Ha Joon Chang makes a good case in his book, Bad Samaritans, that globalization and free trade are a bunch of nonsense. They are ideas that are supported by institutions like the IMF and World Bank, but they do so only in support of the interests of the rich, developed countries.

Leaving economic decisions to the market place does not work, and indeed those in the major western economies, the US and others, are hypocrites for suggesting that this is the case. The US, Britain, and others, when they were on the steep slope of development themselves, were ardent supporters of tariffs and protectionism. Lack of regulation is of most benefit when a modern, affluent country is interested in profiting in a less developed region. Infant industries need time and support to grow, and those that are subjected to competition with major players too soon will not survive.

Chang makes the case again and again that this has been so throughout history. Japan and the Asian Tigers all supported their growing industries ferociously through state intervention, just as Britain and the US did in the nineteenth century. Countries that have faltered are the ones forced by the above institutions to open their markets too soon, and they have done very poorly. Mexico, for example, had a higher rate of growth before it entered into free trade agreements than after.

There may be some short-term benefits to free trade, and the free movement of capital around the world, but overall poorer countries tend to get stuck with the status quo. If they have a cheap labor force, that will be their heritage and mainstay, because they will not be able to develop more value added industustries without government support.

Globalization and free trade only makes the rich richer, everyone else gets poorer.

Curb immigration and outlaw the outsourcing to non-first world countries.

"There may be some short-term benefits to free trade, and the free movement of capital around the world, but overall poorer countries tend to get stuck with the status quo"

Yes, free trade is the problem for them. Not government corruption, decades of hardline socialist/communist governence, relgious fundimentalism and idiotic tribal/racial divisions.

I think that in large part globalisation has been good for a large number of people but certainly there have been many policies of globalisation such as unconditionally free trade (which has become something of a fanatical belief among policy makers) that is definitely causing great harm to the world environment, drawing most of the wealth into the hands of a few rich people and running roughshod over local cultures. The answer I think is to not simply resort to outright protectionism but to more correctly evaluate the human consequences of actions, rather then worshipping the almighty GDP or profit, if it requires protectionism in some areas, then so be it

Father O Rielly wrote:Ha Joon Chang makes a good case in his book, Bad Samaritans, that globalization and free trade are a bunch of nonsense. They are ideas that are supported by institutions like the IMF and World Bank, but they do so only in support of the interests of the rich, developed countries.

I suggest that you familiarize yourself with the economics of trade. Yes, both rich and poor countries benefit from trade. The poor countries wouldn't trade if they didn't benefit from it. That's pretty much implicit.

A quick fact check: Is China better or worse off today compared to when it wasn't globalized? The answer to that should tell you who it is in fact that espouses nonsense.

Father O Rielly wrote:Leaving economic decisions to the market place does not work

How often are the store out of milk or toilett paper when you need it? The former East Bloc can tell you something about that.

Father O Rielly wrote:The US, Britain, and others, when they were on the steep slope of development themselves, were ardent supporters of tariffs and protectionism. Lack of regulation is of most benefit when a modern, affluent country is interested in profiting in a less developed region. Infant industries need time and support to grow, and those that are subjected to competition with major players too soon will not survive.

The US and the UK didn't have universal suffrage when they developed either. Would you suggest that universal suffrage is impossible for development?

Hong Kong didn't develop with protectionism, so your point that protectionism is necessary seems rather hollow.

Father O Rielly wrote:There may be some short-term benefits to free trade, and the free movement of capital around the world, but overall poorer countries tend to get stuck with the status quo.

Would Europe be better off without the EU? What about the free trade and free movement between Canada's provinces?

Haven't read the book, but be careful about making generalizing against free trade practices. There's two sides of the coin, protectionism in the western world, and protectionism in the developing world. We still practice protectionism in the developed world. The EU's Common Agricultural Policy is directly stealing money out of farmers in the developed world due to subsidising uncompetitive European farmers. I'm certainly in favour of freeing up trade in that sense. Developed nations need to embrace the principles of free trade to allow industries in developing economies access to their markets.

Developing nations engage in protectionism all the time - China is heaped in the stuff, despite having joined up to the WTO. China essentially writes its own rules at the moment since the global recovery is so dependent on its demand and production. Protectionism is certainly worthwhile to protect fledgling industries in developing nations.

The point seems to be arguing against a bit of a strawman that "Everyone everywhere should practice complete free trade", I don't know who has been saying that? Certainly the EU and US could adopt better free trade practices to the benefit of the developing world.

Economic convergence is a completely separate issue and although free trade is part of it, you can't discuss convergence without broadening the horizon. Certainly its no secret that developing economies may never "catch up" with developed nations, this has been discussed by economist for over half a century and indeed the Prebisch-Singer hypothesis was first formulated in the 50s (and heavily modified since) that said exactly that. Protectionism will be key to allow such nations to at least start to catch up a bit.

