Edit: to those downvoting me, I'd like to remind you that the downvote button is not the disagree button. I am trying to add to the discussion with this question, not argue for no reason.
But many years of protectionism meant that India continues to lag behind China in most key indicators. India lost out on the manufacturing boom and an opportunity to lift millions out of poverty. India provides a perfect example of pitfalls of a protectionist economy.
If there are more car companies, it means more businesses who will need to hire more people. More jobs right there. Then, with more competition, prices stay reasonable and more people can afford a car. It means more people can get a job to commute further and perhaps be able to work at places they could not before. They will spend more money on consumption of food, fuel, insurance. It all goes to the economy.
With very few choices, it almost becomes a monopoly and then you can only do so much as a consumer. With more choices, you have more consumers and more producers.
Consumers spending money injects growth in the economy. Producers create jobs and indirectly create further growth in a growing economy like India's.
Wait, did I just describe Capitalism ? :)
But what really happens is in this context. And especially if you are just starting out you really end up being somebody who is very good at assembling things, not really that good making them.
This has to some extent happened with the software industry. While the services industries have done good. Product industries have suffered and continue to. What we really have in India are largely me too products from the Bay Area.
You can open up your economy as much as your want but you will only get as far as your human resources are skilled and trained. Beyond that your human resources are now slave labor to a more powerful economy.
There were plenty of debates during the last election. And all economist even the ones supporting the ruling party(Surjit Bhalla) were saying that last thing we want is to build Indian economy on the back of its laborer.
Also, greater potential by those companies to exploit both customers and workers if those customers and workers have little other choice.
The competition introduced by freer capitalist economic systems greatly reduces abuse and increases innovation by necessity. Complacency and abuse lead to failure in the market (though, obviously, imperfectly and often greatly delayed depending on various factors, which is where regulations and other things come into play).
India started out very badly after Independence. It had nothing to show for, infact very little in terms of a trained workforce, quality human resources, industries, scientific enterprise, economy or anything for that matter. By the time British left, they had looted India to the very last paisa.
The first prime minister Jawaharlal Nehru had a great vision and equally good execution abilities. They faced a near impossible task of uniting a already politically, ethnically and linguistically divided nation. They federalized India on the lines of language, thereby uniting it under one union. They set institutions going for sound administration and bureaucracy.
Beyond all these political problems there is problem of nation building. Or Growth as you would call it. To build quality infrastructure you need taxes, to collect taxes you need industries, to build industries you need trained human resources, to get trained human resources you need to build good universities and academic institutions. You realize you are stuck is a chicken-egg problem.
The only solution most post-colonial states employed was to incrementally move upwards by building self reliance and capability. 5 year planning commissions were common.
The corner stone of Nehruvian economics was:
1. Build quality educational institutions.
2. Quality educational institutions build quality human resources.
3. Establish state owned(or partially at-least) industries to develop indigenous, manufacturing, research and production capabilities, in all walks and branches of economy.
4. Use 2 and 3 to eventually build private enterprise.
5. Collect taxes using 4.
6. Build infrastructure and other things in 1. and 2. using taxes collected so far at 5.
We were in the process of 'getting there'. Irrigation networks were laid, nuclear weapons were built, space programs were in motion. In fact India had indigenous presence in everything imaginable. However the politics of India was never stable.
Beyond all this 'capitalism' suddenly got fashionable. Why work and build indigenously when you could just pay and import?
In fact most of India's current predicaments arise out of abandonment of Nehru's path. We can't seem to build anything good. No good roads, no planned cities, no safe drinking water, frequent power cuts... the list just goes endless.
Sure you now have cheap mobile phones and internet. But a city like Bangalore was a heaven to live in during the times of Nehruvian economics. Today you reach home from office with a lot of dust in the mouth.
Ironically the same people who admire freeways, dams and social security in the US, which are the outcomes socialist policies. Hate the same in India.
In fact most people in India have barely a clue what socialism or capitalism actually mean. Except that they know if they hate something that automatically gets classified as socialist or communist.
EDIT: Looks like anything positive about Nehru is a magnet for downvotes.
And who to blame for this? Human greed which led to corruption and crony capitalism? There are always funds for everything in India like roads/bridges/housing for poor, but the roads built don't last for a year and the poor doesn't enjoy the housing, rather it's the middle men(dalal).
