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> the truth is, on balance free trade is better for the world and for every nation in it; Well not quite. Free trade is better for every nation after they have

> the truth is, on balance free trade is better for the world and for every nation in it; Well not quite. Free trade is better for every nation after they have achieved development and wealth. Pretty much all of whom got wealthy by pointedly ignoring free trade. There's a decent book from 10 or 15 years ago by Ha-Joon Chang called Bad Samaritans that explores globalisation, free trade and in particular the insistence of WTO, World Bank and developed nations forcing free trade on the developing world as a condition of loan, or agreements. He makes a pretty decent case that free trade is only suitable after you've arrived. More to the point, it's not mere theory, but an exploration of what has actually happened in various nations around the world. Edit: https://www.goodreads.com/book/show/1032019.Bad_Samaritans https://www.goodreads.com/book/show/1032019.Bad_Samaritans

Animats 7y ago
There's a similar book, "How Asia Works".[1] This has a good survey of industrial policy in Asia, what worked and what didn't. Summary: Step 1: Mechanize agriculture, to free up people for an industrial labor force Step 2: Support export-oriented industries. Step 3: Transition to a developed country. Trouble comes when you botch step 2. [1] https://www.amazon.com/gp/product/0802121322/ https://www.amazon.com/gp/product/0802121322/
- barry-cotter 7y ago
  Korea didn’t do step 1 and it did fine. Their post war land reform lead to farms so small that there were no tractors in the country until something ridiculous like 1970.
  - pas 7y ago
    They had a big population boom, also they very much did a lot of reforms needed to increase economic output (eg. private property laws, market liberalization, free trade agreements, clear-ish laws, education, healthcare, dense urbanization, public transportation).
- NeedMoreTea 7y ago
  Absolutely. Steps 1 and 2 are increasingly frowned upon with WTO or trade agreement requiring acceptance of foreign finance into your markets, preventing the levels of subsidy most of the developed world went through, or trying to require honouring of foreign IP. Which seems to look increasingly like taking away the ladder the developed world used to "get there". The honouring of IP is particularly comical (and to read about here seeing outrage at China borrowing some overseas IP), as from what I can remember everyone who managed to develop did so by stealing IP, subsidising etc whilst providing enough walls to ensure the fledgling industry couldn't simply be bought up by someone higher up the food chain.
armitron 7y ago
This x1000. Everybody interested in economics should read Ha-Joon Chang and study the South Korean phenomenon. Those who haven't and still feel obliged to put down their 2 cents praising free trade / markets are talking out of their asses. The fact that people are still willing to listen to Krugman (even this FP article is sympathetic) rather than cast him out as a colossal buffoon - not quite Alan Greenspan status but close - whilst geniuses like HJC wallow in relative obscurity is beyond sad.
- drtillberg 7y ago
  For the life of me I can't understand his prominence either. He seems profoundly lost and misguided, so much I take even his mea culpa with a grain of salt. I only can imagine that someone important considers him to be a useful idiot.
- rXoX 7y ago
  Chang's great.
- pas 7y ago
  HJC is a crackpot :( Basically he argues using survivor bias. All the countries that tried to pick the winners (support X industry) and levy high tariffs but did not make it are simply not discussed. https://eh.net/book_reviews/kicking-away-the-ladder-development-strategy-in-historical-perspective/ https://eh.net/book_reviews/kicking-away-the-ladder-developm...
abfar 7y ago
Also IIRC much of the "trade" created by free trade agreements are not trade at all, but movements of goods internal to a company (e.g. US companies produce goods in a factory in Mexico and later move those goods back to US to be sold).
- pas 7y ago
  That's still perfect example of trade. Labor is a very important form of goods.
barry-cotter 7y ago
Counter example: Hong Kong. It had no industrial policy whatsoever and went from a bombed out ruin in 1945 to the first world in 40 years based on unilateral free trade, while taking in massive numbers of refugees from China. Completely executed trade policy works but so does free trade if you have rules of law and security of contract and property.
- NeedMoreTea 7y ago
  Not at all. Hong Kong built herself upon stealing and producing cheap copies of firstly plastic toys and items. In the 1960s "Made in Hong Kong" was an insult for the shoddiest crap of all - just like all the rest at some point. They ignored IP, trade, subsidy and all the other world rules to steal and copy their way up the food chain. She also had the unique position of the free-port whilst being allowed better access to China than the rest of the globe had. Those refugees were the reason she grew, as they were mostly highly educated and skilled anti-Communists fleeing China's civil war, and the ugly repressive aftermath. The doctors, bankers, merchants and financiers rushing in surged the population from a minor town supporting the port and little else, to major offshore centre.
  - barry-cotter 7y ago
    Making cheap tat cheaper than others with no government involvement is not an industrial policy. The government in Hong Kong did not direct or subsidize any industry. Export led industrialization just happened because of a policy of unilateral free trade, because people were trying to make money so they made what they thought would sell and doubled down on the things that worked. While the initial wave of refugees were more highly educated than the average Chinese and that probably continued to be true most of the refugees were always illiterate peasants.
    - NeedMoreTea 7y ago
      I know HK is often held up as a miracle of complete and total laissez-faire, but that is largely myth. 1949 through to about 1970 whilst there was no formal economic policy, there emphatically was subsidy. The administration was providing social housing for those refugees, education for their children, infrastructure programs that were often more ambitious than in the UK - providing complete new industrial towns, and land reclamation. There was a policy to limit cost of living increases as far as possible as the fledgling industry relied on low labour cost to compete. There were also export restrictions on textiles and clothes - the backbone of the HK economy up until the seventies, perhaps longer. Those restrictions were certainly in place with the UK and Europe, not sure about the wider world. The large subsidy during development merely wasn't direct to industry. Yet with textiles and cheap plastics, the two industries that formed the bulk of HK's exports, they happened to be two with low startup capital costs. As a result the HK economy was heavily skewed toward small and medium businesses and low startup costs.
pas 7y ago
Regarding Ha-Joon Chang: https://eh.net/book_reviews/kicking-away-the-ladder-development-strategy-in-historical-perspective/ https://eh.net/book_reviews/kicking-away-the-ladder-developm... tl;dr his book is a big exercise in the survivorship bias fallacy

