4 ms·

> Countries like Japan, Taiwan, and South Korea that practiced land reform to wrench land away from idle landlords and distribute it widely, have had this succe

> Countries like Japan, Taiwan, and South Korea that practiced land reform to wrench land away from idle landlords and distribute it widely, have had this success. Land reform was one element. The other, despite the article's unqualified praise of "open up your economy to foreign investment and trade", is trade restrictions and various forms of state meddling to support local industries. I don't need to point out how difficult China makes it for foreign firms to operate in their local market. Per James Galbraith: " ... none of the world's most successful trading regions, including Japan, Korea, Taiwan, and now mainland China, reached their current status by adopting neoliberal trading rules." - https://en.wikipedia.org/wiki/Comparative_advantage#Criticism https://en.wikipedia.org/wiki/Comparative_advantage#Criticis...

zozbot234 4y ago
The well-known problem with "state meddling to support local industries" is that, as a rule, that kind of policy tends to support the most parasitic and least socially beneficial industry sectors (because they don't have much of an alternative to lobbying for more government meddling), not those with the best potential for success.
- epistasis 4y ago
  Exactly, the successful Asian nations had very clever techniques for this. One, was to provide subsidy/tax breaks/trade protections only to those firms that could compete on the global market. This means that firms have to find success through actual productivity and output, rather than through rent seeking. So it isn't so much "as a rule" as "as a rule when the government has been refulatorily captured." In fact I think you will find that most industries that are built only happen through lots of government "interference." Silicon Valley is an excellent example of this, as the early customers were all defense industry largesse. And without those extremely rich customers with very extreme technological needs, development of Silicon Valley would have stalled, or perhaps not happened at all.
  - zozbot234 4y ago
    The government is always "captured" by some interests. The meaningful question is what could incent governments to pick the most widely beneficial policies. Trade policy is one of those sectors where it seems especially easy to make socially bad choices, so being extra careful can make sense.
- car_analogy 4y ago
  I'm not sure I buy your logic (why would a less beneficial industry be better at lobbying?), but even so, is it a worse problem than economic colonialism, where no local owned firms can flourish, because the market is saturated by foreign goods by more advanced firms, and the only economic opportunities are working for those firms? The examples of those successful Asian countries implies that the tradeoff is well worth it.
  - zozbot234 4y ago
    > The examples of those successful Asian countries implies that the tradeoff is well worth it. And the examples of many, many countries which used "industrial policy" to implement awful ideas like import substitution (i.e. "developing" towards autarchy, not increased trade openness and market discipline) can imply the opposite.
    - car_analogy 4y ago
      Of course the state meddling can be done wrong. But unrestricted free trade advocates claim that is cannot be done right - that simply opening up markets is always preferable. That there are zero examples of poor countries that became successful economies following this path, and numerous examples of various forms of protectionism resulting in prosperity, should be a clue to which strategy is better.
      - zozbot234 4y ago
        > But unrestricted free trade advocates claim that is cannot be done right I'm not sure that this is correct, the theoretical argument for supporting infant industries is quite old and well known by now. The main remaining question is an empirical one, of whether you think that industrial policy as it's actually practiced in the real world is generally worthwhile. Those who advocate against government meddling argue that it mostly isn't.
  - imtringued 4y ago