But what's with the thread title? "Globalization" is such a nebulous concept, it's almost impossible to discuss. As communication and logistics technology bring citizens of the world closer together and give consumers and producers access to global markets then in one sense of the word "globalization" is inevitable and unavoidable. So, care to expand on what exactly you oppose?

Hugin wrote:A quick fact check: Is China better or worse off today compared to when it wasn't globalized? The answer to that should tell you who it is in fact that espouses nonsense.

China may be better off, but I don't think the US is. Sure we in the US can buy cheaply made Chinese shit, but it is not in our best long term interest to do so.

Tyrannical wrote:

Hugin wrote:A quick fact check: Is China better or worse off today compared to when it wasn't globalized? The answer to that should tell you who it is in fact that espouses nonsense.

China may be better off, but I don't think the US is. Sure we in the US can buy cheaply made Chinese shit, but it is not in our best long term interest to do so.

Economically it is in your best interests to do so. The only real pertinent argument for not doing so is to retain a domestic manufacturing base for reasons of national security - concerns which won't last forever, as the geopolitical landscape keeps on shifting.

Economically it is in your best interests to do so. The only real pertinent argument for not doing so is to retain a domestic manufacturing base for reasons of national security - concerns which won't last forever, as the geopolitical landscape keeps on shifting.

In the best interest of rich factory owners who take advantage of slave like wages in foreign countries. Not in the best interest of the workers who loose their jobs or have their wages lowered do to unfair competition. Also not in our best interest to help build China into an economic and military power.

Though if you want to speak purely on economic sense, Colonialism and running China as a colony made great sense, and the UK a lot of money. Maybe send a few slave ships over to Africa, because that too would make economic sense. But sometimes what makes economic sense is neither the smartest nor most moral action to take.

It is in the long term interests of those workers to not be working in an uncompetitive industry. "Because people will lose their jobs" is a luddite defense, what, we should keep producing flintlock rifles on a national industry scale because otherwise the rifle-makers will be put out of work?

It is certainly in your interests to build China up into an economic power, though perhaps not militarily. You need someone to buy your stuff, and make your shit, now more than ever. Why do you think the WTO is rolling over, and the US government is happy with a token weakening of the currency peg? China is one of the world's largest industrial powers already, I'm sure you'd rather be profiting off that than not. You know China is both the world's largest producer and consumer of passenger cars? How many Chinese car brands can you name?

Colonialism has nothing to do with anything here. The British profitted hugely off China, forcing China to accept our opium in exchange for tea, spices and whatever else they had that we wanted. Yes, Britain fought a war forcing China to accept our drugs in exchange for stuff we wanted, yes that is horrific, yes so was slavery. But unless you haven't noticed, we're not talking about trafficking drugs or people, and in no way is the US the victim here. Protecting jobs in uncompetitive industries is inherently detrimental to your overall economy. The exact same is true of British farmers, and French winegrowers are subsidised way beyond competitive levels.

Bringing that back on topic, protecting these industries in developed countries is hurting the global economy as a hole for the sake of a few cheap political points, "we're saving your jobs!" (not mentioning that doing so is a net loss to the nation, and the globe) and so on. China has serious protectionist barriers in place, both politically and socially, if we expect others to play ball, those of us in developed nations should lead the way and stop behaving like children.

Jbags wrote:It is in the long term interests of those workers to not be working in an uncompetitive industry.

It is only uncompetitive because we allow companies to export manufacturing equipment and know-how while employing cheap Chinese slave labor. It is not different then a slave based economy, and the poor and middle class in the West suffer because of it.

Jbags wrote:Bringing that back on topic, protecting these industries in developed countries is hurting the global economy as a hole for the sake of a few cheap political points, "we're saving your jobs!" (not mentioning that doing so is a net loss to the nation, and the globe) and so on.

Why give a damn about the "global economy"? Why care about third and second world countries? The rich first world nations should care only about themselves and their citizens. Instead we sell ourselves out over the benefit of cheap slave labor making our trinkets and baubles.

The US should put high tariffs on all Chinese goods to compensate for the difference in wages. If you want to relocate a factory in a cheaper labor area, use Mexico instead. A prosperous and stable Mexico is in the US's best interest as employed Mexicans are more likely to stay in their own country.

Tyrannical wrote:

Jbags wrote:It is in the long term interests of those workers to not be working in an uncompetitive industry.

It is only uncompetitive because we allow companies to export manufacturing equipment and know-how while employing cheap Chinese slave labor. It is not different then a slave based economy, and the poor and middle class in the West suffer because of it.

