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Can anyone think of any economy in the last thirty years that has grown rapidly without relying in part on asset bubbles or the presence of a valuable commodity like oil?
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Mar 18, 2014 15:56
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Slaan posted:Oh, yeah, I see that now. But red text plus the standard 'only white people can explore places' beliefs made me go down the other path. The US sort of followed that model but Britain, perhaps because it industrialized first, doesn't really fit that description.
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Mar 18, 2014 17:49
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Britain did use protectionism to shield the growth of its industry and it practiced "land reform" of a sort via enclosures of common land, but I don't think the British government consciously stimulated industry in the 18th century in the same way that the USA, Japan, South Korea, or China did in the 19th and 20th centuries. I'd have to check some historical sources before saying anything more than that. The British did subsidize and protect their industry under the Henry VII and Henry VIII in the 16th century and I know that in the 18th century guys like Daniel Defoe called for that sort of plan to be repeated but my general impression is that the British industrial revolution mostly happened without any direct stimulation from the government (other than protectionism and the opening up of colonial markets of course), which is not the case in the other countries we're discussing. I admit I might be off here if anyone has evidence to the contrary.
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Mar 18, 2014 19:34
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I have to say the more one looks at China the more it looks like a Japan / American style asset bubble might be present in the economy. The fact that so much of the financing for corporations comes from this unregulated and largely opaque shadow banking puts an element of uncertainty into the mix that could be really devastating if people start to get anxious about the loans they've extended. Of course its very hard to develop rapidly without having some kind of bubble like behaviour. American industrial expansion in the 19th century lead to the panic of 1873 and the long depression. The major developments of the 20th century, i.e. mass electrification, the development of consumer auto-mobiles, the rolling out of mass appliances like refrigerators, coincided with the Great Depression. Big bursts of technological and industrial development tend to stimulate the animal spirits of investors and make ever more risky investments seem like a good idea (bad money chases out good money) and then eventually there's some kind of crash which leads to a period of stagnation. Its not altogether clear that a market based economy can avoid this cycle of development. So from the perspective of the Chinese leadership the real question might be if they can manage a probably inevitable shock to the system with a minimal amount of disruption and pain. It will be truly remarkable if they are able to avoid a crash altogether so the real priority here from the perspective of the regime may be damage control. I imagine the Chinese have watched developments like the fall of the USSR or the Arab Spring with great anxiety, since that is the sort of situation they could end up in if they don't play their hand well. Nessus posted:What probably helped in this matter was that there wasn't an industrial state nearby willing to intervene in British affairs in order to ensure their own market positions stayed good. I recall vaguely reading that one of the major motivators for a lot of Asian industrialization wasn't so much "we want to inherit the great bounty of dark Satanic mills with 14 hour work-shifts" as "we'd prefer not to be a colonial fiefdom." It was certainly the primary motivator for Japan. Even in the case of England, under Henry VII there was a conscious industrial policy. In the 15th century England was a a wool producing country. Henry Tudor Tudor spent a large portion of his youth in exile since the rival House of York controlled the English throne, and during this time Henry observed the wealth of the Flemish textile producers. After he defeated Richard III and took the English throne he imposed heavy tariffs on the export of raw wool. That in turn stimulated an indigenous textile industry which would eventually become the basis for the industrial revolution two centuries later. The big difference between the industrialization of England / Britain and the industrialization of countries like the US, Germany, Japan, etc. is that the specific inventions such as the perfection of steam power were developed largely through the personal financing of the investors themselves drawing upon their profits from the rationalization and commercialization of agriculture following the enclosure acts. In the USA case the government played a more specific role in trying to encourage these industries, in the case of Germany I think a lot of the encouragement came from large banks who ended up owning controlling shares in German manufacturing firms. So the British approach, while certainly not 'laissez-faire' in the Adam Smith sense, happened without the same level of conscious stimulation. There had been previous policies intended to encourage growth and the consolidation of new industry, but as far as the development of steam power and the first modern factories I think that happened without the kind of conscious encouragement that subsequent countries employed. Of course even here you have to be cautious. Part of the British decision to move toward free trade in agriculture in the 1830s / 1840s was to discourage other countries from developing their manufacturing base. The logic here was that if the British opened up their market for agricultural goods then this would encourage other economies to invest capital in the agricultural sector (where they had their 'comparative advantage') rather than try to develop their own manufacturers.