>But a city like Bangalore was a heaven to live in during the times of Nehruvian economics. Today you reach home from office with a lot of dust in the mouth.
Come on, I mean what was the population in Bangalore in Nehruvian times and now? The growth comes with lots of challenges, it's just that there was no plan by any politician to scale the city needs as per the growth. 7 years back when i visited Bangalore, it was the pleasant city with lots of trees, and now half of them are gone to accommodate metro and other things.
That's at the first level. If you think of it a little deeply, its actually scarcity. Either reduce the population or increase abundance.
>>Come on, I mean what was the population in Bangalore in Nehruvian times and now? The growth comes with lots of challenges, it's just that there was no plan by any politician to scale the city needs as per the growth. 7 years back when i visited Bangalore, it was the pleasant city with lots of trees, and now half of them are gone to accommodate metro and other things.
My friend its not really outsiders. But something called as regulation and adherence to planning. All these regulations that we hate here in India we love it in the west when they say they want parks and broad roads while planning layouts.
Its not like Bangalore saw growth only after IT. We were there long before. And it was attractive destination for jobs decades before IT happened. Bangalore was home to every single industry back then. BAL's, HAL's, ITIs of the world.
But its just that after 90's people wanted everything in a instance order be damned.
Like I said why think, plan and make. When you can just copy, rush through and import.
Yeah, Bangalore was a big city and sure there were industries, but the thing is the rate of growth from 90's to today is way more than the city anticipated.
>Like I said why think, plan and make. When you can just copy, rush through and import.
I agree with you that there's no plan and that's the major reason of the dismal structure of the cities in general in India, but this has nothing to do with Nehru policies, just human greed and stupidity.
P.S: your post doesn't deserve the downvotes
> We were in the process of 'getting there'. Irrigation networks were laid, nuclear weapons were built, space programs were in motion.
There are more issues in your post that make it downvote worthy. For example, you consider nuclear weapons and a space program a sign of progress, while many in your country live in abject poverty. Maybe you could use that money for infrastructure, then you wouldn't have to raise taxes? I'm sure the expertise created by these programs is totally worth the investment. Regardless, there are far more important developmental milestones in a country before either of these goals make sense.
> Beyond all this 'capitalism' suddenly got fashionable. Why work and build indigenously when you could just pay and import?
Or this gem. Because capitalism is such a fad, and not the result of world history/economics. You need something to buy imports with. If imports aren't cheaper, making it "indigenously" makes sense! Otherwise, maybe just import it and focus on something else. You can argue that capitalism isn't great, but so far there's nothing better in practice.
Spare us your simplistic, vague and condescending history lesson. If you have any insight, analysing the situation in more depth and looked at how other countries handled similar situations and why/why not that applies to India would be much more valuable.
The issue isn't space program. Things like the space program are necessary to ensure national readiness for high quality skills. ISRO has explicit goals that their missions involve more than just going to space it is to train people, build in house know-how for larger things. IITs are necessary to build the next generation of trained workforces that will build industries and provide more jobs. Health care spending is needed because you don't want 40% of your population to crawl with polio. Food security is needed because you don't want bulk of you population tilling farm lands just to feed themselves.
When you spend on these things you get a bad quarterly bill for tax payers. But you also build your nation for the next century which pays many times over.
Eg: http://www.isro.gov.in/pslv-c25-mars-orbiter-mission/mission...
>>Or this gem. Because capitalism is such a fad, and not the result of world history/economics.
In Indian context it is a fad and continues to be.
>>You can argue that capitalism isn't great, but so far there's nothing better in practice.
Sure you should educate us how we can build great capitalistic society without a trained workforce, without education, without healthy people, without able government bureaucracy.
You can't go from 0 to Wall street capitalism in day 1. Nor is it possible.
>>Spare us your simplistic, vague and condescending history lesson. If you have any insight, analysing the situation in more depth and looked at how other countries handled similar situations and why/why not that applies to India would be much more valuable.
Which are those countries? China? 90% of where China is largely manufacturing. And even they took a good 5 decades non-democratic communist rule to get there.
