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I think one of the interesting things about Germany, Japan, and China is that they are NOT strictly capitalist countries, and they do NOT follow Chicago style e

I think one of the interesting things about Germany, Japan, and China is that they are NOT strictly capitalist countries, and they do NOT follow Chicago style economic models (which, ahem, seem to be inaccurate when one attempts to verify them empirically). I think a little bit of socialism is necessary to keep a thriving industry (not finance) driven economy going. Trade barriers, spending on long term public education and welfare and infrastructure, long term economic planning not based on this quarters dividends, a dash of regulation to curb the worst abusers, some subsidies to beef up struggling sectors that contribute the greater good, an efficient and highly monitored bureaucracy, and zero tolerance for anti-social behavior (whether by the powerful or the proletariat); these are what made the USA an industrial economy from 1776 to about 1976, and they are still a recipe for success.

nl 16y ago
Well generally I agree except for this: Trade barriers WTF?! Trade barriers are very, very bad for industrial economies. Also, I think the case for subsidies is arguable at best. Subsidies may be useful in emerging market sectors, but are usually better structured as public spending on research etc. (Obviously argument this doesn't apply to health care any more than it does to other areas of public good such as roads, police, defense etc)
- forkandwait 16y ago
  Trade barriers, in the sense of protective tariffs to prevent outside manufactures selling cheaply in your domestic market, can be very, very, very good for industrial development. Governing a nation is like cooking a small fish, grasshopper. A little bit of salt (subsidies, tariffs, regulation, taxation to pay for infrastructure, etc) is a wonderful thing, too much salt is unfortunately very easy to apply. And arguments about whether salt "is good" or "is bad" are just plain silly and show that you haven't cooked that many fish.
  - jacques_chester 16y ago
    > Trade barriers, in the sense of protective tariffs to prevent outside manufactures selling cheaply in your domestic market, can be very, very, very good for industrial development. Not really. You hurt your own economy because your own consumers now to pay a higher price for their goods. The protected manufacturer has reduced incentive to reduce costs or improve quality. And of course you have hurt people on the other side of the world, who also happen to be humans with families and aspirations, by cutting them out of your market. The only winners from trade barriers are the protected. Everyone else loses, over and above the ostensible benefits.
    - forkandwait 16y ago
      >> Trade barriers, in the sense of protective tariffs to prevent outside manufactures selling cheaply in your domestic market, can be very, very, very good for industrial development. > Not really. Yes really, though not always. (The word "only" when talking about who benefits is a little to coarse a generalization...) The tradeoff is between cheap goods now and capitalization (building of factories, etc) for later; often, without tariffs, the local industry would never even be able to get off the ground to where it is competitive. And if "the protected" contribute to the overall economy (a big if, I grant) then the country as a whole benefits. It is how the US did, how Japan did/ does it, sort of how China does it, etc, etc. And you are right that too much protection can make industries less competitive ... except when it doesn't... Like all tradeoffs, there are tradeoffs. The complexity of human society defies abstract reasoning, and begs for actual example. I don't see any grounding in actual knowledge of history in your arguments (though (1) I grant that too much protectionism is just as bad as too little, and (2) you are probably better grounded in fact than your arguments).
      - nl 16y ago