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Mar 19, 2014 20:49
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asdf32 posted:This is why I find it hard to accept comparisons between early industrialization and modern development. The policy options available to modern developing economies are completely different. No country has or should emulate economic policy from the 19th century. Some policy options are different but there are some very striking similarities in terms of circumstances and strategy that show up in the history of successfully developed countries its foolhardy to dismiss or ignore them. quote:Other Asian Tigers like Taiwan and South Korea? Their starting points were similar but they're way ahead today. Those countries had a very nasty experience in 1997, and I think its noteworthy that it followed a rather similar path to what happened in the US or Japan. A period of booming growth and lax government regulation leads to asset bubbles and eventually a huge number of non-performing loans which leads to a sharp and contagious economic downturn.
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Mar 20, 2014 07:24
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dilbertschalter posted:Taiwan wasn't affected much at all. Second, to say that they countries fall under the category of "booming growth and lax government regulation" is sort of the opposite of the situation. South Korea's government was played a major role both in setting broader goals for the economy and in setting micro level policies. In return it gave businesses all the credit they wanted and more, which led to the later crisis, but that's not the same thing as lax regulation by any means. Lax regulation in the sense that a lot of loans and extensions of credit that were stimulated by the boom suddenly became a huge weight on the economy following the crash. I'm not overly familiar with the financial regulations of the South Korean government but my understanding of the crash is that both the banks and the chaebols were very aggressive in their expansion and extensions of credit, and this ended up leading to a lot of non-performing loans and bad investment decisions. Perhaps I should have said "lax oversight" to avoid the connotation that I was specifically or exclusively talking about government regulation. asdf32 posted:Quickly which ones? I'm accustomed to hearing about protection, government direction and land reform. I have a hard time with the first two on the grounds that they don't directly lead to growth (accumulation of capital) and at best they can only be a catalyst to its internal production (contrast with trade and foreign investment which can literally net you a crane or a CNC machine). Over the last five centuries there's been a fairly reliable dynamic at play where certain industries, whether its textiles or automobiles or information technology, tend to be growing at a much faster rate than any other industry. This paper gives an overview of this process. As the paper demonstrates industries tend to follow something called a "learning curve".   As we see with these examples from the textiles and footwear industries there is an initial burst of productivity growth that eventually tapers off. Eventually the technology, which was previously transformative, becomes such a ubiquitous and standard part of the economy that we barely even notice it, and productivity growth in the industry becomes measurably slower or basically stops altogether. Successful industrialization tends to revolve around encouraging industries that are still in the takeoff phase of the learning curve. Poorer countries tend to be countries that are stuck producing goods that have already had all their potential for explosive productivity gains exhausted. Obviously this changes over time. So in the 19th century Britain was specialized in textiles, which were then experiencing a dizzying climb in productivity. As textiles reached the mature phase of the learning curve however the productivity growth tapered off and Britain began to transition to other goods. Today textiles tend to be something that poor countries specialize in. As Reinert explains: Erik Reinert, A Note on Capitalist Dynamics posted:Learning Curves and Experience Curves. A successful industrializing strategy tends to revolve around identifying industries that are still in the early phase of the learning curve and finding ways to stimulate this industry domestically. While many countries accumulate capital and foreign reserves by initially producing goods like textiles that have already 'matured', the countries that succesfully reach middle or high income status have economies that are able to make the transition to producing goods with high productivity growth.This high productivity growth makes it possible to have both high wages and high profits and leads to a virtuous circle of development. That may involve protective tariffs, subsidies, attracting foreign capital, building right kind of infrastructure, establishing the right trade relationships, ensuring you have the right kind of financial system, etc. By way of analogy there is no precise strategy for winning a boxing match but that doesn't mean that a boxer can expect to win if they don't learn the techniques of boxing. You have to know how to throw a jab, a cross or a hook and