Animats 7y ago

There's a similar book, "How Asia Works".[1] This has a good survey of industrial policy in Asia, what worked and what didn't. Summary: Step 1: Mechanize agriculture, to free up people for an industrial labor force Step 2: Support export-oriented industries. Step 3: Transition to a developed country. Trouble comes when you botch step 2. [1] https://www.amazon.com/gp/product/0802121322/ https://www.amazon.com/gp/product/0802121322/

barry-cotter 7y ago
Korea didn’t do step 1 and it did fine. Their post war land reform lead to farms so small that there were no tractors in the country until something ridiculous like 1970.
- pas 7y ago
  They had a big population boom, also they very much did a lot of reforms needed to increase economic output (eg. private property laws, market liberalization, free trade agreements, clear-ish laws, education, healthcare, dense urbanization, public transportation).
NeedMoreTea 7y ago
Absolutely. Steps 1 and 2 are increasingly frowned upon with WTO or trade agreement requiring acceptance of foreign finance into your markets, preventing the levels of subsidy most of the developed world went through, or trying to require honouring of foreign IP. Which seems to look increasingly like taking away the ladder the developed world used to "get there". The honouring of IP is particularly comical (and to read about here seeing outrage at China borrowing some overseas IP), as from what I can remember everyone who managed to develop did so by stealing IP, subsidising etc whilst providing enough walls to ensure the fledgling industry couldn't simply be bought up by someone higher up the food chain.

