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It hurts domestic industry in the other country. The negative effects are concentrated while the benefit is diffuse. Example: China subsidizes solar panels to

It hurts domestic industry in the other country. The negative effects are concentrated while the benefit is diffuse. Example: China subsidizes solar panels to the point where all US solar panel companies go bankrupt. The US solar panel industry is badly hurt, even if the rest of us get 40% cheaper solar panels.

mcny 7y ago
> It hurts domestic industry in the other country. The negative effects are concentrated while the benefit is diffuse. > Example: China subsidizes solar panels to the point where all US solar panel companies go bankrupt. The US solar panel industry is badly hurt, even if the rest of us get 40% cheaper solar panels. What is the end game in this example for China? Do they expect to subsidize now and raise prices to exorbitant levels once there is no competition? That can't possibly last for a long time. If prices go high enough, surely the industries in the US will spring back up. The pain is temporary at worst. I think what it shows is a fatal flaw in democracy. I think I read somewhere that if there is an issue that at least about five percent of the population care deeply enough (I don't know the numbers but for example the fanatical religious people in the middle east or pro-birth or pro-gun people in the US) to be single-issue voters, they will have an outsize effect on policy even though their position is bad for a majority of people.
- NicoJuicy 7y ago
  Because everything is gradual. Solar first, then electric batteries, ... Soon, the tech is out of our hands and we have no option/big competitors left anymore. They already have a head start with a 1 billion market without any of our competitors
  - jjoonathan 7y ago
    Exactly. How many economists would argue today that China's independent home-grown software / internet ecosystem was a bad decision? How many of those same economists were saying 10 years ago that China was only shooting itself in the foot with its protectionist software / internet policies?
- carlosdp 7y ago
  How is the US supposed to even develop the technology effectively if the companies keep going under? Solar technology isn't a commodity, it's high-tech R&D, I don't think it's a temporary pain.
  - paganel 7y ago
    Memory chips used to be high tech RD until not that long ago but afaik the US isn’t producing any of them anymore and one of the biggest players in this market is South Korea through Samsung, a conglomerate which 100% receives State subsidies in one way or another. My perception is that no-one in the US is losing any sleep over this because the people who could be potentially upset by this state of affairs are pretty busy investing their money and time resources in other, more lucrative endeavors. But trade wars have always relied on demagogy and plain nationalism, and saying stuff like “we should build our own solar panels” when it has been rationally proved that the best course of affairs is to take the money handed on a silver plate to your own consumers/tax-payers and move on to other economic tasks is plain nationalism bordering on isolationism.
    - coolspot 7y ago
      Micron produces DDR4 memory in the US. https://en.m.wikipedia.org/wiki/List_of_semiconductor_fabrication_plants https://en.m.wikipedia.org/wiki/List_of_semiconductor_fabric...
    - ALittleLight 7y ago
      What do you mean that nobody in the US is losing sleep over it? If nobody were concerned by it, then it wouldn't be an issue it all. It seems like lots of people, including the current administration and their supporters, are deeply concerned by Chinese subsidies. While capitalists might have other, better, opportunities, what about American workers who have seen decades of stagnant or declining wages? American workers being constricted to service and tech jobs, and losing the opportunity for manufacturing work? Surely these people are losing over Chinese anti competitive behavior. In the short term it seems we benefit from cheaper goods. In the long term, the risks are that we lose industries, make ourselves reliant on unfriendly foreign powers, and lose entire categories of productive labor for our workers. Your comment looks down on nationalism in a way that I think is a bit naive. Why shouldn't Americans be concerned with the wellbeing of Americans? Are the Chinese working for our best interests? Are they working neutrally for the good of all? Or are they working in their own best interests, or the interests of their rulers? The Chinese leadership should try to do what's best for the Chinese as American leadership should try to do what's best for Americans.
- whatshisface 7y ago
