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Free market is not a religion that everyone has to follow. That was just a set of conventions that people follow if they benefit from it. As soon as China and other free countries [1] realized they can follow other rules that are more beneficial to them, they naturally shifted to that model.

[1] There are countries that do things that are more beneficial to someone else than own interests, but they don't count as free.

Parts of Spain have a history of anarchism and syndicalism, with an explicit recognition that it was a way to fight back against an economic system that was taking advantage of them.[1]

Chile tried to do something similar when they realized a lot of their mines were owned by US companies, they elected a new leader who was going to nationalize the mines, but then the US govt backed a coup to overthrow him and install a dictator.[2]

[1]: https://en.wikipedia.org/wiki/Anarchism_in_Spain [2]: https://en.wikipedia.org/wiki/1973_Chilean_coup_d'%C3%A9tat

China only copied the model adopted first by Germany to catchup to Britain pre WW1, then by America, followed more recently Japan, Taiwan and Korea. Friedrich List was the first to really come up with a theory of how nations should act for the benefit of their citizens. You go to China, Japan or Korea and you'll find his works translated and common in libraries and second-hand bookstores.

To be transparent, "free market" was never totally free. It was free in the sense of beneficial to only certain countries/establishments. Even before COVID, US/EU had certain subsidies to support (and keep local industries in safe hands). Not that it is wrong/right but crying foul only on China/others is unfair. Every one strong arms this in negotiation.

Reminds me of a game theory experiment they ran as a competition. Build a bot that gets the most resources in a deal-making market.

The optimal solution is tit-for-tat. And it leads to a stable equilibrium for the market as a whole and everyone is better off.

But if you know everyone else is playing tit-for-tat, then you can exploit that by always taking advantage. Then you win.

But if too many other bots also make that same realization, everything collapses again. The whole market is worse off.

China, in this case, is playing a lot like that one player who noticed everyone else believes in free markets. If you’re the only player with the opposite strategy, it works great … until others start changing. Then everyone is worse off.

Although whether markets were ever free free is a questionable claim at best. Are there economies without subsidies and without tax breaks?

I believe the root of the "not a free market" idea comes from the fact that currently if you are wealthy enough, you can "buy" a politician so that they back up policies that enable subsidies and tax breaks which are convenient for you. Tit-for-tat, like you said.

In a sense, there is actually a free market... but it's the one where you buy and sell politicians. That one conditions the other one, which isn't free. That will happen regardless of who lives in the White House.

No it was broken by the US first by providing farm subsidies the size of the GDP of nations

That's a good point but it goes back much further than that, back to

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

The WTO has been in a stalemate since the Seattle riots of 1999 because developed countries insist on subsidizing and protecting farmers of major crops (the odd thing is that there is little dirigisme for healthy foods like broccoli and spinach but a lot for mass carbohydrates such as corn, sugar,...) but developing countries won't further open any other kind of trade unless the developed world opens up in agriculture.

> (the odd thing is that there is little dirigisme for healthy foods like broccoli and spinach but a lot for mass carbohydrates such as corn, sugar,...)

Mass carbs are how you feed people in the kind of emergency that might make having a strong domestic food supply extremely nice. People can always backyard-garden some greens. If you've got enough corn, wheat, rice, and/or potatoes (maybe), the rest will sort itself out. If you're lacking in those, people are gonna die.

> the odd thing is that there is little dirigisme for healthy foods like broccoli and spinach but a lot for mass carbohydrates

You can't run a nation on broccoli and spinach (unless your population consists of Popeye-clones) while you can run it on starchy foods like wheat, corn and potatoes. They may not be the most healthy alternatives but they'll keep you - and your army - alive to live and fight another day. If a nation can not get any broccoli or spinach they'll just get some other green vegetables or do without. If the nation can not get any bulk starch products it is in dire straits. The high status of green vegetables is more of a symptom of overabundance than of their capacity to feed a nation. They certainly make for a healthy addition to a diet but they lack a number of essential things - proteins and fat as well as some vitamins, B-12 being the hardest to find in plant-based foods.

Convincing any country, let alone the USA, to give up national security for policy ideals is going to be tough. Food security as a national interest is an easy argument for the agricultural lobby to make. Now it's starting with semiconductors.

Agricultural protectionism creates political conflict inside the country that practices it.

The Corn Laws were so divisive in the UK because they were good for legacy nobles who owned vast amounts of rural land but bad for city dewellers and the emerging class of factory owners.

Note the story of

https://en.wikipedia.org/wiki/U.S._Sugar

where particularly

   ... sugarcane in the United States remains nearly twice as expensive per pound 
   as in other developed countries due to the failure the industry would face
   without government subsidies

even if you can say that the last things Americans need is more cheap sugar.

In the case of the US our comparative advantage for producing food is large and we don't improve national security by maximizing our production, we just use more fertilizer and get a bigger dead spot where the Mississippi river enters the ocean.

To be fair to the US, it goes back WAYYYY further than that.

The dirty secret of international fair trade, is that there is no international fair trade. And there never has been.

It's not the fault of the US for ag subsidies. Not even the fault of China if we're being honest. It's just how things have always been since before the Phoenecians even.