Try reading some history of China and how many millions of people died there due to famine and draughts.
You can get to these fantasy land capitalist figures, if you are ready to kill millions of your population to such things, with non democratic processes along the way.
That is not what we want here in India.
I'm only mentioning this because you said India was forced to "liberalize" it's economy, which is a definition I'd have associated with the protectionist policies.
Not really arguing anything here, just making an observation on language.
Moral of the story - if you have leverage in terms of market potential, by all means use it to get jobs into your country and develop industrial capabilities.
This might be good for a few people lucky enough to get automotive jobs, but it really sucks for people stuck driving inferior domestic vehicles.
Almost all "imports" below 2 million rupees are actually manufactured 70-80% in India from scratch (for instance Toyota and Honda mainly import engine blocks and engine electronics from Thailand) and the more expensive Mercs, Audis and BMWs are imported as kits and assembled in India. It's only the Porches and Ferraris that are fully imported.
Most of the market anyway is below 1 million Rupees and anyway is mostly owned by Suzuki, Hyundai and Toyota brands who manufacture almost 100% locally.
[1] https://www.google.co.in/amp/wap.business-standard.com/artic...
I really think a country like india needs to open up to encourage foreign investments which will drive improvements in infrastructure which India severely lacks compared to other developing economies.
TL;Dr: In case of India, protectionism has hurt it more than it helped.
https://en.wikipedia.org/wiki/Economic_liberalisation_in_Ind...
Look at the graph below and pay special attention to the GDP growth comparison. Notice the huge spike for India beginning the 90s.
If they had an open economy right after the independence, wouldn't multinationals have completely taken over the industry given almost everyone in India was too poor to start their own business? Wouldn't this basically be "re-occupation " by the west in different garb.
Is it fair to blame India's failure on 'protectionism' when it might as well have been rampant corruption, people divided into caste lines, choosing democracy for a poorly educated/unsophisticated/caste corrupted population? How do you explain china if protectionism is root of all evil.
What about Hindu attitudes of meekness, non-violence that are contrary to aggression of capitalism .
The point is that you could blame some of it on corruption, poverty whatever but protectionism has been one of the greatest causes.
The real issue here is scarcity.
May we should start looking at the population problem at some point in time.
What does this even mean? That it's too easy to blame corruption?
Corruption is exceedingly complex. In a large scale, it could result in policies that are bad for the majority of people, e.g. continued protectionism. Tackling the root cause will take generations until thinking changes.
Scarcity on it's own makes no sense. Scarcity of what? Resources? Opportunities? Basic health care? People?
Scarcity of everything. You might want to take a break and stay in India for a few years to understand what I'm talking about.
It is an interesting point about what protectionism prevented. I agree. It did prevent something worse. But it didn't need to extend for as long as it did, and it still did cause harm -- as a "lesser of both evils" situation it still is not a good situation to be in (and the discussion is about whether it is a good policy to apply in absence of a "worse evil" like in the US)
I am curious about this. Do you have a reference.
>It's also a bit offensive.
Sorry I didn't mean it to be offensive. I think I got that from Nehru's biography that I read couple of years ago.
> The word "Hindu" in the term was used by some early economists to imply that the Hindu outlook of fatalism and contentedness was responsible for the slow growth. The later economists attribute the rate to the Government of India's protectionist and interventionist policies (see Licence Raj), rather than to a specific religion or to the attitude of the adherents of a particular religion.
Yeah, I get that you don't mean to be offensive there.
The point is, too often the savings from outsourcing are passed onto neither the consumer or the employee, so there is definitely question as to who is "really" hurt by protectionist policies.
Last month I wanted to buy protein powder. It cost about $80/tub, as compared to $35 in the US. In the US I drink 3 scoops/day - my (much poorer) Indian workout partner is losing gains because that's too expensive.
I would also enjoy drinking a can of Guinness at my local pub. Unfortunately Guinness is insanely expensive and mostly unavailable. In India I just drink swill - domestically produced Fosters and Kingfisher. Thanks to protectionism, the only good drink available in India is Old Monk, and even that is threatened [1]. (The situation is improving a bit - Birra is new and pretty ok and local breweries are sprouting up for rich people.)
