3 ms·

I think it's more complicated than "free market" vs "interventionism". Japan benefited from the rule of law courtesy of both its culture and its post-war coloni

by crdb 11y ago

I think it's more complicated than "free market" vs "interventionism". Japan benefited from the rule of law courtesy of both its culture and its post-war colonial rulers (and, effectively, from massive investments from the US much as the Marshall Plan boosted Europe, and then for supplies during the Korean War which amounted to a third of exports). US policy was literally to boost the Japanese economy to avoid further militarism. Making the labour available to global investment, opening borders, benefitting from the post-war industrial revolution and population growth (which itself generated demand growth). Japan was no United States, but it wasn't a mere third world colony either - it was an industrial power who held up the most powerful military force in the world for years. China is today where Japan was in the 1960s, and that's putting pressure on this kind of strategy. Property rights is almost the defining factor towards "third world to first" IMO (especially in today's environment where FDI is so much easier). The various degrees of socialism or interventionism are merely an economic brake. Being able to enforce rights is much more important, and that involves many expensive things like a police and justice infrastructure well paid enough to avoid bribes, an independent judiciary and honest politicians whose interests are independent of policy.

crdoconnor 11y ago
If it were instead as simple as "property rights is all you need" there would be virtually no third world left. The same mercantilist strategy applied by Japan was repeated in Hong Kong, South Korea, Taiwan, Singapore and now China. Everywhere it's been tried, it has worked. Hell, even the United States followed this strategy (spearheaded by Alexander Hamilton) after the war of 1812. By the 1830s it had a 40% tariff rate which it kept for about another century.
- crdb 11y ago
  But all of these countries enforce property rights. Hong Kong had the British enforce their brand of common law on it until 1997, and the Chinese haven't altered things much. It was British officers chasing Mao's bombs in 1967. The country became known as a trade hub because you could do business fairly there and tax rates were low. South Korea was defended by US Marines against the North, and in the early 1950s had over 300,000 American soldiers in the country. Again, this helped stop existing power structures from taking the country, although it is distinctly more authoritarian. Was mercantilism explaining part of the variance? Sure, but I don't buy that it would have happened without US troops to secure the country and to an extent the peace. Taiwan was guaranteed by the US (an ally of CKS and the ROC, with whom they fought the Japanese) in the same fashion including $4 billion in aid, and its prominence in electronics came from its very open policies about foreign investment in the field and low taxes. Whatever remained of the Chinese intellectual elite also moved to Taiwan with the ROC. The Economic and Financial Reform program that did away with the 4 year plans was as early as 1959. Singapore is the most interesting case because it is the one exception to dependence on a foreign power for rights protection. In a way, Singapore exists today because of the immense skill and drive of Lee Kuan Yew. He successfully manoeuvred the exit from Malaya and 2 years-early British exit, kept the communist agents from Maoist China at bay via both pretending to act in their interest in the election (as the "safe" socialist candidate that could be the face of the Party) and by systematically exiling them thereafter. He successfully avoided US interference ("The Americans should know the character of the men they are dealing with in Singapore") yet built up an extremely impressive Army and police force inspired in great part by the martial law he had observed run by the Japanese, thus securing individual rights in the street. His economic programme - at least according to the aptly named From Third World to First - consisted of attempting to attract foreign companies so that they would both invest, and train the local workforce. Both foreign and local companies could do business safely and fairly. Looking at tariff rates and things like income tax in isolation is not productive. Did the post-war period result in considerable US growth for decades despite sky-high personal and corporate tax rates? Sure, but most other first world countries also had them. The marginal capital gains tax was at one point in the high 90s in the UK. I remember Ogilvy saying that at his peak, Ogilvy & Mathers was paying something like 70% corporate tax. Any country that attempts these rates today would destroy whichever of its companies were unable to move abroad, and to a certain extent few countries have much ability to set tax rates and tariffs to be far from global standards, with any deviation having to be justified by other factors (for example, local ownership rules in China are mitigated by the fact that it was until recently growing at 10% a year for a while, is a market of a billion people, and had easily available, relatively high quality, cheap labour).
