiodari 9y ago
True, but China is also at the very top of it's game, and it's success came at a rather extreme cost. Mind-boggling debt, smog in all the major cities up to LETHAL levels at times (and something like 80% of the time above cancer-in-10-years levels), no army to speak of, legendary levels of corruption (and centuries of history of corruption). And to top it all off, China's labor market is currently the highest it'll be for the next century or so. It's all downhill from here. China's economic dominance through cheap labor is under severe threat, and they're losing. That loss is causing economic unreast (tens of millions of job losses) in the China. China also legendary when it comes to outright lying about their accomplishments. From scientific advancements in Fusion energy to amounts of iron ore in ports, China has been caught lying so often that economists seriously think 80%-90% of government statistics are outright falsified, with often strong arguments about the remaining 10%. Unfortunately, their leadership is equally famous for believing the lies, right up to the point that they marched a fleet of ships under British cannons, with substandard hulls and without ammunition. You see, the general of that fleet had assured them the ammunition was there, several of his officers had written the central government that he was lying. Whichever was the truth, the fleet was devastated, the general survived and wasn't even fired. Thousands of soldiers and something like 40% of the total Chinese navy was lost. Legendary. There are so many things that could go incredibly wrong here. Economists aren't kidding when they say China might start WW3. They might have to.
- Bucephalus355 9y ago

evadne 9y ago

Very relevant book, http://www.anthempress.com/kicking-away-the-ladder http://www.anthempress.com/kicking-away-the-ladder

gonvaled 9y ago

The US has been the champion of free trade assuming that it was win-win or that if would win when others loose. As soon as it looses while others are winning (in some areas) they are trying to bend (again) the rules on their favor. The American era has been a waste: one country trying by all means to impose its agenda, to claim its divine right to progress and dominance, to unfairly try to control the rest of the economic actors. Let's hope the Chinese era is more fair and balanced.

rm_-rf_slash 9y ago
Ha! Chinese economic policy is proudly mercantilistic. They have no pretentions towards a balanced playing field. China will do what is best for China.
- gonvaled 9y ago
  As has the US, to the point (just one example) of lying on the Security Council to justify taking control of relevant geopolitical resources. It didnt even work. Not only covertly America First, but also incompetent.
baq 9y ago
China has no reason to be better than the US. Why would it if it worked for the states after all?
- gonvaled 9y ago
  I do not know, maybe their ideology is more fair?
  - refurb 9y ago
    Fair in the sense that as long as you agree with it? If you don't you'll be silenced?
    - gonvaled 9y ago

mirimir 9y ago

I wonder about this: > But to grasp China’s economic achievement, and its ramifications, it is imperative to ask: Why has a market economy directed by a Communist state become the world’s second-largest? Was China ever really a communist state? They've said so, of course, and talked the talk. But maybe it's more accurate to say the China remains a Confucian state. With an overlay that looks a lot more like fascism / national socialism than communism.

jonathanyc 9y ago
Come on. China is no utopia—it isn’t even a country I would want to live in—but equating them to Nazis instantly discredits your arguments. The Chinese model is unique, and why shouldn’t it be? They are the first country in history of their size to industrialize and become a world power. Let’s stop making cute generalizations that only serve to make ourselves feel better and think of what we actually don’t like about their system of government so we can fix it in our own. “The Chinese are Nazis!!” doesn’t help anyone.
- HumanDrivenDev 9y ago
  > They are the first country in history of their size to industrialize and become a world power. Are you implying that a very large country becoming a world power is somehow an impressive achievement?
- mirimir 9y ago
  I never said Nazi. What I'm getting at is the emphasis on strong leadership, and the belief that businesses should serve the national interest.
  - emodendroket 9y ago
    You said "national socialism," which is, quite literally, the ideology that "Nazi" is shorthand for.
    - mirimir 9y ago

cheriot 9y ago

Free trade vs protectionism is not a one dimensional spectrum. I can't recommend How Asia Works highly enough as a source of nuance in why protectionism has worked for some and not others. https://www.amazon.com/How-Asia-Works-Joe-Studwell/dp/0802121322 https://www.amazon.com/How-Asia-Works-Joe-Studwell/dp/080212...

vfulco 9y ago

Finally after the middle class in US has been hollowed out and everything that could be shipped over there was, we get the real story. There are scoundrels in (former) US government and industry who sold out this country lock, stock, barrel for their own greed.

chj 9y ago

I don't think China is the only winner of Free Trade here. China did have a large surplus, but isn't that most of the profits go to American and European companies? Why that money wasn't going back to America is a myth itself. After three decades of industrialization, China's environment undergoes tragic damage, and the country gradually loses the ability to feed itself. Today China imports more than 20% of its food supply. As the aging workforce retires, China's future outlook is not very bright. I hope you understand, not all the grass is green in China.