"In the 1960s, there were fears that the US would be overtaken by the Soviet Union. I can still recall the late 1980s, when pundits insisted we needed an industrial policy to avoid being overtaken by Japan."
In the early 1980s, I moved out of research and into corporate work doing mainly regulatory affairs and drug safety in the biopharma industry. I was at an annual meeting of the biotechnology group where I worked and most of the speakers were covering a wide range of international issues (as an aside, I recommended we invite a very young Paul Krugman who came and gave a nice talk on international trade and economics). Clyde Prestowitz spoke at the meeting and at that time he was at the Commerce Dept in the Reagan administration and an outspoken "worrier" about Japan and gave a very gloomy talk about how Japan's industrial policy was endangering the US. While Japan was buying up a lot of US real estate, the economic takeover never happened. Nor is it like to happen with China either.
One more anecdote, though the actual reference must be somewhere in my paper archives. Japan's Ministry of International Trade and Industry was busy trying to set policy for companies. The relatively small motorcycle company, Honda, was starting to manufacture automobiles and the recommendation was for them to leave this sector to the then giants, Datsun and Toyota. The CEO ignored that advice and of course Honda became one of the premier auto manufacturers in the world.
The Ministry of International Trade and Industry actually prohibited Honda from exporting cars to the USA, using a regulation allowing exports only by makers who exported by a certain date. Honda beat the deadline by welding together golf carts (IIRC) sufficiently to meet the regulatory definition of a car, and shipping it over. Honda's Accord became the #1 selling car model in the USA.
I’ll continue shouting this from the rooftops wherever I read someone repeating that the sanctions on Russia are tough. They’re not. They’re highly targeted and circumscribed. If the phrase “secondary sanctions” doesn’t appear in a discussion of sanctions, then I know the author is unaware of by far the strongest tool in our sanctions arsenal. We are only gradually and belatedly beginning to use secondary sanctions.
Yes, but that supports my point. Economists are not good at predicting the effect of industrial policies. In March 2022, experts were almost unanimous in claiming that the sanctions would severely hurt Russia, even though secondary sanctions were not in place. In addition, there are significant political problems with sanctioning countries like Turkey and India.
In any case, Trump will soon be president and he'll hand Putin a victory.
Given the sex-divide between support for Trump and Harris, I could see a number of women saying that they will vote for Trump, or are undecided, as a safety measure, when actually they plan on voting for Harris.
I'm still thinking this will be the election when the prediction markets are proven to be fallible. Though it is a very stressful nailbiter. I'll feel gutted if a person guilty (in my mind) of at least two counts of felony murder of US citizens is elected to the presidency again.
“Richard Nixon? Richard Nixon? I don’t know anyone who voted for Richard Nixon.”
I’m not saying that I was sure the polls *underestimated* Trump’s support, but on what possible basis did you make your in hindsight completely incorrect claim that his polling was “surely” overestimated?
Polls change their algorithms when they've been proven wrong. They underadjusted the last two times. There's no reason to think they'll continue underadjusting.
"As you can see, Trump’s margin with noncollege-educated white voters ended up being higher than the polls suggested. But his current 27-point advantage is almost equal with that 2020 result. "
And if you scroll down, the polls undercounted Biden's margin with black and hispanic voters.
"Given the sex-divide between support for Trump and Harris, I could see a number of women saying that they will vote for Trump, or are undecided, as a safety measure, when actually they plan on voting for Harris."
A lot of men will find it very difficult to find a woman to date or marry unless they have a lot of money. This will be the modern-day version of Lysistrata (Spike Lee's take on this in 'Chi-Raq' was quite compelling). Very few of Trump's male supporters are in any position to emulate him.
I was thinking more of already married women. If a woman feels any sort of even just potential threat from her husband or male partner she's far more likely to lie or fudge when responding to a poll.
"Distance, debt and voting for Donald Trump top the list of reasons singles looking for a relationship wouldn’t consider a potential partner"
By middle age the numbers of men and women are approximately equal. Over a population this should lead to an equal balance of interests. Prior to that, on average, it should prefer women's interests (with more males than females from birth until middle age). To the extent this isn't seen it is likely due to ingrained patriarchical power structures. (More men than women leads to dating and marriage society leaning toward women's average preferences, while more women than men lead to the opposite. Some wiggle room for the relative proportions of homosexual activity. And of course this varies based on milieu.)
