Comment by thablackbull | Hacker News Reader

Comment by thablackbull | Hacker News Reader

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> We have it pounded into our heads that we need globalization in the form of open markets with no protectionism

Because that is false. It works for developed markets with existing strong industries. Dieter Frisch - former Director General for Development at the European Commission says in his La politique de développement de l'Union européenne [1], on page 38 of the PDF:

"En effet, on ne connaît historiquement aucun cas où un pays au stade précoce de son évolution économique se serait développé via son ouverture à la concurrence internationale. Le développement s’est toujours amorcé au gré d’une certaine protection qu’on a pu diminuer au fur et à mesure que l’économie s’était suffisamment fortifiée pour affronter la concurrence extérieure. Mais un tel processus s’étend sur de longues années, sans parler du préalable que constituent, dans le cas des ACP, la mise en place et le fonctionnement de structures régionales."

Essentially, it means that there are no cases of a country that developed through opening its economy to international competition. It always required protectionism which reduces gradually overtime as it is able to grow and absorb and compete with external competition. Haven't you noticed third world countries that attempt to follow America's advice never escape the poverty trap? What works for America does not imply it'll work for other countries.

[1] http://ecdpm.org/wp-content/uploads/PMR-15-Politique-Develop...

Excuse my French, but bullshit.

Consider Thailand and Malaysia, two neighbouring countries in SE Asia. In Thailand, they opened up markets to car manufacturers and suppliers, with the result that Thailand is now one of Asia's largest car manufacturing hubs. In Malaysia, they imposed protectionist barriers and tried to build their own cars. Ever heard of Proton or Perodua? No? There's a reason you haven't -- they're terrible.

Per Wikipedia [1] the successful Thai auto industry is a perfect example of using protective tarrifs to develop one's economy. They slapped huge tarrifs on imports, then shifted to taxing fully-assembled imports to grow their parts manufacturing, then gradually eased restrictions after they'd been able to develop a superior domestic parts manufacturing industry.

Protective taxes. Domestic growth. Expertise. Drop taxes and start telling everyone else how great free trade is.

It's a pretty winning playbook.

[1] https://en.m.wikipedia.org/wiki/Automotive_industry_in_Thail...

This is exactly the playbook my country S. Korea used, enabling the "miracle on the Han". The "free trade" mantra is bullshit, it is literally kicking away the ladder that every developed nation climbed to get to the top.

figuratively

Or "essentially".

Thanks for the correction, I hate getting into a habit of misusing words!

As languages change over time, so has the meaning of "literally" to actually also mean "virtually"[0]

[0]: http://www.dictionary.com/browse/literally

This is what Brazil does and it is definitely not winning.

Exactly.

When arguing something works you can't just ignore how often it doesn't. Development Economics is not so simple.

It was definitely working for a good part of the time. Mismanagement in other areas does not imply the recession was caused by protectionism. Actually, there are several different reasons for the Brazilian recession, yet none of them has anything to do with a "closed" market.

Malaysia is due to protectionism gone too far, rather than opening up gradually.

And I've never heard of any Thai auto manufacturers either. Yet S. Korea, another SE Asian country which went full on gov't interventionist/protectionist from the 60s through the 80s, is home to Samsung and Hyundai etc. These conglomerates would never have survived in direct competition, nascent industries require protectionism until they can compete. Completely "free trade" means each country focuses on industries where they have comparative advantage--S. Korea would still be weaving linen.

> . Yet S. Korea, another SE Asian country

S. Korea is not a SE Asian country...

Well it is in the South East of Asia. Nation groupings aren't exactly scientific taxonomies.

A better comparison: S. Korea, Thailand, Indonesia, and Vietnam all started with sub $200 GDP/capita in 1960. As of last year, S. Korea's has exploded to ~27k, while Thailand and others are below $6k.

> Well it is in the South East of Asia.

No. It is in the NORTHEAST of asia.

"In common usage, the term Northeast Asia typically refers to a region including China.[2][3] In this sense, the core countries constituting Northeast Asia are China, Japan, North Korea, and South Korea."

https://en.wikipedia.org/wiki/Northeast_Asia

https://en.wikipedia.org/wiki/Category:Northeast_Asian_count...

If you don't even know simple things like geography and locations of major nations, why are you even talking about economics?

> Nation groupings aren't exactly scientific taxonomies.

We aren't talking nation groupings. We are talking GEOGRAPHY. NORTH/SOUTH/EAST/WEST.

If you are wondering why the downvotes, might check the rules on civil discourse here on HN.

> Excuse my French, but bullshit.

It isn't bullshit. It is truth.

> In Thailand, they opened up markets to car manufacturers and suppliers, with the result that Thailand is now one of Asia's largest car manufacturing hubs.

But thai car companies aren't building the cars. They are just building cars for foreigners.

> In Malaysia, they imposed protectionist barriers and tried to build their own cars. Ever heard of Proton or Perodua? No? There's a reason you haven't -- they're terrible.

Can you name a thai car company?

"According to Paul Bairoch, since the end of the 18th century, the United States has been "the homeland and bastion of modern protectionism". In fact, the United States never adhered to free trade until 1945. "

https://en.wikipedia.org/wiki/Protectionism_in_the_United_St...