        I think I could probably agree to some degree with an argument that short term trade barriers in emerging market segments may be useful as a tool to encourage investment. Even that is dangerous because of the tendency of the emerging industry to rely on them. An alternate model is that followed by Thailand and its car industry. The Thais aggressively pushed for and signed unilateral free trade agreements with a number of post-industrial and industrial economies and then leveraged those trade agreements as a tool to encourage large investments in heavy industry. The fact that cars imported from Thailand attract no import duty in a large number of countries has made them a very attractive investment target for companies like Honda who have since built factories there.
jacoblyles 16y ago
There's an awful lot of assumptions to unpack in this comment so I'm not going to address everything. But can we all agree that a country which had GSEs pouring $500 billion into the mortgage market and a decade's worth of government holding short term interest rates at 0% isn't some kind of laissez-fare paradise? You had "Chicago style" economists yelling at the government to dismantle Fanny and Freddie for years before the collapse, those shining examples of government long-term economic planning. For decades free market economists advocated replacing the Federal Reserves short-term focus on quarterly GDP with a mandate to maintain long-term price stability. Oh, and they have been railing against both parties for racking up such a huge public debt. Then when the shit hits the fan, all people remember is a caricature of "Chicago-style" economists, not what they actually said and did. The narrative that the United States lost its way through too much deregulation and free market fundamentalism is cheap rhetoric that doesn't become any more true the more often it is repeated. It is symptomatic of too much education by the way of opinion articles.
- forkandwait 16y ago
  You might be right if you said that my argument was too simplistic... but I think there is plenty of "cheap rhetoric" on your side as well, and the ad hominem attack ("too much education by way of reading opinion articles" is pretty slimy, if you ask me. I could easily have said "too much watching of Fox News"....
brc 16y ago
I think this is a bit revisionist at best. One of the defining characteristics of post-war West Germany was the embracing of free markets and de-regulated business. The most influential post-war Economics Minister, Ludwig Erhard was a fierce proponent of liberal economic theory and laid down the foundation for the decades of strong growth that West Germany experienced. He flatly rejected calls for subsidisation of industry and threw out all the price controls that had been in place. In contrast to the UK, which went the other direction after the war and nationalised and socialised so much that it's economy was moribund by the 1970's, in complete isolation with the emerging powerhouse that was the West German economy. Sure, the Germans have had a problem with unemployment, and youth unemployment in particular, but they enjoy a high standard of living and a stable and prosperous economy. And the unemployment rate has been dropping since the conservative-minded government has been in power. It is now lower than most US states. So I would contend that Germany, particularly throughout the period from 1950-1980 was following a classical liberal economic philosophy more closely than just about any other Western country, the US included. And the results showed. Though I would say it was more Austrian school based than Chicago. I also don't agree with your assertion that socialism is required to keep an industry going. For that you just need an export-led manufacturing sector, good technical training in schools, and to keep the finance sector in it's place, instead of being allowed to dominate the economy and thus wield political power. Interestingly enough, the Germans haven't had a housing crash because there was no housing boom. And that's because there was no attempt to change the ownership levels amongst people who didn't own a home.
- nsvida 16y ago
  You are completely wrong. Ludwig Erhard like most other German politicians used an economic school named Social market economy. This school has been the main economic model in mainland Western Europe.