Agreed. Just like with monetary policy, analysts see a “tightening” of sanctions (for example, as measured by number of sanctions) and think the sanctions are strict. Subsequently, if exports to Russia through third-party countries skyrocket, they mistakenly reason from a quantity change and conclude that sanctions don’t work without considering the significantly higher prices Russia is incurring:
I know Trump is currently favored in a number of prediction markets, but as Nate Silver has been emphasizing, it's still extremely close (and he wasn't favored when he actually won in 2016).
There's been lately this talk about how controlling for sanctions makes Acemoglu's result about "democracy implies growth" go away. It's hard to square that with "sanction do not work" narrative.
I would not claim they have precisely zero effect. For instance, Russia is getting a lower price for its oil from India than it got before the sanctions.
Also, in some corners, some analysts were predicting that sanctions on Russia would erode the dollar’s status as a reserve currency. However, that prediction did not pan out.
And a city-state, and that makes almost every policy a de facto macroeconomic policy, with effects on imports and export.
Subsidize worker training, when many industries are exporters. Building industrial parks, land-forming the huge Jurong Island, for state-owned petro-chemical complexes built with state capital. Singapore-owned airport and airlines. Much more.
Singapore has a public policy of running permanent current account trade surpluses, and also of importing labor who live in barracks and similar conditions (the workers were ring-fenced in during the C19 hysteria).
Singapore is probably the most pro-business government on the planet and subsidizes business accordingly. This may be good idea, especially for a city-state.
Certainly, state-subsidized enterprise and protectionism has worked for Singapore.
However, Singapore, unlike most nations, is of a manageable size, and has a strong Han Chinese component. I am not sure the Singapore model would work in the US, due to political problems and the general unwieldy-ness of large nations. Likely not.
The US needs a simple fix, like higher general tariffs and border controls, but no industrial policy per se.
But anyone who thinks Singapore represents free trade or free enterprise is deeply deluded. Some right-wing think tanks say so, as it fits their narratives.
I actually agree that governments should be pro-business. Very pro-business, like Singapore.
But there is no such thing as global free, fair, or foul trade. Michael Pettis and Dani Rodrik are interesting scholars in this field.
International trade is always in large part an artifice of government regulations, taxes and subsidies.
“Does the field of foreign policy even have a model?” Well, Realism sort of does, but it’s a bad one.
Putin acts like Muscovite autocrats have been acting since before NATO, the founding of the US or even Anglo settlement of North America, and “Realists” tell us the problem was US policy and NATO expansion. NATO is the solution, not the problem. As the Swedes, Finns, Estonians, Latvians, Lithuanians and Poles have all rationally concluded.
Sanctions were way over-sold, and some of the Russian-phobic boycotts were stupid and counter-productive, but increasing the friction in Russian economic efforts is a reasonable way to help Ukraine.
There is a curious mixture of hubris and naivete when Westerners make foreign policy.
Plans to convert Iraq and Afghanistan into democracies, and constantly referring to various Islamo-fascists as "moderates."
Russia is Russia and not like Western Europe. China is China, and is not adapting Western values regarding human rights, free speech or even economic rights or models.
The idea that the Western liberal democracy is an ideal...is hardly universal.
Side point: The globalist commercial community is always Nevill Chamberlain. They always prefer peace and commerce (sensibly, from their point of view), regardless of human rights or impending threats. It was the same with the Nazis, pre-WWII.
Today the word is "escalation" whenever Ukraine or Israel take actions to defend themselves.
These are governments, not people. People have cultural preferences too, but we all, all of us, come from small tribes. Tribes in which a few may have dominated at times, but in which all members had to get along to some extent, had to be able to accept others speaking their piece.
You've got people in China and Russian pushing back against official statements and policy, and you've got people in the West bludgeoning people to get in line. It is all prehistoric tribal political variations writ large. There's nothing especially unique to Iraq/Afghanistan, Russia, China, or the West. The current status quo is merely just that, the status quo.
> Putin acts like Muscovite autocrats have been acting since before NATO
That sounds like a vindication of realism. Realism is actually disproven by Mearsheimer predicting a "back to the future" of a reunited Germany being rivalrous with France again, as if nothing had changed.
