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Comment by kranke155 | Hacker News Reader

Tariffs and protectionist policies are unfairly maligned. They are effectively the only way countries build and rebuild industries. The idea that they are bad is an invention of bad economists who don't study history. See the book "How Asia Works" for an accurate economic history of the growth of industrial power in Asia, how it was based on Germany's ascension before it, and how it was al built on the RIGHT kind of policies. https://www.gatesnotes.com/How-Asia-Works

Successful Asian powers studied history, not Milton Friedman. https://en.wikipedia.org/wiki/Historical_school_of_economics

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Tariffs that merely offset subsidies in the other country has zero net effect on competition, and doesn't harm producers on either side unduely.

The net effect is merely a net transfer from the foreign government to the domestic one.

Tariffs that go BEYOND the subsidies in the foreign country has a net protectionist effect. This CAN cause stagnation in the industry in question. But less so if there is still healthy domestic competition.

Subsidies are potentially the most destructive measure. This is especially true for protectionist subsidies, and less so for export subsidies. But in general, subsides sets up a cash transfer facility between a government and local industry, often removing incentives to innovate. In turn, this means that the subsidies need to increase year by year to have the desired effect.

This can lead to the subsidized industry dying a sudden death once public patience for the growing subisides (and so the subisides themselves) come to an end.

Read “How Asia Works” on how subsidies can be used effectively.

The book calls it “export discipline”, that is, you keep the subsidised firms on their toes by demanding them to be exporters and win the global market, thus making them remain competitive.

I don't disagree, you can definitely build more industries with tariffs and protectionism. I just don't see the point.

I'm a consumerist at heart. As long as consumers get to consume, it does not matter to me whose industry is doing the producing.

I get that your foreign suppliers can turn on you and raise prices. I think the money you make during peacetime by not putting tariffs will let you buy more weapons and bribe more allies so that the foreign suppliers don't try anything too awful with the supply chains. Stockpiles can buy a lot of time to restart industry in an emergency or at least find a different foreign supplier.

Take a look at Russia, they are sanctioned by half the planet and they still keep going on a reduced industry because they had huge stockpiles of tanks, artillery and so on. Imagine something like that but with a military that doesn't suck. Nobody would even dare try a sanction.

The point is that unfortunately geopolitics ends up in an eternal competitive state.

Losing your industrial base and giving it away to a geopolitical competitor is almost certainly an error in the long run.

Large industrial bases also are correlated with healthier middle class societies, according to Vaclav Smil, and in my experience, he’s exactly right.

So losing the industrial base is fine for you, a service sector worker, but it’s bad for the country and it’s bad for society, if you want it to have a healthy middle class.

Most of the country works in the service sector. It's not like I'm some kind of out of touch elite.

The ones who are most hurt by tariffs, most affected by higher prices, are the working class. Sure, the workers of the specific industries that are lucky enough to be protected, the ones with the most persuasive lobbies, will certainly benefit. But every other worker will be a little worse off.

If you are concerned about the people who got hurt by globalization, maybe the government should collect money from people like us and spend it on people like them. They can set up the tax in such a way that rich people pay the most.

But if you use tariffs to help the people who got hurt by globalization, you cannot set it up in such a careful way. It's a blunt instrument that hurts productivity across the board and increases the prices to the end consumer. It becomes an implicit tax that poor people pay the most. An actual explicit tax would hurt much less.

If the consumer becomes richer by brining industry back to your country you might actually end up a victor in that transaction.

> The ones who are most hurt by tariffs, most affected by higher prices, are the working class.

Perhaps in the short to medium term, the people who had their livelihoods decimated and partially compensated for the decline in their standard of living by buying cheap imported products, will be most affected.

But tariffs should be a component of a longer term plan of tradeoffs to revitalize the protected industries.

> If you are concerned about the people who got hurt by globalization, maybe the government should collect money from people like us and spend it on people like them.

That idea is past its sell-by date. It's the neoliberal Democrat's response to the economic damage done by globalization: put the losers on welfare indefinitely. IMHO, that money should be

>IMHO, that money should be

Should be...?

>> IMHO, that money should be

> Should be...?

Sorry. Should be used to offset any short-term difficulties caused by tariffs, that occur as part of a longer term plan.

>I don't disagree, you can definitely build more industries with tariffs and protectionism. I just don't see the point.

You don't see the point of building up, say, your domestic chip building capacity? Really?

>Take a look at Russia, they are sanctioned by half the planet and they still keep going on a reduced industry because they had huge stockpiles of tanks

Russia can "keep going" because they have vast reserves of fossil fuels that Europe, currently, can't live without.

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