nl 16y ago

Well generally I agree except for this: Trade barriers WTF?! Trade barriers are very, very bad for industrial economies. Also, I think the case for subsidies is arguable at best. Subsidies may be useful in emerging market sectors, but are usually better structured as public spending on research etc. (Obviously argument this doesn't apply to health care any more than it does to other areas of public good such as roads, police, defense etc)

forkandwait 16y ago
Trade barriers, in the sense of protective tariffs to prevent outside manufactures selling cheaply in your domestic market, can be very, very, very good for industrial development. Governing a nation is like cooking a small fish, grasshopper. A little bit of salt (subsidies, tariffs, regulation, taxation to pay for infrastructure, etc) is a wonderful thing, too much salt is unfortunately very easy to apply. And arguments about whether salt "is good" or "is bad" are just plain silly and show that you haven't cooked that many fish.
- jacques_chester 16y ago
  > Trade barriers, in the sense of protective tariffs to prevent outside manufactures selling cheaply in your domestic market, can be very, very, very good for industrial development. Not really. You hurt your own economy because your own consumers now to pay a higher price for their goods. The protected manufacturer has reduced incentive to reduce costs or improve quality. And of course you have hurt people on the other side of the world, who also happen to be humans with families and aspirations, by cutting them out of your market. The only winners from trade barriers are the protected. Everyone else loses, over and above the ostensible benefits.
  - forkandwait 16y ago
    >> Trade barriers, in the sense of protective tariffs to prevent outside manufactures selling cheaply in your domestic market, can be very, very, very good for industrial development. > Not really. Yes really, though not always. (The word "only" when talking about who benefits is a little to coarse a generalization...) The tradeoff is between cheap goods now and capitalization (building of factories, etc) for later; often, without tariffs, the local industry would never even be able to get off the ground to where it is competitive. And if "the protected" contribute to the overall economy (a big if, I grant) then the country as a whole benefits. It is how the US did, how Japan did/ does it, sort of how China does it, etc, etc. And you are right that too much protection can make industries less competitive ... except when it doesn't... Like all tradeoffs, there are tradeoffs. The complexity of human society defies abstract reasoning, and begs for actual example. I don't see any grounding in actual knowledge of history in your arguments (though (1) I grant that too much protectionism is just as bad as too little, and (2) you are probably better grounded in fact than your arguments).
    - nl 16y ago
      I think I could probably agree to some degree with an argument that short term trade barriers in emerging market segments may be useful as a tool to encourage investment. Even that is dangerous because of the tendency of the emerging industry to rely on them. An alternate model is that followed by Thailand and its car industry. The Thais aggressively pushed for and signed unilateral free trade agreements with a number of post-industrial and industrial economies and then leveraged those trade agreements as a tool to encourage large investments in heavy industry. The fact that cars imported from Thailand attract no import duty in a large number of countries has made them a very attractive investment target for companies like Honda who have since built factories there.

jacoblyles 16y ago

There's an awful lot of assumptions to unpack in this comment so I'm not going to address everything. But can we all agree that a country which had GSEs pouring $500 billion into the mortgage market and a decade's worth of government holding short term interest rates at 0% isn't some kind of laissez-fare paradise? You had "Chicago style" economists yelling at the government to dismantle Fanny and Freddie for years before the collapse, those shining examples of government long-term economic planning. For decades free market economists advocated replacing the Federal Reserves short-term focus on quarterly GDP with a mandate to maintain long-term price stability. Oh, and they have been railing against both parties for racking up such a huge public debt. Then when the shit hits the fan, all people remember is a caricature of "Chicago-style" economists, not what they actually said and did. The narrative that the United States lost its way through too much deregulation and free market fundamentalism is cheap rhetoric that doesn't become any more true the more often it is repeated. It is symptomatic of too much education by the way of opinion articles.

forkandwait 16y ago
You might be right if you said that my argument was too simplistic... but I think there is plenty of "cheap rhetoric" on your side as well, and the ad hominem attack ("too much education by way of reading opinion articles" is pretty slimy, if you ask me. I could easily have said "too much watching of Fox News"....

brc 16y ago

I think this is a bit revisionist at best. One of the defining characteristics of post-war West Germany was the embracing of free markets and de-regulated business. The most influential post-war Economics Minister, Ludwig Erhard was a fierce proponent of liberal economic theory and laid down the foundation for the decades of strong growth that West Germany experienced. He flatly rejected calls for subsidisation of industry and threw out all the price controls that had been in place. In contrast to the UK, which went the other direction after the war and nationalised and socialised so much that it's economy was moribund by the 1970's, in complete isolation with the emerging powerhouse that was the West German economy. Sure, the Germans have had a problem with unemployment, and youth unemployment in particular, but they enjoy a high standard of living and a stable and prosperous economy. And the unemployment rate has been dropping since the conservative-minded government has been in power. It is now lower than most US states. So I would contend that Germany, particularly throughout the period from 1950-1980 was following a classical liberal economic philosophy more closely than just about any other Western country, the US included. And the results showed. Though I would say it was more Austrian school based than Chicago. I also don't agree with your assertion that socialism is required to keep an industry going. For that you just need an export-led manufacturing sector, good technical training in schools, and to keep the finance sector in it's place, instead of being allowed to dominate the economy and thus wield political power. Interestingly enough, the Germans haven't had a housing crash because there was no housing boom. And that's because there was no attempt to change the ownership levels amongst people who didn't own a home.

nsvida 16y ago
You are completely wrong. Ludwig Erhard like most other German politicians used an economic school named Social market economy. This school has been the main economic model in mainland Western Europe.