When India kicked out Coca-Cola, local sodas thrived (2019)
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A water scarce country like India should really not promote high consumption of soda and sugar based drinks. However the same cannot be said about other industries.
Pre liberalization India used to be a country of license permit raj. Handful of local companies were highly inefficient and did not produce quality products or have incentive to improve and innovate. Liberalization did introduce competition and a lot of international products like Honda motorcycles and scooters. Indian 2 wheeler manufacturers like Bajaj had to innovate to compete and did become succesful.
However a lot of sectors today are facing the problem from cheap Chinese products. Even though we are a much poorer country a lot of local products could not compete with Chinese imports. A classic example is furniture. Wood was always expensive here and it was crafted into something useful by local carpenters and artisans for what i would consider were reasonable prices. However a lot of urban furniture is now imported from China.
I mean, I can see not promoting sugary drinks in general…but what does this have to do with water scarcity?
Example: https://www.nytimes.com/2011/03/22/business/energy-environme...
It concludes that each .5L bottle requires 35L of water as input. The majority of this is from the water required to grow sugar beets, which comes primarily from natural rainfall. Obviously, India is not the Netherlands, but I'd guess the same principle applies: growing the sweetener takes a lot of water, and theoretically there could be better uses for this water.
Coke is about 10% by volume sugar, and the pre-mixed syrup with sweetener (like used in soda fountains) is usually prepared for a 5:1 dilution ratio in a soda fountain. The concentrate that goes to the bottling plants is basically straight phosphoric acid and caffeine with some secret 'natural flavors' that is usually diluted at more than 1:100 ratio with the sweetener.
(anyone know specifically why the sweetener differs? I'm guessing either cost or legislation...)
http://www.motherlindas.com/HFCS_murky.htm
https://grist.org/article/adm-high-fructose-corn-syrup-and-e...
https://youtu.be/gPbh6Ru7VVM (skip to 5:30)
https://www.businessinsider.in/tech/apps/news/checkout-the-n...
Also today's news, Hero Cycles of India is shelving its plans to do business with China in light of recent changes.
https://indianexpress.com/article/cities/chandigarh/plans-bu...
What makes you say that?
https://thewaterproject.org/water-crisis/water-in-crisis-ind...
To me, saying that it is a "political/corruption crisis" is equivalent to saying that water isn't really scarce.
It's very hard for a country like India or Argentina to actually innovate when they restrict themselves to a local pool of knowledge, talent, and experience. And that's precisely why India has lagged far, far behind China even if they were ahead in the 1970s-80s. You don't want to reinvent everything all the time, it just isn't possible without lagging far behind and that's what happens with protectionism.You will almost always end up with a low skilled economy with basic economic output (like beverages or commodities).
It's easy to totally replace coca cola with local alternatives, it's impossible to do for sectors like semiconductors or finance when you have to start from almost 0 because no one wants to invest in a protectionist economy.
There were little spurts of protectionism in argentina and brasil but those happened only around the 2000s and only as a reaction after many years of gutting the countries under free market policies.
Holding China as an example of free trade success is a little wrong, to say the least. Post ww2 China has always had a very carefully crafted protectionist policies, and while they did open up majorly, they are still very protectionist by almost any sane international standard. Lets not forget that even now to start any significant business in China you need to make sure that Chinese nationals own a majority of your business.
India liberalized much more than China during the 80s and 90s, so if you want to make that comparison, India should be on the free trade side. In my opinion though the Chinese economic success in comparison to India had much more to do with domestic social policies. China simply did the best to ensure that despite wide spread poverty most people have access to education, clean water, modern medical services, modern telecom and transportation infrastructure, etc. India, on the other hand, as part of their "modernization" gutted social programs (again, listening to the Washington consensus) and they still have a vast part of their population in a more or less pre-industrial state of education and development.