No, its not. Because people are willing to work for lower wages, does not equate to slave labour. Hyperbole and more hyperbole.

It also completely ignores the effect that purchasing power parity has. A worker in China earning $7,000 a year can live as well as an American worker earning $21,000 a year. Now, why would you employ the American, if the Chinese can do what you want just as well? These wages are not forced on the Chinese.

Tyrannical wrote:

Jbags wrote:Bringing that back on topic, protecting these industries in developed countries is hurting the global economy as a hole for the sake of a few cheap political points, "we're saving your jobs!" (not mentioning that doing so is a net loss to the nation, and the globe) and so on.

Why give a damn about the "global economy"? Why care about third and second world countries? The rich first world nations should care only about themselves and their citizens. Instead we sell ourselves out over the benefit of cheap slave labor making our trinkets and baubles.

The US should put high tariffs on all Chinese goods to compensate for the difference in wages. If you want to relocate a factory in a cheaper labor area, use Mexico instead. A prosperous and stable Mexico is in the US's best interest as employed Mexicans are more likely to stay in their own country.

Oh man I facepalmed hard here. Talk about cutting off your nose to spite your face.

Firstly, I'm not sure there really are any second world countries any more, since the Cold War ended (North Korea? But then they're closer to third really). The reasons why we should care are multiple. Firstly, morally - since there is nowhere in the developing world that hasn't been directly affected by the development of the developed world.

Secondly - self interest. The USA (and EU, and China) have nowhere near enough domestic demand to fuel their economies. Slap high tarrifs on Chinese goods and you directly reduce the standard of living of all Americans. The American made replacements will be more expensive, and this direclty bites all of your industry in the ass when you realise how much industrial equipment, and how much your general industry relies on products made overseas. All American industries would become less competitive, and therefore this would affect your production and sales in markets not even directly linked to China, and would hand market share towards European nations making the same stuff that you do with no such tarrifs on imports required for production.

A healthy, competitive China, just as a healthy, competitive Africa, India and so on, is of direct self-interest to the USA. Focus on what you can produce and export competitively, and nuture global markets to create the largest possible demand for your products.

Collectively, developing economies account for a vast proportion of global demand, they are consumers. They may be poor, but there's billions of them. What's more their standard of living is improved by consuming American products (although, that's debatable for McDonalds here in China), everyone wins.

Hugin wrote:

Father O Rielly wrote:Ha Joon Chang makes a good case in his book, Bad Samaritans, that globalization and free trade are a bunch of nonsense. They are ideas that are supported by institutions like the IMF and World Bank, but they do so only in support of the interests of the rich, developed countries.

I suggest that you familiarize yourself with the economics of trade. Yes, both rich and poor countries benefit from trade. The poor countries wouldn't trade if they didn't benefit from it. That's pretty much implicit.

A quick fact check: Is China better or worse off today compared to when it wasn't globalized? The answer to that should tell you who it is in fact that espouses nonsense.

Father O Rielly wrote:Leaving economic decisions to the market place does not work

How often are the store out of milk or toilett paper when you need it? The former East Bloc can tell you something about that.

Father O Rielly wrote:The US, Britain, and others, when they were on the steep slope of development themselves, were ardent supporters of tariffs and protectionism. Lack of regulation is of most benefit when a modern, affluent country is interested in profiting in a less developed region. Infant industries need time and support to grow, and those that are subjected to competition with major players too soon will not survive.

The US and the UK didn't have universal suffrage when they developed either. Would you suggest that universal suffrage is impossible for development?

Hong Kong didn't develop with protectionism, so your point that protectionism is necessary seems rather hollow.

Father O Rielly wrote:There may be some short-term benefits to free trade, and the free movement of capital around the world, but overall poorer countries tend to get stuck with the status quo.

Would Europe be better off without the EU? What about the free trade and free movement between Canada's provinces?

I believe you are confusing the idea of trade in general with the extreme policies of the right wing that unfortunately dominate much discussion in the US, and in the institutions in which the US is so influential, like the IMF and the World Bank. There is nothing wrong with trade, or the injection of capital into developing countries per se. The problem comes in when those with a disproportionate amount of power insist that there be no rules, no limits, on what western companies can do to make a profit.

One of the problems in the Asian financial crisis in 1997 was the flow of “hot money”, in other words, speculators had been given free reign in the financial markets of certain Asian countries. Money flowed into whatever seemed likely to turn a quick buck, not into long-term development. And it all flowed out again as soon as the herd was spooked, for no better reason than maybe there was an instant return somewhere else. Western countries wouldn’t, and didn’t, allow this kind of infringement on sovereign decision making when they were still developing their key industries.