  - crdoconnor 11y ago
    >But all of these countries enforce property rights. Virtually every country in the world enforces property rights. >The country became known as a trade hub because you could do business fairly there and tax rates were low. Hong Kong country became a manufacturing hub on a par with what China is today in the ~70s. No prizes for guessing why. >Singapore is the most interesting case because it is the one exception to dependence on a foreign power for rights protection. In a way, Singapore exists today because of the immense skill and drive of Lee Kuan Yew. That's the facile propaganda line spat out by the PAP. Singapore actually owes most of its economic success to a Dutch economist called Albert Winsemius whom Lee Kuan Yew had the good sense to follow. Guess what he advocated? And yes, LKY imprisoned a lot of communists who were legally standing for parliament. He was a thug. No, that kind of dictatorial crackdown didn't have anything to do with their economic success. It was purely about the suppression of democracy - a theme that continues to this day (trust me I live here). >Looking at tariff rates and things like income tax in isolation is not productive. Did the post-war period result in considerable US growth for decades despite sky-high personal and corporate tax rates? Looking at tariffs when analyzing infant industry growth is pretty productive. Looking at income tax not so much. Looking at income tax when analyzing inflation and income inequality is productive, however. > Any country that attempts these rates today would destroy whichever of its companies were unable to move abroad Looks like somebody believes everything the American Enterprise Institute tells him.
    - crdb 11y ago
      > Virtually every country in the world enforces property rights. Countries enforce a subset of rights to a certain extent on some sort of scale which goes from "none" (e.g. the DRC, where even your life is the property of whichever warlord pops by) to "just enough to keep the place stable" (e.g. India during the License Raj, where any new business that grew beyond a handful of employees was effectively outlawed resulting in negative real growth for decades and the eventual seizing of the country's gold reserves) to "mostly" (e.g. France, where you're free to start a business so long as it does not compete with one of the oligopolistic families close to government, and you're willing to play by the social rules) to "almost completely" which can be found almost nowhere. I've yet to see foreigners praise Indonesia's or Thailand's property rights. In fact, most Thai startups I know are incorporated in Singapore despite not having even one employee in the country. On your critique of Lee Kuan Yew, I would like to see reliable sources. Obviously, I disagree entirely with your response, and hold Lee Kuan Yew to be one of the most honest and skilled politicians that ever lived, perhaps on par with Churchill or even Washington, but I am always open to new data and reexamining my positions. Mine are based on both Singaporean sources which your theory will call biased, and on French sources written around that time (including discussions with the older members of my family who saw it first hand). I personally have incorporated in the UK thanks to their efficient and rights-protecting jurisdiction and will incorporate in Singapore as soon as I am granted PR (I object to the local ownership requirement but think it a low cost to pay), despite being a citizen of neither countries. Anecdotal evidence does not make data, though and I have too little time to try and find some. I sometimes agree with what the AEI writes, when it is backed by data and aligns with the world view I have developed. Instances of where the AEI and I disagree is in the idea that any socialism is detrimental to business - in some cases government intervention can help avoid hysteresis effects, and obviously, I'm a big fan of Singapore whose health and education policies are outright socialist.