On the contrary. Brazil and Argentina are super protectionists and never had a free market economy in the last decades. Free market means entering product from other markets with a near zero tariff. For example, the price of a notebook in theses markets is 2x the price in US, and always worked like that. For an Argentinian a top of the line 13" MacBook Pro in US at USD 2k is cheap because in Argentina that will cost more than USD 4k. There were arbitrary cases (e.g. clothes) where in the 90s the imports from China broke local factories but never a free market economy but an arbitrary market economy.
Have you tried selling software or licensing technology to companies in Latin America? In my experience you will need to double or triple your prices because pay a majority of your income in protectionist taxes.
The result is they have local companies selling some select technologies we have, and little or no access to most technology we have.
I also should've been more clear, what I'm talking about is more free movement of goods than the libertarian definifion of free markets. You can import and export goods in China pretty easily, but it's a nightmare in countries like Argentina. You are (or were, until recently) also relatively safer in china, when you don't have to worry about sudden anti-business measures, tariffs, or outright death by targeted regulations
Also, protectionism in south america has a very long history [0], and was already very strongly enforced much earlier than the 2000s. The concept of protecting "Infant industry" is ingrained in much of the region's recent history. And again, the countries that are doing better right now in latin america have mode liberal trade policies. I don't understand how it's not outright obvious that latin america has shot itself in the foot multiple times with very inefficient, very populist protectionist policies that made competitiveness impossible and commodities/primary goods the only productive sectors.
China is a ridiculously protectionist state - people in the west had theorized that the market would force China to more opennness and democracy back in the day.
China instead found a way to run a market with Chinese characteristics - a dual contract system where the English contract holds little power, knowledge transfer, a closed media environment and more.
It’s worked too. China suggests that some players can extract the benefits of free trade and protectionist policy.
Still, none of what has been accomplished in China could've been possible with very high tariffs, obsession in homegrown industry before acquiring expertise, and obsession with policies that have always failed but still sound good to the electorate. All of which are characteristic of India, Argentina, Egypt, etc. And I'd argue that China is better when it comes to free movement of trade than India even if it's much worst in almost every other type of freedom.
The Chinese government has almost completely lost control of its market. They can control (and profit massively from) very narrow things like blocking foreign servers on their internet (which happens to include our largest tech companies) but otherwise it is very much the wild west over there. The political system has chinese characteristics, but the wildfire of capitalism going in is just plain capitalism, and more so than in the US in some ways.
As for whether the government can survive, this is a complicated question but sooner or later an opposition group always defeats the rulers. I wound't write this ending off yet. Or ever, really.
Canada, Australia, New Zealand and in reality, the US as well.
The US has always been pretty open.
But yes, if a nation is in shambles, it may very well make sense to make major strategic investments for the national good, but ultimately, it can't last.
Korea, Japan etc. would be much poorer today if they had continued to manage their economies in a post-war fashion.
Australia has major advantages when it comes to natural resources and geographic proximity to Asia. There's also major structural issues with the Australian economy with significant agitation at present for major taxation and industrial relations reform.
Arguing that protectionism is good because you are producing beverages when the downside is literal decades lost to anemic growth and poverty is just missing the forest for the tree. India was at a similar but better place than China was, but China embraced foreign investment, liberalization, low friction to trade. And india got totally leapfrogged. Things are changing now, but for a while China was definitely much safer to invest in than India since the whole country was hellbent on not interfering with foreign investing. You were (and still are) much more likely to get your investment made worthless by aggressive "local at all costs" policies in India than in China. Look at what happened to Walmart recently. India wants desperately to skip the "industrialization" and foreign ownership phase and go directly to where china is now, but that's ignoring 30 years of smart policy in China.
Keep in mind, free trade and free international markets still allow for a very regulated economy and socialist policies. So protectionism, by reducing prosperity and investment actually cripples social programs. Scandinavia is known to be "social democrat" but still has a very open economy. Prosperity has been mostly induced by free movement of goods. Of course, China does not want to keep being a manufacturing only economy, and is moving towards a service oriented one. But that's what always happens
Someone also mentioned that Brazil is putting tarrifs on foreign goods. This is fine but there should be an exemption for foreign companies operating within the borders of your country. The exemption would apply to products assembled within Brazil. That way Apple could decide to build a factory in Brazil and provide job opportunities.