Pro tip:

"Empires", are not built on "fair trade".

Yep. It's nobody's fault that, surprise surprise, countries look out for their own best interests.

All countries have historically had tariffs. So, “broken” would mean a break from this free trade cultism that happened after large economies espoused the Austrian School of economics type free trade.

And US had no reason to break it because until maybe 2005 US was the biggest beneficiary of this system.

Today I learned about Dirigsme https://en.wikipedia.org/wiki/Dirigisme thank you! I was quite familiar with Laissez-faire. Disappointed in myself for not considering alternate viewpoints.

>The "free market" thinking behind globalization was broken by China first.

You're right about PRC operating at PRC scale upsetting balance, but it's more inducting PRC into WTO gave US, historically and currently the worst breaker of free market due to domestic policies and sheer historic economic heft, a taste of being victimized by industrial policy from another large economy. Look up WTO DSS database, US is by far the worst WTO violator, and it's not even close. PRC adjusted of ascension time is closer to a medium sized country such as JP, i.e. relative to her trade volume, PRC is probably one of the top adherents of the WTO system and globalization in general, which makes sense since it has benefitted her so much. Finally there's a reason US is holding WTO dispute settlement body hostage, despite all other parties wanting appellate bodies to presume. Why it lost it's shit at WTO for siding with PRC on steel, and also against Canada and Mexico for NAFTA auto shenanigans, showing that currently, US domestic politics can't even cope with regionalism / friendshoring.

The TLDR is US logic is it no longer benefits from globalisms as much as others, particularly PRC, not that US doesn't still disproportionately benefit relative to most parties. But it would rather crush system for everyone else than enable PRC to keep reeping benefits of globalism which could long term displace US in variety of sectors. Which to be fair, might be in US interest.

E: I think this image really highlights the issue

https://i.imgur.com/YGx2fQy.jpg

PRC excess production capacity, it's ability to over supply after meeding domestic demand, hammers shares from incumbent industrial leaders. Part of it is industrial policy, but part of it is also PRC has the infra, talent in absurd quantities where over supply is almost inevitable. As PRC move up value chain, it's going to systemically take market share from US/western companies, but especially US who leads in many fields. Ergo, within US interest to stall that process (Tech sanctions / WTO drama), and try to fracture market into west/rest to maintain her racket.

> The "free market" thinking behind globalization was broken by China first

That’s cute but not true. Countries like France force their colonies (former) in Africa to supply raw materials (like chocolate or vanilla) for cheap, and make billions every year by processing it and selling finished goods for sometimes 100x. Any attempts by African nations to process the raw materials to finished goods are actively squashed by the French govt by a mix of policies. France is not alone in this. “Free Market” has never existed.

> Countries like France force their colonies (former) in Africa to supply raw materials (like chocolate or vanilla) for cheap, and make billions every year by processing it and selling finished goods

Cute theory, unsupported by facts. Chocolate for instance is a simple supply chain problem: shipping cocoa to Europe is cheaper than shipping milk to Africa and then shipping chocolate back to Europe.

Where possible - nuts for example, transformation increasingly takes place locally. The bottleneck isn't some obscure international conspiracy but investor's willingness to take the country risk and establish trust relationships.

For anyone who doubts the above, have a look into which countries in the world produce the most coffee, and make by far and away the most profit from it.

It's just a little suspect those countries have never grown a single bean, and they're able to buy raw coffee beans from undeveloped countries for a steal.

Why do countries like Ethiopia and Guatemala sell them for so cheap? because the IMF would call in their loans if they didn't, sending their economies back to the stone age overnight.

The free market on a global scale has always been entirely fictitious.

Yawn, it's so easy to disprove, it's not even fun.

Crops produced in Africa like crops produced anywhere else are now traded on the international market. France actually imports very little from its former colonies. A casual glance at the world factbook will show you it's not a major trade partner of any of them.

The idea it makes billions from it is simply preposterous. Just check the composition of France's GDP if you don't believe me. It will probably take less time than it took you to write your original comment.

I mean ‘first’ in that the integration of China into global markets was an immediate cause of policy change in the U.S.

Mercantilism on the other hand has a long history as you point out.

well said!

Contra, from Noah Smith, 3 days ago:

>China's industrial policy has mostly been a flop

> China’s attempts to promote specific industries are relatively recent — in the 80s, 90s, and early 00s, China did very little of this. Barry Naughton, probably the premier Western scholar of Chinese industrial policy, explains this in his short book The Rise of China's Industrial Policy, 1978 to 2020, which you can read online for free here. He discusses how from 1978 through 2005, China essentially just focused on liberalizing their economy — if the government targeted specific industries, this was done at the local and provincial level, as in the U.S.

https://noahpinion.substack.com/p/chinas-industrial-policy-h...

Your last sentence is interesting. You use a future tense when a past tense seems more appropriate, especially regarding the specific example of semiconductors in the last 3 or 4 years.

It's not past or future per se but an ongoing pattern outside of time (on the time scale of decades) that will become more or less intense at various times.

That makes it sound like China is the WalMart of the world market.