by crdb 11y ago

crdoconnor 11y ago

If it were instead as simple as "property rights is all you need" there would be virtually no third world left. The same mercantilist strategy applied by Japan was repeated in Hong Kong, South Korea, Taiwan, Singapore and now China. Everywhere it's been tried, it has worked. Hell, even the United States followed this strategy (spearheaded by Alexander Hamilton) after the war of 1812. By the 1830s it had a 40% tariff rate which it kept for about another century.

crdb 11y ago
But all of these countries enforce property rights. Hong Kong had the British enforce their brand of common law on it until 1997, and the Chinese haven't altered things much. It was British officers chasing Mao's bombs in 1967. The country became known as a trade hub because you could do business fairly there and tax rates were low. South Korea was defended by US Marines against the North, and in the early 1950s had over 300,000 American soldiers in the country. Again, this helped stop existing power structures from taking the country, although it is distinctly more authoritarian. Was mercantilism explaining part of the variance? Sure, but I don't buy that it would have happened without US troops to secure the country and to an extent the peace. Taiwan was guaranteed by the US (an ally of CKS and the ROC, with whom they fought the Japanese) in the same fashion including $4 billion in aid, and its prominence in electronics came from its very open policies about foreign investment in the field and low taxes. Whatever remained of the Chinese intellectual elite also moved to Taiwan with the ROC. The Economic and Financial Reform program that did away with the 4 year plans was as early as 1959. Singapore is the most interesting case because it is the one exception to dependence on a foreign power for rights protection. In a way, Singapore exists today because of the immense skill and drive of Lee Kuan Yew. He successfully manoeuvred the exit from Malaya and 2 years-early British exit, kept the communist agents from Maoist China at bay via both pretending to act in their interest in the election (as the "safe" socialist candidate that could be the face of the Party) and by systematically exiling them thereafter. He successfully avoided US interference ("The Americans should know the character of the men they are dealing with in Singapore") yet built up an extremely impressive Army and police force inspired in great part by the martial law he had observed run by the Japanese, thus securing individual rights in the street. His economic programme - at least according to the aptly named From Third World to First - consisted of attempting to attract foreign companies so that they would both invest, and train the local workforce. Both foreign and local companies could do business safely and fairly. Looking at tariff rates and things like income tax in isolation is not productive. Did the post-war period result in considerable US growth for decades despite sky-high personal and corporate tax rates? Sure, but most other first world countries also had them. The marginal capital gains tax was at one point in the high 90s in the UK. I remember Ogilvy saying that at his peak, Ogilvy & Mathers was paying something like 70% corporate tax. Any country that attempts these rates today would destroy whichever of its companies were unable to move abroad, and to a certain extent few countries have much ability to set tax rates and tariffs to be far from global standards, with any deviation having to be justified by other factors (for example, local ownership rules in China are mitigated by the fact that it was until recently growing at 10% a year for a while, is a market of a billion people, and had easily available, relatively high quality, cheap labour).
- crdoconnor 11y ago
  >But all of these countries enforce property rights. Virtually every country in the world enforces property rights. >The country became known as a trade hub because you could do business fairly there and tax rates were low. Hong Kong country became a manufacturing hub on a par with what China is today in the ~70s. No prizes for guessing why. >Singapore is the most interesting case because it is the one exception to dependence on a foreign power for rights protection. In a way, Singapore exists today because of the immense skill and drive of Lee Kuan Yew. That's the facile propaganda line spat out by the PAP. Singapore actually owes most of its economic success to a Dutch economist called Albert Winsemius whom Lee Kuan Yew had the good sense to follow. Guess what he advocated? And yes, LKY imprisoned a lot of communists who were legally standing for parliament. He was a thug. No, that kind of dictatorial crackdown didn't have anything to do with their economic success. It was purely about the suppression of democracy - a theme that continues to this day (trust me I live here). >Looking at tariff rates and things like income tax in isolation is not productive. Did the post-war period result in considerable US growth for decades despite sky-high personal and corporate tax rates? Looking at tariffs when analyzing infant industry growth is pretty productive. Looking at income tax not so much. Looking at income tax when analyzing inflation and income inequality is productive, however. > Any country that attempts these rates today would destroy whichever of its companies were unable to move abroad Looks like somebody believes everything the American Enterprise Institute tells him.
  - crdb 11y ago
    > Virtually every country in the world enforces property rights. Countries enforce a subset of rights to a certain extent on some sort of scale which goes from "none" (e.g. the DRC, where even your life is the property of whichever warlord pops by) to "just enough to keep the place stable" (e.g. India during the License Raj, where any new business that grew beyond a handful of employees was effectively outlawed resulting in negative real growth for decades and the eventual seizing of the country's gold reserves) to "mostly" (e.g. France, where you're free to start a business so long as it does not compete with one of the oligopolistic families close to government, and you're willing to play by the social rules) to "almost completely" which can be found almost nowhere. I've yet to see foreigners praise Indonesia's or Thailand's property rights. In fact, most Thai startups I know are incorporated in Singapore despite not having even one employee in the country. On your critique of Lee Kuan Yew, I would like to see reliable sources. Obviously, I disagree entirely with your response, and hold Lee Kuan Yew to be one of the most honest and skilled politicians that ever lived, perhaps on par with Churchill or even Washington, but I am always open to new data and reexamining my positions. Mine are based on both Singaporean sources which your theory will call biased, and on French sources written around that time (including discussions with the older members of my family who saw it first hand). I personally have incorporated in the UK thanks to their efficient and rights-protecting jurisdiction and will incorporate in Singapore as soon as I am granted PR (I object to the local ownership requirement but think it a low cost to pay), despite being a citizen of neither countries. Anecdotal evidence does not make data, though and I have too little time to try and find some. I sometimes agree with what the AEI writes, when it is backed by data and aligns with the world view I have developed. Instances of where the AEI and I disagree is in the idea that any socialism is detrimental to business - in some cases government intervention can help avoid hysteresis effects, and obviously, I'm a big fan of Singapore whose health and education policies are outright socialist.