    What people who are against immigration, especially "economic" migration don't understand that the companies that provide goods in the migrants origin country are in the destination country. If you are in El Salvador and you are buying American trucks, those trucks are manufactured in the US,if you have nothing to export in El Salvador, you have to go where the employer is and that means migration. It is especially absurd in Germany because exporting and never importing means a constant outflow of funds out of e.g. Greece which also means a constant flow of immigrants to Germany.
- ohgodplsno 4y ago
  Saying this while China has adopted a posture of letting the state control which industries to grow before opening it up to competition, soon becoming the wealthiest country in the world kind of reveals your bias for known-to-not-work solutions.
- mbrodersen 4y ago
  Most successful US industries from defence to medical science to the internet was fully bootstrap funded by the US government. The same goes for the most successful industries in other countries. Without governmental “meddling” rich countries would not be rich.
MomoXenosaga 4y ago
The smart idea is to adopt neo-liberal free trade AFTER you have made sure your local business people can stand the competition.
- frostwarrior 4y ago
  And how can that be done? Sometimes you simply can't compete with another country with really devalued currency and very low wages
  - Psyladine 4y ago
    The same way oil-scarce regions don't compete against oil-rich ones. Geography is destiny, and nations specialize in industry for a reason, beyond the universals (food, education, justice and social welfare).
  - epistasis 4y ago
    The book I recommend at the top gets into that in parts two and three. For example, "export discipline"
  - mbrodersen 4y ago
    That’s exactly what Japan, Singapore and the rest of Asia did. It worked.
  - pas 4y ago
    what? that's the time to sell labor. that's how China started. since the farms were industrializing, there was a lot of people who had "nothing to do", hence Foxconn and so on. and you know, sweatshops. people opted to work in one because it was better than trying to make it in whatever rural village farming rice and hope. the problem is not the economics, but the politics. the elites who got filthy rich on this don't want to move to the next stage.
simonh 4y ago
I see it differently. They didn't go all-in on neoliberal trading rules from day one, and that was probably largely sensible, but the end objective should be and basically still is transitioning to neoliberal trading systems. I'm no absolutist, each country has to balance a whole host of local conditions and needs. They also need to build a consensus. However the fact is they liberalised trade and investment, and that's what brought success. There were preconditions to being able to do that, but it's still a fact.
- car_analogy 4y ago
  I would argue that they only liberalized international trade and investment after they attained success, i.e. their local industries became mature enough to compete internationally. But I suspect we agree - different trade policies are needed for different stages of development. Fledgling industries need protection, while mature industries want to expand into foreign markets. Where conflict arises is when mature industries want to expand into developing markets, crushing any local competition. Sometimes this is mutually beneficial (not every country can have leading edge semiconductor fabs), other times it is not (nobody needs McDonald's to feed their country), but those industries will still lobby for trade deals for market access, and use neoliberal trade theory to justify it as mutually beneficial.
  - Ekaros 4y ago
    I'm not sure McDonald's is worst possible option. As long as it is allowed to operate with local franchises and production. Maybe some part of supply chain can be imported, but mostly it should be locally produced. Thus allow some rent seeking, but also build up local economy.
  - simonh 4y ago
    I don't think that's true, because industrialising takes capital, a lot of it. If all these countries tried developing using indigenous rural sources of capital it would take generations. But foreigners aren't going to invest capital if they don't get rights and guarantees, and that means at least some level of liberalisation.
ETH_start 4y ago