I'm regularly asked to bring various products into the country - a new phone, a laptop, etc, because they are too expensive or just unavailable locally.
I wanted to cook some non-Indian foods for one of my friends. But many of the things I wanted to cook for her were impossible due to lack of ingredients - the import duties make them too expensive, and no local market exists. Another friend of mine is begging for me to bring her a bagel and a bunch of philadelphia cheese next time I come.
Protectionism hurts because we are all consumers.
[1] Something bad happened and now Old Monk tastes bad. It's truly sad - Old Monk used to be a world class liquor.
Many people seem to imagine 'Made in China' means that the iPhones were shaped into complete products from unformed raw materials entirely in China. In fact China mainly just does the final assembly of components which (apart from some very low value components) are mainly made elsewhere. For example did you know that many of the Ax CPUs designed by Apple in California were actually manufactured at a Samsung foundry in Texas and shipped to China for integration into the phones? The same goes for several iterations of the Gorilla Glass. Historically the US has actually captured a sizable chunk of the value in iPhone manufacturing (though it varies by model).
Assembling iPhones in India is about very low wage jobs for unskilled labour in order to avoid punitive local market intervention by the government. India's economy is hamstrung by a highly interventionist economic policy which triggers equally punitive economic sanctions from other countries against Indian exports.
Raise an import tax (or other barriers such as subsidies) on phones made elsewhere? Ok, but you'll get hit by retaliatory market interventions when you try to export phone made in India. It's issues like this that's why iPhones for the global market are manufactured in China, not India. If the US starts interfering in trade that way they might win back some low wage assembly jobs in the US, but at the cost of risking retaliatory trade barriers against their own exports such as the high value components in the phones that are made in America, and the high paying skilled jobs that supports.
If you've ever been to India, you'd understand why their decisions and ours are and should be very different due to radically different circumstances.
We can force the issue with protectionist policy, but that doesn't change the underlying economic realities. Bringing production of cheap consumer goods back to the US would increase prices for everybody else.
In the long run, we are better off with free trade. We get the low prices we desire. The foreign country gets to develop an industrial base on which to build a large, prosperous economy. China over the last 20 years or so is a prime example - we get $1 t-shirts, they get factory jobs that increase their standard of living.
> In the long run, we are better off with free trade. We get the low prices we desire.
"I want my consumer excess, f*ck the middle class"
I prefer higher prices and protectionism. Cheap goods are not a right.
Have to hold capital hostage. That's the way to success for labor, and regulation is the way to do it.
There are no new jobs coming. Its time to drop the charade that retraining and hustling will be the solution.
The types of people who would consider a socialized universal wage are not the types of people you just elected in. So no, protectionists aren't going to do this. They'll just give the spoils to corporations, who they are indebted to to stay in office and who ultimately produce the erroneous talking points you parrot. Trump isn't pulling the Frank-Dodd act or removing environmental regulations for you, your job, your community, or the middle class. He's doing it to please the wealthy elites who will personally benefit. These policies won't "create jobs."
>Failing that, we can replicate it and break the patents for it.
That wont work and then what? This is the path to a command economy that won't work either. You can't just hand-wavey some kind of robotic utopia powered by taxes.
>There are no new jobs coming.
Obama's time in office saw the creation of 15m jobs. We're dying for talent at my employer and constantly hiring. But no, we don't want high school dropouts who think they're entitled to subsidized wages for lazy 'make work' rural jobs. You're not entitled to a job. You have to earn it by being competitive and learning in-demand skills just like everyone else did all through history.
Should the less intelligent live in squalor while the smart get by? I don't think so. There needs to be good job opportunities for all classes, not just the upper class.
If labor wasn't needed for many manufacturing jobs,
then labor wouldn't be used overseas.
I don't think that the "less intelligent" should love in squalor and I want to involve them economically too. I also think Americans Do Not want to live like factory workers in china or India. They want to live like American factory workers in the 60s. That isn't likely anymore for a variety of reasons.
We need job training for the new reality
The prices would be higher but the need to replace would be lower.
Unfortunately we're in a downward spiral. Making cheaper products overseas lowers wages. People with lower wages are forced to buy cheap, non-durable products.
All protectionism will do is increase wages for engineers, who will be tasked with accelerating the pace of automation. Those shirt factory jobs aren't coming back.