China is indeed better off today, but precisely because it has insisted on strong regulation of the market place. They have planned to develop an industrial base all along, and not just stay stuck with low value exports. To do this, they have had tariffs, controlled exchange rates, and directed resources to target industries through a process of central planning. In recent years, China has had a much higher rate of growth than western “free traders”, and has also come through the recent recession in much better shape.

As for the East Bloc countries, no one, including the author, is suggesting Stalinist style communism. The key point is that if we have no regulation of the market place, pretty soon, to no great surprise, the market will be dominated by the most powerful, who will manipulate it for their primary benefit.

I don’t think I see your point about universal suffrage. The US and UK had very strong protectionist policies when they were developing, and did well with them. This is also true for other regions. Latin America also had some good rates of growth while they still had “protectionist” policies in place, which then sagged when they were pressured to “open up”.

You are right that Hong Kong is a bit of an exception, although even here, it was not a place without any regulation.

Europe is probably a lot better off with the EU. But it is better off because those settling up the organization have gone to painstaking, intricate, time consuming lengths to insure a level playing field. They did so because they knew that the unregulated flow of goods and services only works well between those of equal development, with similar financial policies. The EU today is a bureaucracy, an additional layer of government. It works exactly because so much effort has gone into the regulation of its economy, and it would not if key decisions were just left hanging, or given over to corporate CEOs to handle in what ever way suited them. The EU engages in functions that are angrily denounced by the uber-right when practiced in less developed countries, such as protecting its agricultural industries, and allocating resources to target industries.

Father O Rielly wrote:
I believe you are confusing the idea of trade in general with the extreme policies of the right wing that unfortunately dominate much discussion in the US, and in the institutions in which the US is so influential, like the IMF and the World Bank. There is nothing wrong with trade, or the injection of capital into developing countries per se. The problem comes in when those with a disproportionate amount of power insist that there be no rules, no limits, on what western companies can do to make a profit.

Again, we need to consider different spheres of influence here. There are situations where relaxing rules/limits/tariffs is of paramount importance. Goods from developed nations should be available in developing nations without the market interference of trade tariffs or subsidies on the part of the developed nation. Their goods should accurately reflect their market competitiveness (which is distorted when you domestically subsidise an industry and let it export at that lower, subsidised price).

Now, on the part of the developing nations, you have a fine balancing act that needs to be played sensibly. First of all, I would highlight that MNCs from developed nations have in the past (and continue today) to exert political pressure on developing nations purely for their own profit. This of course is a potentially nefarious activity, and should not be endorsed.

But that said, developing nations are under no obligation (and shouldn't be under one) to implement western laws and standards. Things like relaxed labour, financial and development regulation is exactly what draws MNCs to developing nations in the first place - and in the majority of cases this is a situation that benefits everyone. Jobs, expertise and infrastructure are created in developing nations, and MNCs are able to take advantage of lower costs.

Now this doesn't stop countries like the US using its FDI and government aid as leverage for political ends, and this is just as troublesome as MNCs doing the same. Sometimes this is done for a good reason, for example to put an end to discrimination or to pressure a totalitarian regime to reform. However it's also used to further less admirable political choices, refusing aid unless countries acquiesce to a "pro-life" policy on abortion, or refrain from distributting contraceptives in favour of "emphasis on abstinence".

And just like these governments, pressure from foreign investors can be used to both good and bad ends, clearly this is something that needs international supervision, but any move towards a situation where MNCs are unable to involve themselves economically in developing nations is detrimental to everyone involved.

Father O Rielly wrote:China is indeed better off today, but precisely because it has insisted on strong regulation of the market place. They have planned to develop an industrial base all along, and not just stay stuck with low value exports. To do this, they have had tariffs, controlled exchange rates, and directed resources to target industries through a process of central planning. In recent years, China has had a much higher rate of growth than western “free traders”, and has also come through the recent recession in much better shape.

I won't debate the role hot money played in the bursting of the asian bubble in the 90s, or the role it had in the dot com bubble, and so on, the herd mentality leads to vast movements of capital which can be damaging to all economies, just as we've seen in the developed world with today's financial crisis.

I think its a mistake, however, to purely attribute China's growth and its weathering of the financial crisis purely down to its strict economic controls. Certainly was a stabilizing factor in terms of the financial crisis, and even today A shares on the Shenzhen and Shanghai stock exchanges are extremely tough for foreigners to get involved with . A list of approved foreign investors is given a carefully measured quota at regular intervals. This is very gradually being raised to allow greater foreign involvement, to build up China's financial markets, partcularly Shanghai. The Shanghai stock exchange recently allowed futures trading for the first time, and the world's biggest IPO (being conducted by the Agricultural Bank of China) is about to be conducted on Chinese stock exchanges, so they are keen for (controlled) foreign involvement.

