Is intellectual property law the new protectionism? Canada should be wary
theglobeandmail.com
theglobeandmail.com
- https://www.ted.com/talks/johanna_blakley_lessons_from_fashi...
Do you know anything about the speaker (besides what it says at that link)?
She's (was?) the director of the Norman Lear Center[0], but that's about it.
Sometimes it's exploring old fashions with modern techniques for making things. Textile and garment-construction technology have changed a lot in the past couple hundred years.
Innovation needs to be positive-sum to be worthy of the name. That isn't.
For software this still makes no sense. As far as protectionism is concerned, protectionism is precisely the way first-world economies became such. It's a myth that trade liberalization moved any economy indigenously forward. (This does not mean that all liberalization is bad)
> It's a myth that trade liberalization moved any economy indigenously forward.
What does "indigenously forward"? Are you implying that trade liberalization does not move indigenous economies forward? Or is "indigenously forward" a term with which I'm not familiar?
I'm having a hard time with the statement as a super-majority of economists agree that liberal trade is a net boon, and hence, am wondering where the myth part comes in, but without understanding the latter part of the statement, I'm confused.
Not the OP but familiar with some of these arguments.
Free trade is held to be pareto optimal outcome - you and I get cheaper tshirts, people in bangladesh get higher incomes because of tshirt manufacturing, everyone is better off because of comparative advantage, etc.
However, if we distinguish between development or industrialization, then free trade provides strong disincentives wrt investing in capital intensive industries where one does not have a comparative advantage.
If I have capital to invest in Bangladesh, it does not make sense for me to try to create a high-end equipment factory; German manufacturers are way more efficient and effective, so it will be very hard for me to compete.
The competitive advantage of my region is cheap-labour, so all investment will be biased towards that. Unfortunately, this means that it's very hard to create high-value-added industries that can substantially raise average incomes.
If we look into the historical record, we find that the industrial revolution was a period of high tariffs and protectionism; the British empire had a great advantage in acquiring raw materials but IIRC, the French textile industry was more efficient at the time.
As a result, they were incentivized to export raw resources and import high value added materials. This is a loser's game. Instead, with the application of high tariffs British manufacturers were now able to compete and thus were incentivized to develop their own industry.
Again, IIRC, you can basically take every well-industrialized nation and look back to the period where they gained their industrial edge and you will find high tariffs and protectionist policies aimed at protecting and developing their own internal industries.
(This is a decent segue into talking about how pareto optimal outcomes, without taking the initial distribution of resources into account, aren't automatically moral or just http://www.interfluidity.com/v2/5537.html )
TLDR: free trade makes things cheaper, and spreads money around, but it does not automatically make poorer countries substantially richer.
Sure, you could make a high-tech plant in Bangladesh, but it would cost you much more (in time and money) than making one in Germany. Instead, you first invest into a low-cost low-skill plant, make the workers' lives a bit better, they can afford better education, and so on, and very soon you'll have high-tech companies there as well.
I think the main problem with free trade is completely different - that countries don't just compete on cheap labour, but also (mainly?) on lack of regulation - the West tries to pass laws protecting the workers, people's health, the environment... but companies simply product their products elsewhere where these protections don't apply, and then sell these products in the West with comparatively low tarrifs - destroying the local competition that actually abides by all the health/conservation/safety laws.
This is confusing - if the goal is to have high-tech companies there, and it should be, why wait? If it's more expensive, spend the money - it's an investment. Why spend years and years crawling along on low-margin sales of labor? The workers lives will be "a bit" better, but this sort of accumulation will be extremely anemic. It's hard to get ahead sewing T-shirts.
Meanwhile, compare Korea or Japan, which built actual industries instead of pursuing their comparative advantage and became economic powerhouses.
I think that Japan is an example of a very protectionist economy that built up internal, high tech factories and educated workforces. It's a counter-example to the free trade argument.
I am Peruvian so the topic is extremely interesting to me.
You state very matter-of-factly your assumption that the goal should be to have high-tech companies there. I'd want to see that claim backed up.
Because you don't create high-tech companies simply by decreeing that it will be so, even if you have a lot of money behind your decree. You need a bunch of infrastructure (reliable power is a big one, but educated and trained workers are probably the most important). If you try to go to high-tech in one step, you're going to have to create a huge amount of infrastructure, all of which has no present reason to exist. (You expect that it will in the future that you are aiming for, but in the present it has none.)
It seems much more likely to work to build some industry and some infrastructure, then some more of each, then some more of each, as you try to move to higher tech.
An analogy: It's easier and safer to climb a ladder one rung at a time than it is to try to jump off a trampoline directly to the top rung.
By free trade I mean international trade without restrictions.
The modern examples like Japan, South Korea, China etc are very planned economies that protected their industrial base until it was fully developed.
If this observation is right, an interesting question would be: why "a super-majority of economists" says otherwise?.
Furthermore there is broken windows here, you don't know how those economies would have done if they were freer.
The path that is normally recommended to the "developing countries" doesn't match the path that the industrial powers followed. If you wanted that Bangladesh developed an industrial base you would do well in advise them to develop and industrial base and some internal market. That takes time and takes some kind of protection.
Yeah, well, would you rather we recommend Bangladesh adopt a US-like "path forward" including 150 years of chattel slavery, a bloody civil war that more than decimated the population, and nuking a rival world power at the end of a 4-year global conflict?
Anyway, why not a Japanese or South Korean path forward? or Chinese?
That is, if you actually want to convince anyone, you're going to have to do more than simply asserting that it's true.
In this case the argument goes back to Ricardo, who said that countries should pursue their comparative advantage (whatever they're best at) in order to maximize their gains from trade. This is true, mathematically, and has been orthodoxy ever since, perhaps because economists are more interested in nice mathematical models than actual real-world development.
However, this argument doesn't account for history and technological development, which is what the OP is arguing I think. I am fond of recommending this essay by Philip Pilkington on this subject: https://fixingtheeconomists.wordpress.com/2014/05/01/argumen...
and especially, this example of the fate of England and Portugal (quoting Joan Robinson):
>The most misleading feature of the classical case for free trade (and the arguments based upon it in modern textbooks) is that it is purely static. It is set out in terms of a comparison of productivity of given resources (fully employed) with or without trade. Ricardo took the example of trade between England and Portugal. He argued that England, by allowing imports of wine from Portugal, would expand the production and export of cloth to pay for it. Ricardo, of course, was thinking of the English side of the exchange but the analysis is perfectly symmetrical; it implies that Portugal will gain from specialising on wine and importing cloth. In reality, the imposition of free trade on Portugal killed off a promising textile industry and left her with a slow-growing export market for wine, while for England, exports of cotton cloth led to accumulation, mechanisation and the whole spiraling growth of the industrial revolution.
First-world economies also employed slavery, colonialism, racism and sexism during massive economic growth periods. Doesn't make 'em good policies.
The end result of protectionism taken to its conclusion is autarky, which has some highly notable and horrible failures, especially in more contemporary times. The protectionist agent is, of course, the state. And contrary to many social critics who shriek of "market failures," there are also corresponding government failures that are often far more disastrous, as public choice theorists have written on the subject, for instance. This along with the problems of state power that we all know too well.
Autarkies necessarily have high levels of central planning that lead to such issues as undersupply, allocative inefficiencies from distorted signaling, more frequent rationing, shortages incurred by price controls and high amounts of idle or unproductive labor with possible frantic/erratic production cycles ("employed unemployment").