how to cover up when your opponent is pummelling you. Similarly, if you want to industrialize your country and reach high income status globally then you need to be familiar with the menu of techniques that can stimulate the right kind of industrial growth so that your economy doesn't end up specializing in industries with low productivity gains and, as a result, low wages. quote:Industrialization and rapid economic development are themselves a common element when making these comparisons so it's easy for cause and effect to be obfuscated. That could be said of almost any complex process. The role of scholarship is to investigate the underling processes so that we can identify causal mechanisms. quote:What do you mean similar path to U.S. or Japan (the U.S. started industrializing 2 centuries ago..)? I thought I explained myself pretty clearly in that post. It tends to be the case that when a country is growing really rapidly and at the forefront of technological innovation you'll have a boom period which creates the conditions for so called 'irrational exuberance'. Growth in the real economy leads to growth in the financial economy. Credit and loans get extended to riskier and riskier ventures as the boom persists, creating the potential for bubbles to appear. Eventually something happens that halts the boom and suddenly a lot of the loans made during the boom become none-performing. It turns out that some investments that made sense during the height of the boom were actually not such a good idea. The result is a painful economic slowdown or contraction. You can see this kind of pattern occurring in the US with the long depression and, a half century later, the Great Depression (arguably something similar may have happened in 2007 / 2008). In both cases a period of very impressive growth in the real economy eventually produced a speculative bubble that popped, leading to an economic contraction. You can also see it in the case of Japan, which grew very rapidly during the 70s and 80s, leading to an asset bubble that eventually popped, which lead to the 'lost decade(s)'. My point about China was that, based on these precedents, there's reason to believe that sooner or later the Chinese economy will have to face some kind of reckoning. It seems to be a standard part of explosive economic growth.
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Mar 20, 2014 18:33
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asdf32 posted:Really poor countries are really poor because they're not productive at anything. They're not productive at anything because they lack human and physical capital. Yes, at a low enough level of development it makes sense to adopt really basic industries like textiles since they are an improvement over agriculture. England, the US, Japan and Korea all followed a similar path. However that first step has to be followed by developing industries with greater room for rapid productivity growth and that usually requires that you somehow protect or subsidize your strategic industry from superior international competition. Countries that get trapped in labour intensive low productivity industries won't automatically transition out of it once they magically accumulate enough capital.
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Mar 21, 2014 17:02
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asdf32 posted:Why? The government is not compelled by the short term need to realize a profit on its investments. In many cases the industries that are necessary to incubate a high growth economy can be uncompetitive on the international scale for years so relying on private capital to make those investments is simply not feasible. quote:What you're asking for here, choosing high growth industries, is exactly the thing private capital is trying to do at the same time. And after accumulating a certain amount of capital it should be in a position to do exactly that. You want to have the presence of certain kinds of industry, such as high value added manufacturing, regardless of whether it can be internationally competitive in the short term. These are the industries that can provide rising wages, that utilize an educated workforce, and which can create spin off innovations. To ensure the presence of that kind of economic activity you need the government to take a more active hand in managing the economy by encouraging some uses of capital and discouraging or limiting others. quote:Government of course has an incredibly important role doing all the things government is uniquely well suited for - education, infrastructure, regulatory framework etc, but picking and choosing winning industries isn't really among them. The problem with your suggestions is that economic development is a lot more complicated than just the accumulation of capital. You need the right institutions and the right balance between economic sectors to actually create the conditions for sustainable long term growth in living standards. Having the right industries will create knock on effects that are good for the rest of the economy and the workforce, whereas following the short term dictates of capital will mean that you keep reinvesting your resources in the areas where you already have a 'comparative advantage', i.e. low productivity manufacturing, basic agriculture and resource extraction.