>>The other, despite the article's unqualified praise of "open up your economy to foreign investment and trade", is trade restrictions and various forms of state meddling to support local industries A couple counter-arguments to that: According to Milton Friedman, after Japan was forced by Western powers to remove trade restrictions and drastically lower tariffs in the late 1800s, it prospered, contrary to what the mercantilist theories of the time predicted: https://youtu.be/CWgNe8v6KFc?t=322 https://youtu.be/CWgNe8v6KFc?t=322 Also, there is much evidence dispelling the mythologized account of MITI's role in the expansion of the Japanese economy specifically: https://www.econlib.org/library/Enc1/JapanandtheMythofMITI.html https://www.econlib.org/library/Enc1/JapanandtheMythofMITI.h... The article notes much more foundational properties of the 50s/60s Japanese economy, like a smaller portion of private sector output being taxed to support the public sector, as more likely causes of its growth: >>"The fact that the tax burden is unusually low by the standards of other developed countries may alone be a significant factor in the explanation of the high rate of private saving and investment in Japan." From 1951 to 1970, while Japan's real GNP was growing at an average of 9 percent per year, total national and local taxes (excluding social security) fell from 22.4 percent of national income to 18.9 percent. This left more money for people to save and invest. Compare Japan's situation with the United States, where the proportion rose from 28.5 percent to 31.3 percent. Interestingly, Japan's two decades of greatest postwar growth were also its decades of lowest taxes. During the seventies, as Japan's taxes rose to 22.8 percent of national income in 1980, real GNP growth declined to only 4.8 percent. Higher taxes weren't the only reason for this deteriorating performance, of course; oil price increases also contributed. This graph demonstrates how much lower social welfare spending used to be in Japan: https://ourworldindata.org/grapher/social-spending-oecd-longrun https://ourworldindata.org/grapher/social-spending-oecd-long...
mbrodersen 4y ago
Yep. The US did the exact same thing. Protecting local industry with trade barriers until they were ready to compete internationally. Countries that freely open their borders gets crushed by international corporations.
rasz 4y ago
Japan had foreign currency quota and ownership limits just like China does today. "MITI'S SUCCESSES AND FAILURES IN CONTROLLING JAPAN'S TECHNOLOGY IMPORTS" https://www.jstor.org/stable/43294946 https://www.jstor.org/stable/43294946 Frontline: Coming From Japan [The Fall Of The US Television Industry] (1992) https://www.youtube.com/watch?v=aesJTsZqm6c https://www.youtube.com/watch?v=aesJTsZqm6c https://www.washingtonpost.com/archive/opinions/1990/09/30/japan-and-the-big-squeeze/0fb1617e-8756-4390-a776-f1619d59869a/ https://www.washingtonpost.com/archive/opinions/1990/09/30/j... "JAPAN AND THE BIG SQUEEZE September 30, 1990. HOW DID Japan destroy the American television industry? The secret history of that strategy reveals how Japanese manufacturers and the Japanese government first created an anti-competitive cartel ..." "Japan's raid on the American market dates back to 1956, when the largest Japanese manufacturers formed the Home Electronic Appliance Market Stabilization Council, an illegal production cartel. The intent of the cartel was to monopolize the domestic market for television receivers, radios and other home electric products and to exclude foreign imports. Once their home market was secure, they would launch a drive against the far richer American market." https://www.chicagotribune.com/news/ct-xpm-1987-04-23-8701310301-story.html https://www.chicagotribune.com/news/ct-xpm-1987-04-23-870131... "TARIFFS WON`T AFFECT MOST JAPANESE TV SETS Apr 23, 1987 The new tariffs on Japanese color televisions will have little or no effect on the U.S. market, because most sets are exempt."
pas 4y ago
> "none of [...] reached their current status by adopting neoliberal trading rules" and? what's the counterfactual? what would have happened otherwise? trading is important, but politics is the critical factor. trading provides the inflow of wealth, if it gets allocated in a way that inequality just keeps rising, then the beneficiaries will eventually capture the state and then revert/regress to whatever anti-competitive shit they will think of to enrich themselves. the problem with neoliberal policies is that they are not enforced, and what we got on a global scale is libertarian idgaf-ism. WTO members should have loudly levied serious tariffs on China (and others) who don't reciprocate the various policies required for doing business as foreigners.