However, to attribute its econoic growth purely to its protectionism is highly misplaced. China had already invested in an industrial base under Communist rule, although it was run very badly, they at least had a foundation of infrastructure. Now, here you'll have to bear with me, the most important thing about Chinese growth is you have to compare different types of growth. In particular, you have to examine growth in real output, growth in potential output and utilization of production potential.

By economists, this idea is described with the "production possibility frontier" (PPF) curve. I shan't draw you an example, as I don't think its particularly necessary, but the concept is highly relevant here. Increasing potential output in the economic is represented by expanding the PPF curve. This is where developed nations derive most of their growth. They are utilizing the majority of the nation's potential economic production, and achieve economic growth by increasing the potential level of production their economies can output. This is generally the case for most economic growth we see today.

At certain times however, countries will find themselves well within their PPF boundary - they will not be using the majority of their country's potential for production. An example here would be post war Germany, which experienced a period of rapid growth after WWII raising it from its post-war desolation to one of the most economically powerful nations in Europe (and today's largest European economy). After the war, Germany had a huge amount of unemployment, and a completely delapidated industrial infrastructure. The process of rebuilding itself contributed to massive growth rates - it was recapturing its Economic potential for production, rather than expanding it.

This is exactly what we've seen in China. China was essentially in a period of upheaval between 1912 and 1949 (for example: where most countries were at war between 1939 and 1945 around the second world war, China was at war betwen 1927 and 1949, it was at war for twenty-two years with barely more than six months peace between the end of WWII and the resuming of their own civil war). Then, after over twenty years of warfare, Mao proceeded to squander China's capacity, often taking direct steps backward with The Cultural Revolution, and the ironically named Great Leap Forward.

Finally when Deng Xiaoping implemented the open door policy (giving the green light for, as he put it, "communism with chinese characterists"), China gradually started to allow its citizens to engage in basic economic activity, and then, slowly allowed foreign input in finally getting the Chinese economy off the floor.

Unlike Germany, which saw an immediate return to standard market stability, China has only been gradually opening its economy up (arguably, this gradual change has been one of its greatest achievements). And they are racing back towards their production potential, and have probably already utilized more than ever before. This "catch up" growth is extremely powerful, does not incur high levels of inflation and is notoriously good at weathering exogenous shocks (see: financial crisis).

China was already on an extremely powerful growth pathway when the financial crisis hit, Chinese growth is fuelled by the exact kind of production you would expect to see of this "catch up" growth - infrastructure development and construction contribute the vast majority of Chinese growth at the moment. This is not something that can really be endangered by a financial crisis, or interfered with much by developed nations (it does, however, have its own dangers - if you don't know when to stop building, you can enter a property bubble, which would have a much larger impact on China than the financial crisis).

(tl;dr) So, in summary, current Chinese economic growth has only very little to do with its protectionism, a lot to do with the nature of its growth.

Father O Rielly wrote:
Europe is probably a lot better off with the EU. But it is better off because those settling up the organization have gone to painstaking, intricate, time consuming lengths to insure a level playing field. They did so because they knew that the unregulated flow of goods and services only works well between those of equal development, with similar financial policies. The EU today is a bureaucracy, an additional layer of government. It works exactly because so much effort has gone into the regulation of its economy, and it would not if key decisions were just left hanging, or given over to corporate CEOs to handle in what ever way suited them. The EU engages in functions that are angrily denounced by the uber-right when practiced in less developed countries, such as protecting its agricultural industries, and allocating resources to target industries.

The EU's agricultural protectionism is absolutely shameful and has no sound economic basis. These are measures that should be afforded to developing nations and not tolerated in developed nations.

So, its not just a case of being against free trade, but ensuring developed nations practice free trade policies, but ensuring developing nations are afforded the chance to protect their domestic industries. Decades of the EU's CAP has done enough damage to the agricultural industries in the developing world, its high time we put an end to it.

And, "those of equal development" is a bit of a misnomer for the EU, as development levels and economy types vary hugely among its members. All would be considered "developed" economies, but its certainly not a case of a level playing field.

I am strongly in favour of the EU as an organization, but I am highly critical of its proctectionist policies.

===

I think there is a fundamental point here that I think we may agree on: Developed economies should refrain from engaging in protectionism, whereas developing economies should be given the opportunity to protect their fledgling industries.

Am I far wrong?

I'll write a longer reply to Father O Rielly's post in the afternoon (after my job), but I'll just briefly deal with the infant industry argument here. The problem with the infant industry argument is that it is very hard to predict what industries in a country that are going to be successful and who aren't. People who could successfully predict that would make a fortune by their investments.

I find the only justification for protectionism to be when governments of desperately poor countries need some cash.

I'm so angry about this subject, I'm going to hop in my Toyota Land Cruiser and go protest in the streets, then stop off at Sizzler on the way home for dinner...