  >That can't possibly last for a long time. US antitrust law is motivated by the idea that it will last for long enough to hurt. That's why monopolies are specifically broken up. After killing all of the competition, a monopoly could threaten to drop prices again if anyone else sprung up. That is enough to act as a deterrent, if you want to find out about the economic arguments before or against, research the history of anti-trust.
  - mcny 7y ago
    > After killing all of the competition, a monopoly could threaten to drop prices again if anyone else sprung up. That is enough to act as a deterrent, if you want to find out about the economic arguments before or against, research the history of anti-trust. If we want to introduce tariffs, why not wait until we see China PR actually show monopolistic behavior? My gut reaction is that because the US is such a big customer, China PR will not be able to do that.
- pizza 7y ago
  > The pain is temporary at worst. To paraphrase the quote "the market can remain irrational longer than you can remain solvent", the pain can remain temporary for a long time. To go along with the example, it could take decades of subsidies in US solar panel research before the US has anything that can compete with or out-compete contemporary Chinese solar panels on a more-or-less level playing field, in the international market. Because of US's unwillingness to match subsidies and allowing Chinese solar panels to out-sell them, in this example, they concede decades of industry dominance and the simultaneous ability to acquire state of the art advances (bright minds and new knowledge).
- microcolonel 7y ago
  > I think I read somewhere that if there is an issue that at least about five percent of the population care deeply enough (I don't know the numbers but for example the fanatical religious people in the middle east or pro-birth or pro-gun people in the US) to be single-issue voters, they will have an outsize effect on policy even though their position is bad for a majority of people. It might be helpful to not think about people becoming single-issue voters this way. People become single-issue voters because they see something as crucial, single-issue voters are supremely justified in voting. Also probably not ideal to think of people in terms of partisan dogwhistle labels, but that's a separate issue.
paganel 7y ago
I was thinking about the solar panel example, I think that in this case the US (and Germany, another country that has made similar complaints) can instead focus their economic resources on trying to solve energy storage and distribution, which is still an unsolved problem (I mean “unsolved” in the context of the intermittent power inputs provided by solar and wind) and they can use part of the money that would have otherwise been spent on building solar panels (remember, these are now subsidized by the Chinese) on trying to achieve this.
- mistermann 7y ago
  They can do this, but I think the point of contention is whether it will ultimately turn out to be a wise strategic decision. The fact that it's not an entirely voluntary decision also seems at least somewhat important.
  - paganel 7y ago
    Regular people take economic steps because of decisions almost forced on them from the outside on a regular basis, being stubborn about going down a route that is not economically rational anymore it's just that, stubbornness. I remember our 60-year old mom being discontent about my brother still wanting to be in the business of selling cows (my brother was a peasant) even though that wasn't economically rational anymore, as my brother had to fight against agri-business (he's a sole cow breeder) and against farmers from other countries whose governments are more generous towards them (our government it's not that large-handed when it comes to small farmers, I live in Eastern Europe). My mother correctly pointed out that there was a lot more money available for my brother if he had only wanted to accept other job opportunities (like being a truck driver) and give up what was essentially an economically dead end. So, if a 60-year old woman from Eastern Europe with no formal education in economics can still intuitively see what the best economically rational move is given a set of inputs, then I fail to understand how come a democratically elected government like the US one cannot do the same, but instead it chooses to go down the economically dead end road, and all that only because of stubbornness and misguided pride.
    - 7y ago
_iyig 7y ago
It also hurts R&D. A state-subsidized solar panel factory might use inefficient, wasteful production methods which could not compete in something closer to a market economy. This can have negative externalities for the state, end-users, and society.