The crucial point is not Russian, it is autocrat. The nature of regimes makes a difference in their behaviour, one of my many points of disagreement with Realism.
The Iberian peninsula was run by autocrats for decades after the 1930s, but I don't believe invaded their neighbors. East Germany was a dictatorship, but didn't try to invade West Germany. The United States is a democratic republic, but has invaded lots and lots of countries (including both Canada & Mexico a ways back).
Capacity also matters. It is true that Russian nationalism and Russian imperialism cannot easily be separated. But Russian autocracies have a track record. I do not believe a Russian democracy would have the same patterns. https://www.lorenzofromoz.net/p/the-latest-iteration-of-continuing
I wouldn't say that Russia's strategy of expansion "keeps failing". A country doesn't get to be the largest in the world that way. Instead the one big failure they haven't recovered from is the collapse of the Soviet Union at the end of the cold war.
Thank you. Can you explain this sentence more please? "The crash of 2008 was attributed to “unbridled capitalism”, even though it was actually due to a monetary policy that allowed a big drop in NGDP."
My main problem is your “aside” that you favor a carbon tax.
While I agree that this is far less harmful than all the other policies proposed in the name of “climate change”, unless it replaces some other worse tax, why is a carbon tax a good idea?
The only legit reason would be the threat of AGW catastrophe - i.e. global temperatures increase 2 to 3 degrees, and then accelerate upwards from there. But given that most of the leftists advocating for “climate change” action don’t even support rapid expansion of nuclear energy, why in the world should we take their claims seriously?
And unless one imposes - and enforces - the carbon tax worldwide, why should we expect it to have much of a positive impact? And since you don’t believe in nation-building, how exactly would this be enforced worldwide?
Given your excellent stance against industrial policy, it is surprising to see you advocate one that is almost sure to be ineffective at addressing its supposed goal.
My first thought was about how every country want to be a net exporter. But, of course this is an impossibility, net export must equal 0 in the aggregate, at least until Elon builds his Mars colony.
"The world’s far too complex to be managed by experts."
I think I need to print this in 1 foot letters and frame it.
"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things. All governments which thwart this natural course, which force things into another channel, or which endeavour to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical."
Adam Smith got it right 250 years ago.
"But Olson reckoned very few goods, if any, are truly strategic."
Well, there is at least one truly strategic good: oil
You can't successfully prosecute a war of conquest without plentiful access to it. It's unfortunate that Russia has a lot of oil within its borders.
The people who are constantly telling us that China is a threat but seem silent about Russia, seem to forget this. China must import all of its oil and it knows this; they are very unlikely to be stupid enough start war in which they will be easily cutoff from the resource that would allow them to fight it. Russia on the other hand can fight wars of its choosing because no one can cut if off from its oil supply.
I've been arguing for some time that Russia is far more of a threat than China. I thought people would wake up with the Ukraine invasion, but when pundits have their minds made up, facts aren't enough to cause them to change their minds.
Not quite how it looks from Australia. Nuclear issues aside, Europe should be able to easily counter-balance Russia, having much greater population and wealth.
Wait « We were told by the same experts that the shutoff of Russian gas would severely damage Europe’s economy. If they can’t even get those two predictions right », is this a joke?
Is the closing of a big number of industrial sites in Germany, France and the UK not proving this.
No economy in the EU is really growing except if it is too small (Malta) or fueled by insane levels of debt (Spain). Economists prediction that the Russuan cutting of gas would gut the economy is right in many levels
Very, very late coming onto this post, given I replied on a different one, got interested and read some other posts.
All I would suggest is a read of 'How Asia Works' by Joe Studwell, and 'Trade Wars are Class Wars' to a lesser extent by Michael Pettis and Matthew Klein. The former is about industrial policy in East Asia and the commonalities between the seemingly disparate East Asian economies. It changed my mind completely - I was a soft neoliberal before (still am, actually, with regards to developed countries at least). The set of policy prescriptions are quite clear, and I think it gives a good indication of why those policies worked, which then gives one an indication of when those policies might NOT work. To be clear, Studwell suggests that these sets of policies, if implemented, will work only for a time, after which it's best to switch to standard neoliberal stuff. (His view is that virtually none of those countries handled that transition well, with the exception of South Korea which was forced to by circumstance due to the East Asian crisis in 1997).