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Mar 23, 2014 17:09
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The United States industrialized through stolen "intellectual property" as did most other countries. The fact that China has a massive industrial base and technology sector, plus a large educated workforce, means they'll likely become very innovative over time. They are still in the wild growth phase of their development so its a bit premature to be speculating about when they will change their attitude toward IP. asdf32 posted:I think this post does a good job zooming in on the disagreements. I'll mostly just rephrase and highlight them here. There are substantial benefits to having a manufacturing sector in your economy even if it is relatively less efficient than the global average. Manufacturing in sectors with rising productivity and increasing returns to scale create the potential for higher wages. It also tends to create the economic clusters of activity necessary to incubate innovation and it creates a demand for skilled workers. So even absent the capability of government to anticipate which industries are going to take off, there are still very good reasons to support a local manufacturing industry that will develop the country's capability to reach middle income status. Even if you can't produce cars as well as Japan there are very real benefits to the economy from having a car manufacturing sector in the economy. Obviously there are dangers that subsidies create a permanently inefficient industry that lobbies for protection from the government rather than innovating. That may be part of the reason that export oriented industrial strategies have tended to perform better than import substitution strategies (i.e. you want an Asian industrial strategy, not a Latin America one). But, even if we recognize this danger, its important to also recognize that countries like Peru and Mexico which pursued an import substitution strategy in the post war era were much better off than they have been since they abandoned import substitution for neoliberal economic policies. So even accepting the dangers of subsidized industry, the historical record suggests very strongly that a country with a protected and somewhat inefficient advanced industrial sector is still better off than a country that merely specializes in its 'comparative advantage' and relies on capital accumulation (most of which will usually end up flowing out of the country to the firms that own the textile factories) to develop itself. quote:Just to re-emphasize, while an industry requires subsidies it's costing the rest of the economy. Jobs which earn $15 an hour with a $5 subsidy are worse than jobs that earn $11 with none. When you replace the latter with the former you're losing in the immidiate. It's a real cost and it must be recouped. If you just invest in education without investing in industries that require an educated work force then the people you train will leave the country to work elsewhere. This is why I keep emphasizing that economic development is much more complicated than the accumulation of capital stock or even just the accumulation of 'human capital'. You need the right institutions, including industries that will create employment for an educated workforce. A properly functioning economy doesn't just emerge spontaneously anymore than a farm will just emerge from a plot of uncultivated land. quote:No, not really*. See below. In order to develop the institutions and industries that will create the virtuous circle of economic development you need to encourage certain types of economic development so that you can jump start development. Otherwise a country that is currently on the bottom of the global economic order will never be able to catch up with countries that are at the top. Instead the wealthy countries will monopolize high growth industries until all the potential innovation has been squeezed out of them, at which point they'll be passed along to the poorer countries (this is what happened with textiles or shoes: as long as they were high growth industries they remained concentrated in the developed economies, once they reached the far end of their 'learning curve' however the potential for growth and innovation in the production process was exhausted and they became staples of the under developed economies of the world).
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Mar 25, 2014 16:49
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Typo posted:Now this is interesting because I've consistently heard it argued the other way but never seen this side of the argument before. As far as the track record of the neoliberal era you can refer to this document. Growth rates have been much worse since the turn toward market liberalization and the 'Washington Consensus'. Even making some allowance for the idea that different eras have different growth potential (i.e. maybe something about the 1950s-1970s made that era more amendable to growth regardless of the economic policies in place) its still quite remarkable just how lovely the real world results of market liberalization have been in contrast to the bad old days of protectionism, capital controls and Keynesian economics. As for the more specific claims on Peru, this whole paper is worth reading (and quite relevant to a thread on the Chinese economy) but I'll just make an extended quote here: Erik Reinert, The Terrible Simplifiers: Common Origins of Financial Crisis and Persistent Poverty in Economic Theory and the new '1848 Moment', December 2009, DESA Working Paper No. 88, pp. 18-21 posted:Increasing Returns and Synergies: Their Creation and their Destruction Getting back to China, I think its hilarious the way free market fundamentalists have tried to use China's economic growth as some kind of vindication of neoliberal policies or of the so called 'Washington Consensus' model of development. While China certainly represents a break from Soviet style central planning its absolutely not an example of a free market success story. Instead it exemplifies how what are basically mercantilist policies continue to be the most reliable toolkit for developing your national economy - provided that you are strong enough to resist other countries when they try to tell you that you'd be better off focusing on your 'comparative advantage' in cheap labour. Using cheap labour and low value added industries as a stepping stone toward real economic development is acceptable, but it needs to be accompanied by a conscious policy of incubating a strong manufacturing sector with a high level of value added (even if that means protection against superior foreign competitors for an extended period of time, maybe even indefinitely since you're still better off with an inefficient manufacturing sector than you are with nothing at all, as we see in the case of Peru).