zozbot234 4y ago

The well-known problem with "state meddling to support local industries" is that, as a rule, that kind of policy tends to support the most parasitic and least socially beneficial industry sectors (because they don't have much of an alternative to lobbying for more government meddling), not those with the best potential for success.

epistasis 4y ago
Exactly, the successful Asian nations had very clever techniques for this. One, was to provide subsidy/tax breaks/trade protections only to those firms that could compete on the global market. This means that firms have to find success through actual productivity and output, rather than through rent seeking. So it isn't so much "as a rule" as "as a rule when the government has been refulatorily captured." In fact I think you will find that most industries that are built only happen through lots of government "interference." Silicon Valley is an excellent example of this, as the early customers were all defense industry largesse. And without those extremely rich customers with very extreme technological needs, development of Silicon Valley would have stalled, or perhaps not happened at all.
- zozbot234 4y ago
  The government is always "captured" by some interests. The meaningful question is what could incent governments to pick the most widely beneficial policies. Trade policy is one of those sectors where it seems especially easy to make socially bad choices, so being extra careful can make sense.
car_analogy 4y ago
I'm not sure I buy your logic (why would a less beneficial industry be better at lobbying?), but even so, is it a worse problem than economic colonialism, where no local owned firms can flourish, because the market is saturated by foreign goods by more advanced firms, and the only economic opportunities are working for those firms? The examples of those successful Asian countries implies that the tradeoff is well worth it.
- zozbot234 4y ago
  > The examples of those successful Asian countries implies that the tradeoff is well worth it. And the examples of many, many countries which used "industrial policy" to implement awful ideas like import substitution (i.e. "developing" towards autarchy, not increased trade openness and market discipline) can imply the opposite.
  - car_analogy 4y ago
    Of course the state meddling can be done wrong. But unrestricted free trade advocates claim that is cannot be done right - that simply opening up markets is always preferable. That there are zero examples of poor countries that became successful economies following this path, and numerous examples of various forms of protectionism resulting in prosperity, should be a clue to which strategy is better.
    - zozbot234 4y ago
      > But unrestricted free trade advocates claim that is cannot be done right I'm not sure that this is correct, the theoretical argument for supporting infant industries is quite old and well known by now. The main remaining question is an empirical one, of whether you think that industrial policy as it's actually practiced in the real world is generally worthwhile. Those who advocate against government meddling argue that it mostly isn't.
- imtringued 4y ago
  What people who are against immigration, especially "economic" migration don't understand that the companies that provide goods in the migrants origin country are in the destination country. If you are in El Salvador and you are buying American trucks, those trucks are manufactured in the US,if you have nothing to export in El Salvador, you have to go where the employer is and that means migration. It is especially absurd in Germany because exporting and never importing means a constant outflow of funds out of e.g. Greece which also means a constant flow of immigrants to Germany.
ohgodplsno 4y ago
Saying this while China has adopted a posture of letting the state control which industries to grow before opening it up to competition, soon becoming the wealthiest country in the world kind of reveals your bias for known-to-not-work solutions.
mbrodersen 4y ago
Most successful US industries from defence to medical science to the internet was fully bootstrap funded by the US government. The same goes for the most successful industries in other countries. Without governmental “meddling” rich countries would not be rich.

MomoXenosaga 4y ago

The smart idea is to adopt neo-liberal free trade AFTER you have made sure your local business people can stand the competition.

frostwarrior 4y ago
And how can that be done? Sometimes you simply can't compete with another country with really devalued currency and very low wages
- Psyladine 4y ago
  The same way oil-scarce regions don't compete against oil-rich ones. Geography is destiny, and nations specialize in industry for a reason, beyond the universals (food, education, justice and social welfare).
- epistasis 4y ago
  The book I recommend at the top gets into that in parts two and three. For example, "export discipline"
- mbrodersen 4y ago
  That’s exactly what Japan, Singapore and the rest of Asia did. It worked.
- pas 4y ago
  what? that's the time to sell labor. that's how China started. since the farms were industrializing, there was a lot of people who had "nothing to do", hence Foxconn and so on. and you know, sweatshops. people opted to work in one because it was better than trying to make it in whatever rural village farming rice and hope. the problem is not the economics, but the politics. the elites who got filthy rich on this don't want to move to the next stage.

simonh 4y ago

I see it differently. They didn't go all-in on neoliberal trading rules from day one, and that was probably largely sensible, but the end objective should be and basically still is transitioning to neoliberal trading systems. I'm no absolutist, each country has to balance a whole host of local conditions and needs. They also need to build a consensus. However the fact is they liberalised trade and investment, and that's what brought success. There were preconditions to being able to do that, but it's still a fact.

car_analogy 4y ago
I would argue that they only liberalized international trade and investment after they attained success, i.e. their local industries became mature enough to compete internationally. But I suspect we agree - different trade policies are needed for different stages of development. Fledgling industries need protection, while mature industries want to expand into foreign markets. Where conflict arises is when mature industries want to expand into developing markets, crushing any local competition. Sometimes this is mutually beneficial (not every country can have leading edge semiconductor fabs), other times it is not (nobody needs McDonald's to feed their country), but those industries will still lobby for trade deals for market access, and use neoliberal trade theory to justify it as mutually beneficial.
- Ekaros 4y ago
  I'm not sure McDonald's is worst possible option. As long as it is allowed to operate with local franchises and production. Maybe some part of supply chain can be imported, but mostly it should be locally produced. Thus allow some rent seeking, but also build up local economy.
- simonh 4y ago
  I don't think that's true, because industrialising takes capital, a lot of it. If all these countries tried developing using indigenous rural sources of capital it would take generations. But foreigners aren't going to invest capital if they don't get rights and guarantees, and that means at least some level of liberalisation.