The latter is less development focussed, but more or less on the same page re. development. It's more focussed on what happens when some of those policies are continued past their sell - by date, the subsequent effect on global trade imbalances, and the effect of that on the real economy.
I haven't read that, but in general I totally disagree with Pettis on international macro. Trade barriers and subsidies don't help countries develop, nor do they reduce trade deficits (which are caused by deficient domestic saving.)
Singapore and Hong Kong followed a "neoliberal" approach, and did better than South Korea.
Trade wars are not class wars, they are suicide. You only hurt yourself. Countries with trade surpluses should not be criticized, they should be praised.
In their conception of things, Singapore and Hong Kong are entrepot city states, with limited learnings that can be applied to other countries with a hinterland. I tend to agree.
I don't think you can say they did better than South Korea. South Korea was poorer than India when they started out, now they are a developed country. Singapore was already twice as rich as Malaya at the time of independence. LKY and his guys were amazing and Singapore is a marvel, but that 'fishing village' myth is just that, a myth. Singapore was a fishing village at the time of Stamford Raffles, not in the modern times.
Between Singapore and HK, it was Singapore that followed the less neoliberal approach. Even now, whatever you want to say about the political situation, HK is arguably more neoliberal from an economic perspective, and has done worse. I've been to both, and honestly I've never had such a negative surprise visiting Hong Kong. As someone who grew up in Asia, and thought of HK as an Asian place that was rich, I knew HK was unequal, but most of the city didn't seem that much better than your average South East Asian urban areas. If their GDP/capita is to be taken at face value, the translation from that to average actual living standards must be really modest if inequality is high. By contrast Singapore has always felt like a first world city.
Don't take the title too literally. It stems from Pettis' observation the current trade imbalances benefits elites both in trade surplus and deficit countries at the expense of everyone else. I'm not sure why trade surplus countries should be praised, any more than trade deficit countries should be criticised?
I would really like to hear your thoughts on Studwell's book in particular, or at least on the summary of the book. Like yourself I didn't think much of trade barriers, etc. That book really made me understand under what circumstances they could be useful, how and why.
Clearly South Korea is highly successful, but that's because of its mostly free market policies, and despite its government intervention. It is a highly open economy, with very little protectionism. It has a very high trade to GDP ratio, far above Japan.
I agree that Hong Kong's living standards are disappointingly low, but that's mostly because of the one sector that's run by the government--housing. I will concede that Singapore has more "state capacity" than HK, and that this is a factor.
To be clear, I don't think trade surpluses are good in and of themselves, rather I favor the policies that lead to trade surpluses--i.e., high saving policies.
Not sure what you mean about elites. Are you saying that if a country has a deficit, it benefits the elites, and that if it switched to a surplus, that would also benefit the elites? Compared to what?
I've read some recent articles by Pettis that show a very questionable understanding of international macro theory. He seems to think that tariffs are a way of creating jobs. When you tax trade, you get less trade (both imports and exports). That's bad for almost everyone outside of very narrow special interest groups. People have tried to refute Ricardo for 200 years--no one has succeeded.
The original Ricardian argument was based on exogenous comparative advantage (wool in Scotland, wine in Portugal). That theory is clearly correct and robustly supports free trade.
Now, with endogenous comparative advantage, global efficiency is the same, but there is room for distributional impacts being more important than efficiency. Farmer suggests that the total cumulative production is the main driver of productivity.
Industrial policy and other kinds of top-down policy were discredited soundly decades ago by Mises, Hayek, and Friedman. Has something changed that contradicts what these three taught us?
"The sad truth is that policymakers do not know how to fix regional problems. [...] In contrast, I think we do know how to fix Illinois (be more like Indiana.)"
Does not the sad truth hold for Illinois and Indiana as well? Illinois is considerably more productive per capita than Indiana, and this hasn't changed in at least 25 years https://ssti.org/blog/useful-stats-capita-gross-state-product-1998-2018 (1998-2018 and more readily available recent figures show the same).
Bangladesh is more free-market than Pakistan? I wasn't previously aware of that generalization. I know India & Bangladesh sided with Russia in the Cold War (against Pakistan, the US & China) and many Bangladeshis have pro-Russian sentiment now as a result. I also wouldn't have been able to guess off the top of my head whether the contemporary Netherlands is more free-market than Germany.