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Mar 26, 2014 00:28
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dilbertschalter posted:The problem with this entire argument is simple- a big part of the reason growth has been "bad" is because the ISI-fueled growth that the paper above touts above was the definition of an unsustainable bubble. Latin American governments propped up their inefficient (i.e. wages too high/productivity too low to be truly competitive on the world market) industries through heavy borrowing and the end result was a huge economic crisis when the credit ran out. Latin American countries didn't move away from ISI because they were tricked by nefarious advocates of the free market, they did so because ISI was a disaster. Growth rates in America from 2001-2007 were reasonably good, but that doesn't mean we should start another subprime bubble to boost growth. Mercantilism isn't necessarily bad, but if you the industries you protect never produce anything people abroad want you're going straight down a dead end. Your comment really just illustrates how premature free trade is a recipe for keeping currently under developed countries at the bottom of the global economy. South Korea industry was less efficient than its best global competitors for many decades and had to use various protectionist measures and subsidies. The USA had a century of protectionism and Britain had several hundred years of it before those countries were able to compete effectively in a "free market". In fact it isn't a coincidence that Britain switched from protectionism to advocating 'free trade' right around the time it became the world leader in industry. The Americans did the exact same thing: they were huge advocates of protectionism and cultivating 'infant industries' until they had built up the world's most productive industry and then they suddenly became the world's fiercest advocates for free trade. All those countries also experienced major bubbles during their development, but they were able to recover from them and forge ahead because, for various reasons, they didn't end up at the mercy of foreign creditors who had a vested interest in keeping them down. I agree that the record of ISI isn't as good as the record of export lead protectionism but its still got a much better track record than "free trade" which tends to only benefit the core countries plus a small strata of elite interests in the periphery. If we actually wanted to use trade to develop the entire world then free trade would be phased in gradually, starting at the regional level and then slowly working up as countries became more efficient. We'd recognize that while a country is developing they are better off having an inefficient industrial base that is protected by government rather than having no real industry at all. OwlBot 2000 posted:How does this work, if at all, from a TRPF perspective? Reinert is a Schumpeterian, not a Marxist (though Schumpeter, despite being quite conservative, took Marxian economics quite seriously and credited Marx with having a much clearer understanding of how capitalism develops than Alfred Marshall or other neoclassicals). In the Schumpeterian perspective the focus is placed on 'entrepreneurs' (this can be an individual or a corporation or whatever) who "innovate" via "combination", i.e. they combine two inputs or services or ideas in some novel way. This could be anything from the idea of having a cafe where you can also play boardgames (i.e. you're combining the idea of a cafe with the idea of a gaming store) or it could be combining two industrial techniques to hugely improve the efficiency of your factory. To use a recent example you could think of the Blackberry, which essentially combines the functions of a computer and a phone. If this innovation is succesfull then the entrepreneur who developed it is able to charge well above the cost of production for it. This extra profit is referred to as a Schumpeterian rent. However this will cause others to copy your innovation (think of how, within a few years of Blackberry's roll out, numerous other 'smart phones' were being brought to market). As more people enter the market seeking to copy or improve on your innovation your profits will go down. Eventually your profit rate drops down to the industrial average or even below it. There's a certain resemblance here to the idea of the tendency of the rate of profit to fall since you start out with a highly profitable product and then over time the market process causes more capital to rush into this particular industry, bringing down the rate of profit. However Schumpeter was pro-capitalist (though he largely accepted the Marxian idea that capitalism was doomed in the long run) and was more interested in describing how a capitalist economy functions than he was in predicting its inevitable downfall.