ETH_start 4y ago

>>The other, despite the article's unqualified praise of "open up your economy to foreign investment and trade", is trade restrictions and various forms of state meddling to support local industries A couple counter-arguments to that: According to Milton Friedman, after Japan was forced by Western powers to remove trade restrictions and drastically lower tariffs in the late 1800s, it prospered, contrary to what the mercantilist theories of the time predicted: https://youtu.be/CWgNe8v6KFc?t=322 https://youtu.be/CWgNe8v6KFc?t=322 Also, there is much evidence dispelling the mythologized account of MITI's role in the expansion of the Japanese economy specifically: https://www.econlib.org/library/Enc1/JapanandtheMythofMITI.html https://www.econlib.org/library/Enc1/JapanandtheMythofMITI.h... The article notes much more foundational properties of the 50s/60s Japanese economy, like a smaller portion of private sector output being taxed to support the public sector, as more likely causes of its growth: >>"The fact that the tax burden is unusually low by the standards of other developed countries may alone be a significant factor in the explanation of the high rate of private saving and investment in Japan." From 1951 to 1970, while Japan's real GNP was growing at an average of 9 percent per year, total national and local taxes (excluding social security) fell from 22.4 percent of national income to 18.9 percent. This left more money for people to save and invest. Compare Japan's situation with the United States, where the proportion rose from 28.5 percent to 31.3 percent. Interestingly, Japan's two decades of greatest postwar growth were also its decades of lowest taxes. During the seventies, as Japan's taxes rose to 22.8 percent of national income in 1980, real GNP growth declined to only 4.8 percent. Higher taxes weren't the only reason for this deteriorating performance, of course; oil price increases also contributed. This graph demonstrates how much lower social welfare spending used to be in Japan: https://ourworldindata.org/grapher/social-spending-oecd-longrun https://ourworldindata.org/grapher/social-spending-oecd-long...

mbrodersen 4y ago

Yep. The US did the exact same thing. Protecting local industry with trade barriers until they were ready to compete internationally. Countries that freely open their borders gets crushed by international corporations.

rasz 4y ago

Japan had foreign currency quota and ownership limits just like China does today. "MITI'S SUCCESSES AND FAILURES IN CONTROLLING JAPAN'S TECHNOLOGY IMPORTS" https://www.jstor.org/stable/43294946 https://www.jstor.org/stable/43294946 Frontline: Coming From Japan [The Fall Of The US Television Industry] (1992) https://www.youtube.com/watch?v=aesJTsZqm6c https://www.youtube.com/watch?v=aesJTsZqm6c https://www.washingtonpost.com/archive/opinions/1990/09/30/japan-and-the-big-squeeze/0fb1617e-8756-4390-a776-f1619d59869a/ https://www.washingtonpost.com/archive/opinions/1990/09/30/j... "JAPAN AND THE BIG SQUEEZE September 30, 1990. HOW DID Japan destroy the American television industry? The secret history of that strategy reveals how Japanese manufacturers and the Japanese government first created an anti-competitive cartel ..." "Japan's raid on the American market dates back to 1956, when the largest Japanese manufacturers formed the Home Electronic Appliance Market Stabilization Council, an illegal production cartel. The intent of the cartel was to monopolize the domestic market for television receivers, radios and other home electric products and to exclude foreign imports. Once their home market was secure, they would launch a drive against the far richer American market." https://www.chicagotribune.com/news/ct-xpm-1987-04-23-8701310301-story.html https://www.chicagotribune.com/news/ct-xpm-1987-04-23-870131... "TARIFFS WON`T AFFECT MOST JAPANESE TV SETS Apr 23, 1987 The new tariffs on Japanese color televisions will have little or no effect on the U.S. market, because most sets are exempt."

pas 4y ago

> "none of [...] reached their current status by adopting neoliberal trading rules" and? what's the counterfactual? what would have happened otherwise? trading is important, but politics is the critical factor. trading provides the inflow of wealth, if it gets allocated in a way that inequality just keeps rising, then the beneficiaries will eventually capture the state and then revert/regress to whatever anti-competitive shit they will think of to enrich themselves. the problem with neoliberal policies is that they are not enforced, and what we got on a global scale is libertarian idgaf-ism. WTO members should have loudly levied serious tariffs on China (and others) who don't reciprocate the various policies required for doing business as foreigners.