So you will.
David Ricardo mathematically proved it was a bad thing over 200 years ago. It absolutely befuddles me that people, especially in scientific communities, continue to support its implementation. Hong Kong has always been free trade and their GNP per capita is now greater than all of western europe, barring Norway (which is equal to HK). Protectionism makes yourself poorer.
Isn't interesting concerning tariffs that what we do to our enemies during wartime we do to ourselves during peacetime.
Ricardo’s proof applies to comically simplified conditions which fail to consider a number of factors that exist in real world trade and resulting shifts of specific industries between countries including:
(1) potential impacts of current activity on future production possibilities, and
(2) strategic impacts of different production patterns and how that effects non-trade international relations, including war.
That's not to say it's not an important result that has massive implications for policy, but it is far from proof that protectionism is a bad thing in every case. It does prove that it always comes at a short-term cost, so you'd better have a specific long-term strategy that justified the short-term cost, though.
Economists have always befuddled politicians.
Unfortunately, the collision of the two typically leads to the worst of all outcomes without the benefit of any. E.g. Implementing protectionist policies without a low term plan for their withdrawal.
Larger, independent countries with resources that open themselves to the extent of city states end up selling their resources to the lowest bidder (after the proper hands get a little extra) and having their industries siphoned off to places that'll work for less.
If economics were so easy that the optimal way was mathematically proven 200 years ago, I think economic difficulties would be resolved by now.
I think you underestimate the market failures of the political system. Politicians are not interested in doing what's best for society, but what gets them votes and donations to help reelection. Sometimes the two align. Other times they do not. Like it or not, that is how the incentives are set up. This is why rent control for example keeps getting passed time and time again despite economists unanimously agreeing that it does not work.
What if Shenzhen didn't exist across the river? HK is part of a unique economic environment with significant externalities making it prosperous.
Hong Kong is equal or larger than Austria, Switzerland, Denmark, Finland, and Ireland.
Taiwan is larger than all those, plus the Netherlands, Portugal, Belgium, and many others.
They are richer because of their adoption of free trade.
I think you have this backwards. Milton Friedman was already raving about Hong Kong leading the world back in 1980.
https://www.youtube.com/watch?v=m0dfiWM-rsE https://en.wikipedia.org/wiki/Free_to_Choose
The first special economic zone was created in Shenzhen in 1980, coincidentally. It's population at that time was around 60k according to this link:
https://worldpopulationreview.com/world-cities/shenzhen-popu...
Hong Kong's population was in the millions at that time. The SEZ was created specifically to imitate HK and other successful neighboring economies.
International trade when done with effective reciprocity and managing the trade deficit, can lead to competition on a larger scale, better outcome for consumers and specialization in particular aspect of manufacturing or services.
Even domestically, specialization is how human species became to me. If humans continued to be inwards looking and never engaged in barter-trade or any kind of bilateral exchange either with monetary instrument or goods/services; we would still be caves.
National to international trade is just one more step in the expansion of trade that we all benefit from. We have proof that it works when all parties are rational and cooperative. If we found aliens on another planet, it would only make sense to trade with them (just increasing the abstraction layer from national to international to interplanetary).
This is exactly what protectionism can help achieve. Without it, you get banana republics, wholly owned by foreign multinationals.
It's telling you ignore the parent posts Asian tiger economies as examples of successful protectionism, and instead address the ridiculous strawman of "never engaged in barter-trade or any kind of bilateral exchange either with monetary instrument or goods/services"
I'd appreciate it if you didn't jump straight to insults.
> International trade when done with effective reciprocity and managing the trade deficit, can lead to competition on a larger scale, better outcome for consumers and specialization in particular aspect of manufacturing or services.