mcny 7y ago

> It hurts domestic industry in the other country. The negative effects are concentrated while the benefit is diffuse. > Example: China subsidizes solar panels to the point where all US solar panel companies go bankrupt. The US solar panel industry is badly hurt, even if the rest of us get 40% cheaper solar panels. What is the end game in this example for China? Do they expect to subsidize now and raise prices to exorbitant levels once there is no competition? That can't possibly last for a long time. If prices go high enough, surely the industries in the US will spring back up. The pain is temporary at worst. I think what it shows is a fatal flaw in democracy. I think I read somewhere that if there is an issue that at least about five percent of the population care deeply enough (I don't know the numbers but for example the fanatical religious people in the middle east or pro-birth or pro-gun people in the US) to be single-issue voters, they will have an outsize effect on policy even though their position is bad for a majority of people.

NicoJuicy 7y ago
Because everything is gradual. Solar first, then electric batteries, ... Soon, the tech is out of our hands and we have no option/big competitors left anymore. They already have a head start with a 1 billion market without any of our competitors
- jjoonathan 7y ago
  Exactly. How many economists would argue today that China's independent home-grown software / internet ecosystem was a bad decision? How many of those same economists were saying 10 years ago that China was only shooting itself in the foot with its protectionist software / internet policies?
carlosdp 7y ago
How is the US supposed to even develop the technology effectively if the companies keep going under? Solar technology isn't a commodity, it's high-tech R&D, I don't think it's a temporary pain.
- paganel 7y ago
  Memory chips used to be high tech RD until not that long ago but afaik the US isn’t producing any of them anymore and one of the biggest players in this market is South Korea through Samsung, a conglomerate which 100% receives State subsidies in one way or another. My perception is that no-one in the US is losing any sleep over this because the people who could be potentially upset by this state of affairs are pretty busy investing their money and time resources in other, more lucrative endeavors. But trade wars have always relied on demagogy and plain nationalism, and saying stuff like “we should build our own solar panels” when it has been rationally proved that the best course of affairs is to take the money handed on a silver plate to your own consumers/tax-payers and move on to other economic tasks is plain nationalism bordering on isolationism.
  - coolspot 7y ago
    Micron produces DDR4 memory in the US. https://en.m.wikipedia.org/wiki/List_of_semiconductor_fabrication_plants https://en.m.wikipedia.org/wiki/List_of_semiconductor_fabric...
  - ALittleLight 7y ago
    What do you mean that nobody in the US is losing sleep over it? If nobody were concerned by it, then it wouldn't be an issue it all. It seems like lots of people, including the current administration and their supporters, are deeply concerned by Chinese subsidies. While capitalists might have other, better, opportunities, what about American workers who have seen decades of stagnant or declining wages? American workers being constricted to service and tech jobs, and losing the opportunity for manufacturing work? Surely these people are losing over Chinese anti competitive behavior. In the short term it seems we benefit from cheaper goods. In the long term, the risks are that we lose industries, make ourselves reliant on unfriendly foreign powers, and lose entire categories of productive labor for our workers. Your comment looks down on nationalism in a way that I think is a bit naive. Why shouldn't Americans be concerned with the wellbeing of Americans? Are the Chinese working for our best interests? Are they working neutrally for the good of all? Or are they working in their own best interests, or the interests of their rulers? The Chinese leadership should try to do what's best for the Chinese as American leadership should try to do what's best for Americans.
whatshisface 7y ago
>That can't possibly last for a long time. US antitrust law is motivated by the idea that it will last for long enough to hurt. That's why monopolies are specifically broken up. After killing all of the competition, a monopoly could threaten to drop prices again if anyone else sprung up. That is enough to act as a deterrent, if you want to find out about the economic arguments before or against, research the history of anti-trust.
- mcny 7y ago
  > After killing all of the competition, a monopoly could threaten to drop prices again if anyone else sprung up. That is enough to act as a deterrent, if you want to find out about the economic arguments before or against, research the history of anti-trust. If we want to introduce tariffs, why not wait until we see China PR actually show monopolistic behavior? My gut reaction is that because the US is such a big customer, China PR will not be able to do that.
pizza 7y ago
> The pain is temporary at worst. To paraphrase the quote "the market can remain irrational longer than you can remain solvent", the pain can remain temporary for a long time. To go along with the example, it could take decades of subsidies in US solar panel research before the US has anything that can compete with or out-compete contemporary Chinese solar panels on a more-or-less level playing field, in the international market. Because of US's unwillingness to match subsidies and allowing Chinese solar panels to out-sell them, in this example, they concede decades of industry dominance and the simultaneous ability to acquire state of the art advances (bright minds and new knowledge).
microcolonel 7y ago
> I think I read somewhere that if there is an issue that at least about five percent of the population care deeply enough (I don't know the numbers but for example the fanatical religious people in the middle east or pro-birth or pro-gun people in the US) to be single-issue voters, they will have an outsize effect on policy even though their position is bad for a majority of people. It might be helpful to not think about people becoming single-issue voters this way. People become single-issue voters because they see something as crucial, single-issue voters are supremely justified in voting. Also probably not ideal to think of people in terms of partisan dogwhistle labels, but that's a separate issue.

paganel 7y ago

I was thinking about the solar panel example, I think that in this case the US (and Germany, another country that has made similar complaints) can instead focus their economic resources on trying to solve energy storage and distribution, which is still an unsolved problem (I mean “unsolved” in the context of the intermittent power inputs provided by solar and wind) and they can use part of the money that would have otherwise been spent on building solar panels (remember, these are now subsidized by the Chinese) on trying to achieve this.

mistermann 7y ago
They can do this, but I think the point of contention is whether it will ultimately turn out to be a wise strategic decision. The fact that it's not an entirely voluntary decision also seems at least somewhat important.
- paganel 7y ago
  Regular people take economic steps because of decisions almost forced on them from the outside on a regular basis, being stubborn about going down a route that is not economically rational anymore it's just that, stubbornness. I remember our 60-year old mom being discontent about my brother still wanting to be in the business of selling cows (my brother was a peasant) even though that wasn't economically rational anymore, as my brother had to fight against agri-business (he's a sole cow breeder) and against farmers from other countries whose governments are more generous towards them (our government it's not that large-handed when it comes to small farmers, I live in Eastern Europe). My mother correctly pointed out that there was a lot more money available for my brother if he had only wanted to accept other job opportunities (like being a truck driver) and give up what was essentially an economically dead end. So, if a 60-year old woman from Eastern Europe with no formal education in economics can still intuitively see what the best economically rational move is given a set of inputs, then I fail to understand how come a democratically elected government like the US one cannot do the same, but instead it chooses to go down the economically dead end road, and all that only because of stubbornness and misguided pride.
  - 7y ago

_iyig 7y ago

It also hurts R&D. A state-subsidized solar panel factory might use inefficient, wasteful production methods which could not compete in something closer to a market economy. This can have negative externalities for the state, end-users, and society.