The US was protectionist. Korea, Japan are protectionist. Russia is protectionist. And even much of europe is/was protectionist.

You need protectionism to develop your own companies/industries. Otherwise, you become just a supplier for a company.

The difference between thailand and malaysia is that malaysia want their own "Ford/Toyota/etc". Thailand just wants to be a low-end supplier on the bottom of the supply chain.

Exactly. You can't industrialize a country without protection. Just think how USA, Germany, Japan, South Korea accomplished it.

When the IMF and others advice against it, it's because they are not thinking in the welfare of the country in question in the first place.

The other side of the coin is that it's very difficult (or inefficient) to develop a country without access to knowledge and technology from outside, so you need foreign currency.

In order to get foreign currency, you need to sell something or investment from outside that bring what is necessary, but you need a way for the benefits to stay in the country. Navigating this dichotomy is something that the Chinese are doing very well.

Aren't the Chinese essentially just playing on foreign greed for access to their domestic market, in an era of saturation in most of the rest of the world?

They've been dangling the "access" carrot on a stick in front of myopic shareholders and corporate management for 30 years, without ever delivering.

It's great if they want to grow their internal economy. But call a duck a duck: it's done at the expense of freedom for anyone who chooses to engage.

"Aren't the Chinese essentially just playing on foreign greed"

Sure they are.

I'm not an expert but my perception is that China is using two carrots: cheap labour and big markets.

If you are foreign capital, in order to profit you need to create a "mix enterprise" with local capital. The result is that they get the know-how and knowledge and they diminish the chance of relocation to cheaper places.

When they sell their products abroad, they also get foreign currency that allow them to import technology and expertise.

That is very well done.

If you think this is morally wrong (even if every developed country did it), considered the following:

"according to the World Bank, more than 500 million people were lifted out of extreme poverty as China’s poverty rate fell from 88 percent in 1981 to 6.5 percent in 2012" (from https://en.wikipedia.org/wiki/Poverty_in_China)

500 million people. That justify a little trickery I think.

Compare that to the morality of people in IMF and other institutions that advice poor countries (in collusion with corrupt local authorities) to open totally their markets.

I don't think it's morally wrong. I think it's great for China (and the Chinese people, government support aside).

That said, they, like Britain and the US before them, deserve to be called on the discrepancy between what they say and what they do.

Seems like the allure of cheap labor is fading http://fortune.com/2016/12/22/us-china-manufacturing-costs-i...

@RobertoG, do you have some book to recommend about what you said "You can't industrialize a country without protection."

I don't like the protecting laws of my country, avoiding cheaper and better products coming here. I would like to understand more about this, I hope I am wrong disliking this.

It didn't even work for the USA! We built our power on conquest, slavery, and industrial piracy. Don't know much about protectionism, but even without it, that seems like plenty.

Pre-WWII, the US absolutely taxed the hell out of foreign imports to protect northern industry. It only switched to a free-trade policy after the war wiped out most of Europe's industrial capacity.

https://en.m.wikipedia.org/wiki/Protectionism_in_the_United_...

Yeah, one of the arguments I heard to why India couldn't accomplish any rapid economic development was their lack of protectionism until recent years, then again protectionism alone is not enough.

I live in Brazil and we have lots of protectionism. It's really interesting your comment, it changed some of my beliefs.

To add a thought, invitations to foreign companies and investments can drown out local cultures with foreign personalities. This can be detrimental to what makes the country special and reduces the purpose of why they should ever prosper.

I'm not sure I follow your reasoning. What is that purpose?

I though it was so the people of the country have better lives.

I believe parent meant "why they would prosper".

Essentially: if you turn your country into {other country, except with cheaper labor}, then you kill the uniqueness of your national identity. Which is one of the biggest assets you ultimately have in international trade, if all countries were economically alike.

Thanks for the correction and elaboration. I could not have done it myself.

You say "that is false", but all you have is a quote in French, and a link to a paper in French that most of us can't read. Can you make your case in a more accessible way?

We shouldn't be surprised that most emerging economies have gone from high protectionism to low because they started from a position with high protectionism, and lowered it under advice and pressure from the first world--with very good results. Meanwhile, many countries in South America and Africa are doing things the protectionist way, with very poor results.

IMHO, quote the authentic language and a translation is the best you can do.

FWIW, I actually less trust a translated version from main stream media outlets, which 1) unlikely to report this type of narrative; 2) highly likely to cut out of context and interpret creatively.

French is not particularly inaccessible; nowadays particularly I find Google Translate always at least gives the gist of the meaning. Here's my translation, made by taking Google's and retranslating the bits it took liberties with to be a bit more literal. (Note that I have very little knowledge of French, but this translation was relatively straightforward.)

> In effect, one cannot historically find a single case where a country at an early stage of its economic development would have developed through its opening to international competition. Development has always been attracted [lit. "baited to consent"] with a certain degree of protection that has been diminished as the economy has strengthened sufficiently to face external competition. But such a process extends over many years, not to mention the prerequisite which consists, in the case of the ACP [I believe this is the "États d'Afrique, Caraïbes et Pacifique", parties to the Cotonou Agreement], of the putting in place and operation of regional structures.

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