I didn't say international trade should be stopped entirely. "Free trade" isn't "all trade". I'd appreciate it if you didn't strawman me. A part of the myth is the idea that free trade means perfect competition. No, it means a massive existing company can easily buy up local competitors and ensure that competition ceases entirely.
> Even domestically, specialization is how human species became to me. If humans continued to be inwards looking and never engaged in barter-trade or any kind of bilateral exchange either with monetary instrument or goods/services; we would still be caves.
This ignores the many cases where countries have protected local industries despite these industries existing elsewhere producing far better products and being far more competitive, and been wildly successful because of it. And again, I never said "no trade ever at all allowed because all trade is bad".
> National to international trade is just one more step in the expansion of trade that we all benefit from. We have proof that it works when all parties are rational and cooperative. If we found aliens on another planet, it would only make sense to trade with them (just increasing the abstraction layer from national to international to interplanetary).
I never said otherwise. Trade is fine. Foreign companies crowding out local industries to the point that local jobs are primarily low quality and low paying is not (see the number of countries that are relegated to production of fabrics and other low-cost goods).
Related thought experiment: What if the aliens were 1000 years ahead in patenting everything (in a way which didn't expire), then forced their IP regime on Earth, extracting IP rent for everything, since it would _only_ make sense to trade with them?
you need a properly functioning local government, which is pretty rare in developing countries.
Not only hyper-optimization produces fragile systems (i.e. look at the mask and sanitizer shortages at the most wealthy nation on Earth), it also eventually will make most of the labor uncompetitive.
You can only consume so much on credit, I’m not sure how world will reshape when most of the humans cannot contribute anything of value.
Free markets are great. So are some closed markets. There has to be a balance.
Argentina basically trampled on economic stability and investors. The idea behind welfare is dragging up the poor because there are so many rich people your country can easily afford it, obviously Argentina is not such a country. They have some core export industries but not much else. What happened instead is that the government spent too much on social programs, ran a heavy deficit with no ability to borrow money because they were locked out of the international lending market through their own incompetence. So you have to print money to fund government programs which leads to heavy inflation. They also randomly partially nationalize companies if they are mostly owned by foreign investors. Imagine you buy a car and the car dealer calls you tomorrow that you must bring your car back for a refund. Once an investor gets burned he won't come back. The importance of investor money can't be overstated when your country is bleeding money with no ability to borrow. Metaphor: For some reason people prefer being "in moderate pain" for the rest of their lives over a quick but highly painful recovery.
1. Land reform so that people can generate money from farming and generate financial surplus.
2. Controlled domestic finance sector protected from external competition..
3. Export oriented manufacturing where products are exposed to global competition but financing comes from domestic sources. This kind of partial protection allows capital accumulation even when products are inferior at first.
Asian countries that failed in the first step never became tigers or are still trying. Incidentally China had partial land reform that started from bottom up (illegally) but was later accepted.
When india imposed duties against chinese steel, the steel sector grew but soon the Real Estate sector accrued high input costs and real estate became expensive.
Same happened to automobile sector in india, yes few people gain from protectionism at expense of others.
I'd go on 1 foot and tell everyone, quality of skilled labor in india is bad not because of lack of quality education but because they are not able to afford quality tools which international market has to offer. Primary reason for that is those tools are only available to you if you work for big companies, goverment has put lots of taxes/tarrifs/duties on that which is HUGE relative to what people make there.
India has taxes duties more than europe but doesn't offer its citizen as much benefits as europe does.
Protectionism might workout/help out for a limited time to jump start nascent local industries, but in the long term is damaging to an economy.
The "embargoes bad", "protectionism good" doesn't make a whole lot of sense.
If there was competition from foreign players, this would have not happened
It is not like we do not have any checks and balances. We have an activist Supreme court as well as high courts which ignore average folks but open their doors at 3 am for special hearings for important folks.