> But Olson reckoned very few goods, if any, are truly strategic. Instead, there are only strategic needs: feeding a population, moving supplies, producing weapons. And no amount of pounding, literal or figurative, seems able to alter the target countries’ ability to meet those needs, one way or another.
That's false. Germany really did starve the places it occupied in WW2, and the US managed to not only strategically damage German logistics but completely cripple the Japanese merchant fleet via submarine warfare & sea mines. Starvation was happening for Japanese troops as early as their first campaign against US troops on Guadalcanal.
> But that’s no reason to be despondent. Cultural change can happen more quickly than you might think.
Not necessarily for the better. Nobody knows how to steer culture, and as Robin Hanson has been arguing the forces of selection that long operated on it (and people like Henrich write about) are now greatly weakened so that instead we have accelerating drift.
I agree that policies like bombing have some effect. And yet in the end, we still had to beat the German's on the battlefield, which wasn't easy (even with help from the Russians.)
But I'd stand by the claim that things like sanctions often disappoint their proponents. BTW, I seem to recall that our bombing campaign in Vietnam was much more intense than in WWII.
"In the 1960s, there were fears that the US would be overtaken by the Soviet Union. I can still recall the late 1980s, when pundits insisted we needed an industrial policy to avoid being overtaken by Japan."
In the early 1980s, I moved out of research and into corporate work doing mainly regulatory affairs and drug safety in the biopharma industry. I was at an annual meeting of the biotechnology group where I worked and most of the speakers were covering a wide range of international issues (as an aside, I recommended we invite a very young Paul Krugman who came and gave a nice talk on international trade and economics). Clyde Prestowitz spoke at the meeting and at that time he was at the Commerce Dept in the Reagan administration and an outspoken "worrier" about Japan and gave a very gloomy talk about how Japan's industrial policy was endangering the US. While Japan was buying up a lot of US real estate, the economic takeover never happened. Nor is it like to happen with China either.
One more anecdote, though the actual reference must be somewhere in my paper archives. Japan's Ministry of International Trade and Industry was busy trying to set policy for companies. The relatively small motorcycle company, Honda, was starting to manufacture automobiles and the recommendation was for them to leave this sector to the then giants, Datsun and Toyota. The CEO ignored that advice and of course Honda became one of the premier auto manufacturers in the world.
Good comment. Back in the 1990s, Krugman did a great job exposing the fallacies of the neo-mercantalists.
The Ministry of International Trade and Industry actually prohibited Honda from exporting cars to the USA, using a regulation allowing exports only by makers who exported by a certain date. Honda beat the deadline by welding together golf carts (IIRC) sufficiently to meet the regulatory definition of a car, and shipping it over. Honda's Accord became the #1 selling car model in the USA.
I’ll continue shouting this from the rooftops wherever I read someone repeating that the sanctions on Russia are tough. They’re not. They’re highly targeted and circumscribed. If the phrase “secondary sanctions” doesn’t appear in a discussion of sanctions, then I know the author is unaware of by far the strongest tool in our sanctions arsenal. We are only gradually and belatedly beginning to use secondary sanctions.
https://www.ft.com/content/be8f3264-ac16-4fd9-b1ba-4e5e6fba466b
Yes, but that supports my point. Economists are not good at predicting the effect of industrial policies. In March 2022, experts were almost unanimous in claiming that the sanctions would severely hurt Russia, even though secondary sanctions were not in place. In addition, there are significant political problems with sanctioning countries like Turkey and India.
In any case, Trump will soon be president and he'll hand Putin a victory.
Given the sex-divide between support for Trump and Harris, I could see a number of women saying that they will vote for Trump, or are undecided, as a safety measure, when actually they plan on voting for Harris.
I'm still thinking this will be the election when the prediction markets are proven to be fallible. Though it is a very stressful nailbiter. I'll feel gutted if a person guilty (in my mind) of at least two counts of felony murder of US citizens is elected to the presidency again.
Wow, are you the one who inspired the Julia Roberts ad?
https://www.youtube.com/watch?v=P3aC84YZLlU
[I think you’re whack here, to be clear. But that you “predicted” this is impressive…]
No. This was an easy, but unfortunately wrong, "prediction".