Father O Rielly wrote:I believe you are confusing the idea of trade in general with the extreme policies of the right wing that unfortunately dominate much discussion in the US, and in the institutions in which the US is so influential, like the IMF and the World Bank. There is nothing wrong with trade, or the injection of capital into developing countries per se.

If you understand that trade is beneficial, then doesn't it follow that protectionism is bad because it hampers trade? If you have no protectionism, it's called free trade.

There is free trade between the US states, and also between the USA, Canada and Mexico. There is free trade between the EU countries, and also between the various countries that have free trade agreements with the EU (Russia, Ukraine, Turkey, Israel, etc). This is good for all involved.

Father O Rielly wrote:The problem comes in when those with a disproportionate amount of power insist that there be no rules, no limits, on what western companies can do to make a profit.

Hmm, could you please elaborate?

Father O Rielly wrote:One of the problems in the Asian financial crisis in 1997 was the flow of “hot money”, in other words, speculators had been given free reign in the financial markets of certain Asian countries. Money flowed into whatever seemed likely to turn a quick buck, not into long-term development. And it all flowed out again as soon as the herd was spooked, for no better reason than maybe there was an instant return somewhere else. Western countries wouldn’t, and didn’t, allow this kind of infringement on sovereign decision making when they were still developing their key industries.

I know nothing about that crisis, I'm sorry.

Father O Rielly wrote:China is indeed better off today, but precisely because it has insisted on strong regulation of the market place. They have planned to develop an industrial base all along, and not just stay stuck with low value exports. To do this, they have had tariffs, controlled exchange rates, and directed resources to target industries through a process of central planning. In recent years, China has had a much higher rate of growth than western “free traders”, and has also come through the recent recession in much better shape.

I think you are partially confusing free trade with domestic laissez-faire. Free trade is not at all incompatible with regulation of domestic markets, cases in point being all the above-mentioned examples of countries in free trade agreements.

That China has had higher growth than the West is very much because it started out dirt-poor. The Baltic states also had very strong growth when they had transisted to capitalism.

Father O Rielly wrote:As for the East Bloc countries, no one, including the author, is suggesting Stalinist style communism. The key point is that if we have no regulation of the market place, pretty soon, to no great surprise, the market will be dominated by the most powerful, who will manipulate it for their primary benefit.

Again, free trade and economic globalization are not incompatible with domestic market regulation. A lot of people seem to have that idea, and I'm at loss from where they got it.

Father O Rielly wrote:I don’t think I see your point about universal suffrage. The US and UK had very strong protectionist policies when they were developing, and did well with them. This is also true for other regions. Latin America also had some good rates of growth while they still had “protectionist” policies in place, which then sagged when they were pressured to “open up”.

My point was that just because they had protectionism when they developed, that alone doesn't mean that protectionism is necessary, or even good, for development. Is there any evidence to suggest that the Latin American growth has slowed down because of opening up?

Father O Rielly wrote:You are right that Hong Kong is a bit of an exception, although even here, it was not a place without any regulation.

Again, free trade is not incompatible at all with regulation.

Father O Rielly wrote:The EU engages in functions that are angrily denounced by the uber-right when practiced in less developed countries, such as protecting its agricultural industries, and allocating resources to target industries.

The EU's agricultural protectionism makes no economic sense whatsoever. It makes political sense however, as the agricultural lobbies in France and some other countries are very powerful.

Tyrannical wrote:Globalization and free trade only makes the rich richer, everyone else gets poorer.

Curb immigration and outlaw the outsourcing to non-first world countries.

I don't know how to outlaw outsourcing. What I would do is restore tariffs, though. Anyone who wants access to a market in a particular country would either have to produce and invest in that country or pay a penalty for not doing so. (Might be a good way to finance infrastructure projects also.)

Roger Cooke wrote:

Tyrannical wrote:Globalization and free trade only makes the rich richer, everyone else gets poorer.

Curb immigration and outlaw the outsourcing to non-first world countries.

I don't know how to outlaw outsourcing. What I would do is restore tariffs, though. Anyone who wants access to a market in a particular country would either have to produce and invest in that country or pay a penalty for not doing so. (Might be a good way to finance infrastructure projects also.)

Tariffs are bad for the consumers, and good for domestic firms. They reduce competition.

Jbags wrote:

Father O Rielly wrote:
I believe you are confusing the idea of trade in general with the extreme policies of the right wing that unfortunately dominate much discussion in the US, and in the institutions in which the US is so influential, like the IMF and the World Bank. There is nothing wrong with trade, or the injection of capital into developing countries per se. The problem comes in when those with a disproportionate amount of power insist that there be no rules, no limits, on what western companies can do to make a profit.