However overzealous regulation in India has also meant that a Copper plant in India was closed in Tuticorin after protests allegedly funded by Chinese interests. Now India imports Copper from China. Apparently the main reason why protests happened (pollution) did not change 1 year after closure of the plant. Whereas thousands of poor unskilled laborers did lose their jobs.
Britain's "benign civilizing" (schools in anglo-saxon nations have no shame) policies vis-a-vis India were severely skewed against India, and towards protecting her own fledgling industries.
Mercantilism, 'a.k.a' Free Trade, was then exactly what China does now - freedom to sell my goods in your place. Opium wars too was all about 'Free Trade'.
Where do people get this Orwellian Newspeak? Mercantilism is the opposite of free trade. Colonials were prohibited from trading with anyone else, and prohibited from choosing not to trade (were not permitted to have their own industries higher up the value chain). It was not free trade in any respect.
(Conversely, New England has a variety of local "sodas". I do not hesitate to try those when I am in that area. New England is not India.)
The rest of the world tends to use either cane sugar or sugar beets as their goto sweetener depending on location.
Between 1977, when India kicked Coke out the country, to 1993, 16 years, when Coke reentered the Indian market, India's GDP per capita (adjusted for inflation) increased 65%. During the next 16 years, from 1993 to 2009, GDP per capita increased increased 267% (multiplying by 3.6x). In the next 11 years, GDP per capita doubled again.
Had India not engaged in a multi-decade dalliance with central planning and pursued economic liberalization off the bat, India's per-capita GDP would be twice as high today.
It seems to me more and more that the mere existence of a Goliath in a marketplace causes far fewer David's to even attempt competition, whereas their breakup or de-integration can cause new markets to flourish (and eventually new Goliaths to arise).
The part of the story that seems to be missing above that you would normally see in the USA is that the upstarts in India here were not purchased / tookover / or otherwise integrated by the larger entity.
I wonder why this didn't happen? Is there something about India's corporate law or antitrust?
And then several years later, TATA motors bought JLR. Of the two purchases, Coke definitely seems to have gotten the better of it.
It’s quite impressive what was managed in 1991, and the deep impact it’s left on the country.
For example, Bajaj scooters could only manufacture a fixed number of scooters, and that number was decided by a bureaucrat with no idea of how much demand there was. The waiting list for these scooters stretched to 10 years at times! [source - interview with Chairman of Bajaj Group here https://www.hbs.edu/creating-emerging-markets/Documents/tran... ]
Some elderly people I know also started going to the doctor more often, because walking to and from the bus stops was difficult, and the taxi was quite expensive for their low pensions.
Every bottled drink brand is now either owned by the Coca-Cola Company, or by PepsiCo Inc. :-(
"crime, corruption and complete incompetence" are often cited as the reasons for why local brands disappeared, along with "nostalgia" for their revival. I personally believe people just wanted to have the stuff they could not get before - or "curiosity" to put it in one word. Once that was over, people went by taste again and yes, there are actually customers who just like a higher acidity, less sugar or simply a different taste.
A sip of Thums up takes me back to my college days (in India), just like Fresca teleports me to Costa Rica, The orangey goodnesss of Kas takes me to the coast of Malaga in Spain, and I can't even think of Mexico without tasting the many flavours of Jarritos available there!
My wife's parents are American immigrants from Malta. I tried Kinnie when we visited Malta. Not personally a fan. I think it's an acquired taste.
Cold drinks are a sector where capital is the only way to gain market share. No wonder Coca Cola could outspend its local rivals and capture market share.
Sectors where innovation and understanding of local market matters, local competitors can emerge and do better. Vehicles are one such market where developed country behemoths have had limited success. Dinosaurs like Hindustan Motors couldn't compete, but Maruti Suzuki (now Suzuki) and Hyundai maintain comfortable leads in market share.
So they did the logical business thing and sold both.
(Although thums up may be smaller than it used and could just be dying a slower death.)