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Mar 28, 2014 16:50
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Typo posted:I don't think he has a problem with protectionism and said as much his post. But he is correctly pointing out that if protectionism doesn't lead to competitive industries it is problematic. Whatever you have to say about protectionism in Britain or Germany or the US it did result in industries that were genuinely competitive on the world stage. If those countries had been forced to open up their industries after only a decade or two then they would have suffered the same fate as Peru. They were able to reach competitiveness because they had a much longer time to incubate their infant industries. quote:But he -is- correct though. ISI only has a better record in the sense that it borrowed money countries can't repay and kicked a economic crisis down the road. Periodic crises in Latin America where investment capital rushes in and then rushes out again are not new or unique to ISI. The downturn became an excuse for the IMF and the United States to put the breaks on the industrialization (and what was perceived to be a leftward shift) in Latin America. I agree that ISI doesn't always have the best track record but it went a lot better than the neoliberal reforms that followed it and I don't think its accurate to say it simply kicked the crisis down the road. Like I said, an economy with an inefficient industrial base is still better off than an economy without any industry at all. If the United States had been forced by international creditors to impose IMF style conditionalities on its economy following the Panic of 1873 then America never would have become a global power.
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Mar 28, 2014 19:06
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asdf32 posted:Any examples are interesting but being a small country which suffered political instability at the time it liberalized makes it a difficult example to generalize from. I'd like to see more about the claims of government debt too. Another example would be Mexico. The Mexican government adopted ISI policies in the 1940s and maintained them up until the end of the 1970s, a period referred to as the "Mexican Miracle". Growth averaged around 6% during the ISI period before dropping to around 1.5% during the 1980s and 1990s. Also note that this period of growth the share of GDP taken up by manufacturing rose substantially while the share taken up by agriculture shrank. Also note that one of the factors involved in the eventual end of the miracle period was when the government began to invest heavily in oil exports (i.e. the Mexican economy's "comparative advantage" in oil) which created difficulties when the price of oil suddenly dropped in the early 1980s. Like I said above, there are identifiable patterns here. Building and maintaining a manufacturing sector promotes healthy economic growth and rising wages. It isn't some kind of magical policy that will guarantee success but it is clearly a necessary step for achieving middle or high income status as a nation. It also takes a long and sustained period of protectionism mixed with trade to achieve middle or high income status, something that is evidenced by the historical example of just about every high or middle income country in the world today. Typo argued above that the ISI period merely propped up industries that weren't competitive internationally, but this ignores the fact that all successful countries do this, often for extended periods of time, before their industries are ready to compete. The first Japanese car sold in America, the Toyopet Crown, was a disaster. It was too heavy and it had a weak motor that meant it could barely climb some hills, and it was more expensive than other economy cars. Japan also had a reputation for shoddy goods and there was left over bad feelings from the war. The car performed so poorly in the American market that it was withdrawn. Observers at the time, both in Japan and abroad, pointed to this as an example of why Japan should stay focused on producing textiles and electronics rather than sinking capital into its uncompetitive automobile manufacturing. When South Korea decided to pursue self-sufficiency in steel construction it established POSCO in 1968 as a State Owned Enterprise. Since South Korea hadn't possessed any modern steel plants up until that time and since it lacked iron ore or coking coal the World Bank and most international lenders refused to loan money for the project and condemned it as an extravagant waste. However the South Korean government persisted and POSCO has become one of the world's largest corporations and possibly the world's most efficient producer of steel. It takes many decades to achieve competitive status internationally and during that period you need all kinds of government support to keep the industry alive. This example is clear in country after country. You need to consciously encourage industries with the potential for high productivity growth even if this means protecting your own relatively inefficient industrial base from foreign competition for an extended period of time. quote:One thing that's important about China for discussions like this is it's size. When China is able to grow and reduce poverty it means a significant chunk of the worldwide population is improving. We