Everything at every step of the supply chain will be more expensive. The combination of more expensive goods and a fixed amount of capital means less stuff gets made. And the amount of stuff being made is practically the definition of economic strength.
So in the same manner as the window repair person in the fallacy getting work, local jobs get created in the short term, but at a net negative to the overall system. Ultimately, it's better for everyone if things are efficient (with the GIANT caveat that those economic gains benefit everyone who is in that economy, which clearly hasn't happened in the US since around Reagan's tenure).
To answer your question directly, as just a job creation tactic, I don't think it will work in the medium-to-long term in either India or the US.
So the question is: what can we do to redistribute wealth in our political climate without a revolution? UBI would never pass here, but protectionism MIGHT works as a band-aid.
If it is the case, it will be no use to make iphones in the USA if they can not be sold.
I believe these are the jobs people talk about when they talk about "high tech manufacturing". To do manufacturing in rich countries it needs to be efficient, which means skilled jobs. The problem is for people who don't have the skills and want their old unskilled manufacturing jobs back.
The question is not whether it would bring benefits, the question is whether the benefits would outweigh the costs. Pointing to a benefit doesn't answer that question.
$233/ month.
I don't know if bringing in protectionism in the US when unemployment is under 5% makes much sense.
It seems to me that technology and free trade have similar effects. If you like one you should like the other.
Note also that there are plenty of tariffs on goods from rich countries to poor countries. For example, India's tax on vehicle imports means cars are manufactured in labour-intensive Indian 'sweatshops' instead of efficient, automated Japanese factories.
Brazil isn't doing too bad, and they have the 7th largest economy in the world, and perks like universal free healthcare.
Hard to say for sure if import taxes and more expensive consumer goods are hurting more than the increased number of jobs are helping.
India:
GDP per capita: 1,498.87 USD (China is 6,807.43 USD)
GDP: 2.3 trillion USD. (China is at 11T)
The World Bank, in 2011 based on 2005's PPPs International Comparison Program, estimated 23.6% of Indian population, or about 276 million people, lived below $1.25 per day on purchasing power parity.
194 Million People Starved for Food in India in 2014-2015, Maximum in the World According to UN Report. India is home to the highest number of hungry people in the world, at 194 million, surpassing China, according to United Nations annual hunger report.
According to the World Bank, India's under-5 child mortality rate in 2012 was 56 deaths per 1,000, far short of the country's goal of reducing child mortality to 39 per 1,000 by 2015. By comparison, the child mortality rate in 2012 in Bangladesh was 41; in Brazil, 14; and in the United States, 7.
Infant mortality rate: total: 40.5 deaths/1,000 live births. This is some of the worst in the world and its only 15 in China. 4.2 in EU nations.
As of Nov 2016, India is the second-most unequal country in the world .[1] The richest 1% of Indians own 58.4% of wealth. The richest 10 % of the Indians own 80.7 % of the wealth. This trend is going in the upward direction every year, which means the rich are getting richer and the poor are getting poorer [2]
--
So no, things are clearly not fine under a protectionist system that damns so many to poverty and inequality. Also, the only reason Apple is coming to India is because rural Chinese labor costs more than Indian labor. That's not a good sign for India's economy.
EDIT: One thing I neglected to mention. You can probably tell based upon my comment being downvoted, you are not actually allowed to talk about downvoting. Its kind of like fight club.
https://news.ycombinator.com/item?id=117171
Based on your green colored name, you may not know that pg is Paul Graham http://www.paulgraham.com/
It would makes sense to consider downvotes similarly, however they also grey out the comment, so they aren't symmetrical actions. I've pointed out 'pg's comment myself in the past, but don't consider it a great practice now. As you note, it's useful for historical context.
And yeah, there is are guidelines specifically related to downvotes.
https://news.ycombinator.com/newsguidelines.html
If you're wading into contentious discussions, be prepared for them. Take extra care to be considered and civil. If you do receive downvotes, consider them as feedback that you could do more to better express yourself. There's nothing you can really do about those who downvoted for disagreement. Commenting on that will definitely result in more downvotes, from what I've observed.
https://www.bloomberg.com/amp/news/articles/2014-11-06/india...