Again, we need to consider different spheres of influence here. There are situations where relaxing rules/limits/tariffs is of paramount importance. Goods from developed nations should be available in developing nations without the market interference of trade tariffs or subsidies on the part of the developed nation. Their goods should accurately reflect their market competitiveness (which is distorted when you domestically subsidise an industry and let it export at that lower, subsidised price).

Now, on the part of the developing nations, you have a fine balancing act that needs to be played sensibly. First of all, I would highlight that MNCs from developed nations have in the past (and continue today) to exert political pressure on developing nations purely for their own profit. This of course is a potentially nefarious activity, and should not be endorsed.

But that said, developing nations are under no obligation (and shouldn't be under one) to implement western laws and standards. Things like relaxed labour, financial and development regulation is exactly what draws MNCs to developing nations in the first place - and in the majority of cases this is a situation that benefits everyone. Jobs, expertise and infrastructure are created in developing nations, and MNCs are able to take advantage of lower costs.

Now this doesn't stop countries like the US using its FDI and government aid as leverage for political ends, and this is just as troublesome as MNCs doing the same. Sometimes this is done for a good reason, for example to put an end to discrimination or to pressure a totalitarian regime to reform. However it's also used to further less admirable political choices, refusing aid unless countries acquiesce to a "pro-life" policy on abortion, or refrain from distributting contraceptives in favour of "emphasis on abstinence".

And just like these governments, pressure from foreign investors can be used to both good and bad ends, clearly this is something that needs international supervision, but any move towards a situation where MNCs are unable to involve themselves economically in developing nations is detrimental to everyone involved.

Father O Rielly wrote:China is indeed better off today, but precisely because it has insisted on strong regulation of the market place. They have planned to develop an industrial base all along, and not just stay stuck with low value exports. To do this, they have had tariffs, controlled exchange rates, and directed resources to target industries through a process of central planning. In recent years, China has had a much higher rate of growth than western “free traders”, and has also come through the recent recession in much better shape.

I won't debate the role hot money played in the bursting of the asian bubble in the 90s, or the role it had in the dot com bubble, and so on, the herd mentality leads to vast movements of capital which can be damaging to all economies, just as we've seen in the developed world with today's financial crisis.

I think its a mistake, however, to purely attribute China's growth and its weathering of the financial crisis purely down to its strict economic controls. Certainly was a stabilizing factor in terms of the financial crisis, and even today A shares on the Shenzhen and Shanghai stock exchanges are extremely tough for foreigners to get involved with . A list of approved foreign investors is given a carefully measured quota at regular intervals. This is very gradually being raised to allow greater foreign involvement, to build up China's financial markets, partcularly Shanghai. The Shanghai stock exchange recently allowed futures trading for the first time, and the world's biggest IPO (being conducted by the Agricultural Bank of China) is about to be conducted on Chinese stock exchanges, so they are keen for (controlled) foreign involvement.

However, to attribute its econoic growth purely to its protectionism is highly misplaced. China had already invested in an industrial base under Communist rule, although it was run very badly, they at least had a foundation of infrastructure. Now, here you'll have to bear with me, the most important thing about Chinese growth is you have to compare different types of growth. In particular, you have to examine growth in real output, growth in potential output and utilization of production potential.

By economists, this idea is described with the "production possibility frontier" (PPF) curve. I shan't draw you an example, as I don't think its particularly necessary, but the concept is highly relevant here. Increasing potential output in the economic is represented by expanding the PPF curve. This is where developed nations derive most of their growth. They are utilizing the majority of the nation's potential economic production, and achieve economic growth by increasing the potential level of production their economies can output. This is generally the case for most economic growth we see today.

At certain times however, countries will find themselves well within their PPF boundary - they will not be using the majority of their country's potential for production. An example here would be post war Germany, which experienced a period of rapid growth after WWII raising it from its post-war desolation to one of the most economically powerful nations in Europe (and today's largest European economy). After the war, Germany had a huge amount of unemployment, and a completely delapidated industrial infrastructure. The process of rebuilding itself contributed to massive growth rates - it was recapturing its Economic potential for production, rather than expanding it.

This is exactly what we've seen in China. China was essentially in a period of upheaval between 1912 and 1949 (for example: where most countries were at war between 1939 and 1945 around the second world war, China was at war betwen 1927 and 1949, it was at war for twenty-two years with barely more than six months peace between the end of WWII and the resuming of their own civil war). Then, after over twenty years of warfare, Mao proceeded to squander China's capacity, often taking direct steps backward with The Cultural Revolution, and the ironically named Great Leap Forward.

Finally when Deng Xiaoping implemented the open door policy (giving the green light for, as he put it, "communism with chinese characterists"), China gradually started to allow its citizens to engage in basic economic activity, and then, slowly allowed foreign input in finally getting the Chinese economy off the floor.