don't have to try and generalize from it (though we may want too). I'll just note that China is an extremely protectionist economy. It is in no way a vindication of free trade arguments or neoliberal policy. quote:I still don't think you're showing recognition of the fundamental importance of trade, especially for economy like Peru which doesn't have any hope of substituting imports for, well, most things including critical items like industrial equipment, computers, telecommunications etc. And again the landscape has really changed here. Mexico manufactured 95% of it's consumer goods in the 60's - this wouldn't be possible or desirable today. And as the technological gap widens between developed and undeveloped countries comparative advantage becomes more and more powerful. I fully recognize the importance of trade, but I also recognize that so called "free trade" is a policy that strong countries impose upon weak countries to prevent them from emulating the successful development strategies that basically all wealthy countries have relied upon. If you go back to the 19th century when Britain pioneered "free trade" and economic liberalism and you actually examine the arguments made by the British at that time then you'll note that the people arguing in favour of free trade advocated that policy because they thought it would retard the growth of manufacturing on the European continent. The argument basically ran as follows: since we have such an advanced manufacturing sector we should open up our market for agricultural imports from the continent. This will encourage the continental economies to focus on the short term profits they can achieve by selling us their agricultural produce and will thus discourage them from emulating our industrial growth. Likewise in the 19th century USA there was a saying "don't do what the British tell you to do, do what the British did", i.e., encourage and protect infant industries rather than prematurely liberalizing the economy. Trade is great. Countries on a relatively equal footing like France and Germany can gain plenty by trading with each other with relatively few restrictions. And economies at different levels of development can also gain a lot from trading with each other. This trade, however, should be pursued as part of a balanced approach that prioritizes development. It shouldn't be about blind adherence to the fake ideology of 'free trade' which, historically, has been a rhetorical excuse for powerful countries to maintain control over weaker economies. quote:China does rely on the comparative advantage of cheap labor as a major component of it's growth which is exactly why it gets brought up as an example of that. Personally, I generally don't go a whole lot beyond pointing this out. Trade is key, and a certain amount of liberalization (and not too much protection) is necessary to create it. China is a great example of this. China is a heavily protectionist country. Sure it uses cheap labour to its advantage, but it does so in the context of a very aggressive development strategy in which the freedom of foreign capital is greatly restricted and in which massive subsidies and protections are extended to strategic industries. Nothing about China supports the conventional 'free trade' agenda. I mean obviously international trade is an important part of development. Nobody is denying that. But that doesn't in any way vindicate the idea that the path to prosperity comes by abandoning industrial strategy in favour of "comparative advantage".
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Apr 6, 2014 17:53
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Axe Master posted:Yeah, apologies for the anecdotal evidence however I imagine it is reflective of the current trend. One of the chemists at my university is on the verge of publishing a revolutionary process (which I will keep intentionally vague, I learned most of this from the bitter students in the lab), and the professor in question just returned from a lengthy trip to China to begin the process of starting a multi-billion dollar company there related to it. Part of this is to eschew the patent policy of the university (which is a whole other can of worms), but one would presume if the IP atmosphere in China is as dire as stated it wouldn't be in his best interest to build a startup there. So this guy used the public resources of the university and now he wants to move operations to another country so that he can claim exclusive benefits from the resulting research?
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Apr 7, 2014 19:56
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So based on this thread the Chinese property market has been experiencing a massive bubble that is now popping, sending ripples through the extensive shadow banking system and possibly triggering a deflationary spiral. If history is any guide then this would indicate a period of serious pain for the Chinese economy. On the other hand China's development is still driven by exports rather than domestic consumption like in the United States. So what happens to all those export oriented factories? Are they taken down by a collapse in the credit system? Or can they keep chugging along while other parts of the economy collapse?
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Jun 2, 2014 01:38
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