armitron 7y ago

This x1000. Everybody interested in economics should read Ha-Joon Chang and study the South Korean phenomenon. Those who haven't and still feel obliged to put down their 2 cents praising free trade / markets are talking out of their asses. The fact that people are still willing to listen to Krugman (even this FP article is sympathetic) rather than cast him out as a colossal buffoon - not quite Alan Greenspan status but close - whilst geniuses like HJC wallow in relative obscurity is beyond sad.

drtillberg 7y ago
For the life of me I can't understand his prominence either. He seems profoundly lost and misguided, so much I take even his mea culpa with a grain of salt. I only can imagine that someone important considers him to be a useful idiot.
rXoX 7y ago
Chang's great.
pas 7y ago
HJC is a crackpot :( Basically he argues using survivor bias. All the countries that tried to pick the winners (support X industry) and levy high tariffs but did not make it are simply not discussed. https://eh.net/book_reviews/kicking-away-the-ladder-development-strategy-in-historical-perspective/ https://eh.net/book_reviews/kicking-away-the-ladder-developm...

abfar 7y ago

Also IIRC much of the "trade" created by free trade agreements are not trade at all, but movements of goods internal to a company (e.g. US companies produce goods in a factory in Mexico and later move those goods back to US to be sold).

pas 7y ago
That's still perfect example of trade. Labor is a very important form of goods.

barry-cotter 7y ago

Counter example: Hong Kong. It had no industrial policy whatsoever and went from a bombed out ruin in 1945 to the first world in 40 years based on unilateral free trade, while taking in massive numbers of refugees from China. Completely executed trade policy works but so does free trade if you have rules of law and security of contract and property.

NeedMoreTea 7y ago
Not at all. Hong Kong built herself upon stealing and producing cheap copies of firstly plastic toys and items. In the 1960s "Made in Hong Kong" was an insult for the shoddiest crap of all - just like all the rest at some point. They ignored IP, trade, subsidy and all the other world rules to steal and copy their way up the food chain. She also had the unique position of the free-port whilst being allowed better access to China than the rest of the globe had. Those refugees were the reason she grew, as they were mostly highly educated and skilled anti-Communists fleeing China's civil war, and the ugly repressive aftermath. The doctors, bankers, merchants and financiers rushing in surged the population from a minor town supporting the port and little else, to major offshore centre.
- barry-cotter 7y ago
  Making cheap tat cheaper than others with no government involvement is not an industrial policy. The government in Hong Kong did not direct or subsidize any industry. Export led industrialization just happened because of a policy of unilateral free trade, because people were trying to make money so they made what they thought would sell and doubled down on the things that worked. While the initial wave of refugees were more highly educated than the average Chinese and that probably continued to be true most of the refugees were always illiterate peasants.
  - NeedMoreTea 7y ago
    I know HK is often held up as a miracle of complete and total laissez-faire, but that is largely myth. 1949 through to about 1970 whilst there was no formal economic policy, there emphatically was subsidy. The administration was providing social housing for those refugees, education for their children, infrastructure programs that were often more ambitious than in the UK - providing complete new industrial towns, and land reclamation. There was a policy to limit cost of living increases as far as possible as the fledgling industry relied on low labour cost to compete. There were also export restrictions on textiles and clothes - the backbone of the HK economy up until the seventies, perhaps longer. Those restrictions were certainly in place with the UK and Europe, not sure about the wider world. The large subsidy during development merely wasn't direct to industry. Yet with textiles and cheap plastics, the two industries that formed the bulk of HK's exports, they happened to be two with low startup capital costs. As a result the HK economy was heavily skewed toward small and medium businesses and low startup costs.

pas 7y ago

Regarding Ha-Joon Chang: https://eh.net/book_reviews/kicking-away-the-ladder-development-strategy-in-historical-perspective/ https://eh.net/book_reviews/kicking-away-the-ladder-developm... tl;dr his book is a big exercise in the survivorship bias fallacy