Unlike Germany, which saw an immediate return to standard market stability, China has only been gradually opening its economy up (arguably, this gradual change has been one of its greatest achievements). And they are racing back towards their production potential, and have probably already utilized more than ever before. This "catch up" growth is extremely powerful, does not incur high levels of inflation and is notoriously good at weathering exogenous shocks (see: financial crisis).

China was already on an extremely powerful growth pathway when the financial crisis hit, Chinese growth is fuelled by the exact kind of production you would expect to see of this "catch up" growth - infrastructure development and construction contribute the vast majority of Chinese growth at the moment. This is not something that can really be endangered by a financial crisis, or interfered with much by developed nations (it does, however, have its own dangers - if you don't know when to stop building, you can enter a property bubble, which would have a much larger impact on China than the financial crisis).

(tl;dr) So, in summary, current Chinese economic growth has only very little to do with its protectionism, a lot to do with the nature of its growth.

Father O Rielly wrote:
Europe is probably a lot better off with the EU. But it is better off because those settling up the organization have gone to painstaking, intricate, time consuming lengths to insure a level playing field. They did so because they knew that the unregulated flow of goods and services only works well between those of equal development, with similar financial policies. The EU today is a bureaucracy, an additional layer of government. It works exactly because so much effort has gone into the regulation of its economy, and it would not if key decisions were just left hanging, or given over to corporate CEOs to handle in what ever way suited them. The EU engages in functions that are angrily denounced by the uber-right when practiced in less developed countries, such as protecting its agricultural industries, and allocating resources to target industries.

The EU's agricultural protectionism is absolutely shameful and has no sound economic basis. These are measures that should be afforded to developing nations and not tolerated in developed nations.

So, its not just a case of being against free trade, but ensuring developed nations practice free trade policies, but ensuring developing nations are afforded the chance to protect their domestic industries. Decades of the EU's CAP has done enough damage to the agricultural industries in the developing world, its high time we put an end to it.

And, "those of equal development" is a bit of a misnomer for the EU, as development levels and economy types vary hugely among its members. All would be considered "developed" economies, but its certainly not a case of a level playing field.

I am strongly in favour of the EU as an organization, but I am highly critical of its proctectionist policies.

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I think there is a fundamental point here that I think we may agree on: Developed economies should refrain from engaging in protectionism, whereas developing economies should be given the opportunity to protect their fledgling industries.

Am I far wrong?

I don’t think you are far wrong, and indeed this is a subject that you are apparently well versed in.

The point about China’s, or for that matter, and economy growing fast because it is going from a standing start is of course a correct one. If I made $100 a week last year, and this year I am making $200, that’s a 100% increase; sounds good, but it depends on the context. It is still a long way to go to catch up with my fellow workers.

You also state, however, that developing countries are under no obligation to implement western laws and standards, and this I believe brings us to the heart of the issue. The main point of the book is that less developed countries are under immense pressure to do just that. The US, and also the IMF and World Bank, have been very strongly influenced by the ideology of the far right in recent years. These individuals that are so influenced have repeatedly attempted to force their ideas down the throat of nations that are too small to be able to resist.

In a typical scenario, a country that is in financial trouble will come ask for a loan, and will then be required, in order to qualify, to adhere to the political philosophy and the legislation of the ultra-right. They are compelled to cut government spending, stop subsidies to protected industries, allow unemployment to rise, and to eliminate regulations on industry- in other words, conform to a narrow ideologically driven economic policy that is currently in vogue in the west. This is done despite the prospect that it is often exactly the wrong way to go. Many prominent economists argue the Keynesian viewpoint that increased spending is the way to go during tough economic times. Keep up spending an employment, even at the cost of running a deficit, and then increase taxes when times are better.

And I am going to refrain from excessive cynicism here, and just mention briefly that these same loan/ reform policies so insisted upon are ones that very nicely benefit the commercial interests of major western countries, the ones that exert considerable control of the IMF and World Bank. Corporation’s function better in countries that have, as you say, lax labor and environmental regulations, and less financial oversight: more profit to be made. Higher rates of unemployment don’t hurt either, and that has a downward pressure on wages.

The point is made in the book that it is those countries that have been able to dodge the IMF bullet that have done better economically. This is not the only reason for their successes, but is a major factor. China did this because it is now big enough. One of the reasons it is doing relatively well is because it avoided IMF type policies, and did pretty much the opposite: supported fledgling industries, and intervened in the economy heavily through subsidies and regulation. They have target industries that they are determined to see grow (despite considerable outside criticism for this in regard to things like currency manipulation). Others made the jump to greater development before the ultra-right ascended, such as South Korea or Singapore.