In the two other elections Trump was significantly underestimated by the polls, but surely this election he's overestimated.
“Richard Nixon? Richard Nixon? I don’t know anyone who voted for Richard Nixon.”
I’m not saying that I was sure the polls *underestimated* Trump’s support, but on what possible basis did you make your in hindsight completely incorrect claim that his polling was “surely” overestimated?
Sarcasm
Polls change their algorithms when they've been proven wrong. They underadjusted the last two times. There's no reason to think they'll continue underadjusting.
They did indeed change in 2020, to little effect.
https://www.nbcnews.com/politics/2024-election/steve-kornacki-polls-off-2020-trump-biden-harris-rcna176619
"As you can see, Trump’s margin with noncollege-educated white voters ended up being higher than the polls suggested. But his current 27-point advantage is almost equal with that 2020 result. "
And if you scroll down, the polls undercounted Biden's margin with black and hispanic voters.
"Given the sex-divide between support for Trump and Harris, I could see a number of women saying that they will vote for Trump, or are undecided, as a safety measure, when actually they plan on voting for Harris."
A lot of men will find it very difficult to find a woman to date or marry unless they have a lot of money. This will be the modern-day version of Lysistrata (Spike Lee's take on this in 'Chi-Raq' was quite compelling). Very few of Trump's male supporters are in any position to emulate him.
I was thinking more of already married women. If a woman feels any sort of even just potential threat from her husband or male partner she's far more likely to lie or fudge when responding to a poll.
From August 2020: https://www.pewresearch.org/short-reads/2020/08/20/key-takeaways-on-americans-views-of-and-experiences-with-dating-and-relationships/
"Distance, debt and voting for Donald Trump top the list of reasons singles looking for a relationship wouldn’t consider a potential partner"
By middle age the numbers of men and women are approximately equal. Over a population this should lead to an equal balance of interests. Prior to that, on average, it should prefer women's interests (with more males than females from birth until middle age). To the extent this isn't seen it is likely due to ingrained patriarchical power structures. (More men than women leads to dating and marriage society leaning toward women's average preferences, while more women than men lead to the opposite. Some wiggle room for the relative proportions of homosexual activity. And of course this varies based on milieu.)
Agreed. Just like with monetary policy, analysts see a “tightening” of sanctions (for example, as measured by number of sanctions) and think the sanctions are strict. Subsequently, if exports to Russia through third-party countries skyrocket, they mistakenly reason from a quantity change and conclude that sanctions don’t work without considering the significantly higher prices Russia is incurring:
http://jpkoning.blogspot.com/2024/10/a-glass-half-full-take-on-caucasus.html?m=1
I know Trump is currently favored in a number of prediction markets, but as Nate Silver has been emphasizing, it's still extremely close (and he wasn't favored when he actually won in 2016).
There's been lately this talk about how controlling for sanctions makes Acemoglu's result about "democracy implies growth" go away. It's hard to square that with "sanction do not work" narrative.
I would not claim they have precisely zero effect. For instance, Russia is getting a lower price for its oil from India than it got before the sanctions.
Also, in some corners, some analysts were predicting that sanctions on Russia would erode the dollar’s status as a reserve currency. However, that prediction did not pan out.
Good point.
Since they stole 300b in Currency Reserves from the Russians the BRICs have really taken off. I wonder why?
Right…
https://www.themoscowtimes.com/2024/10/02/russia-to-accept-mandarins-instead-of-money-amid-payment-difficulties-a86543
Singapore is a dirigiste economy.
And a city-state, and that makes almost every policy a de facto macroeconomic policy, with effects on imports and export.
Subsidize worker training, when many industries are exporters. Building industrial parks, land-forming the huge Jurong Island, for state-owned petro-chemical complexes built with state capital. Singapore-owned airport and airlines. Much more.
Singapore has a public policy of running permanent current account trade surpluses, and also of importing labor who live in barracks and similar conditions (the workers were ring-fenced in during the C19 hysteria).
Singapore is probably the most pro-business government on the planet and subsidizes business accordingly. This may be good idea, especially for a city-state.
Certainly, state-subsidized enterprise and protectionism has worked for Singapore.
However, Singapore, unlike most nations, is of a manageable size, and has a strong Han Chinese component. I am not sure the Singapore model would work in the US, due to political problems and the general unwieldy-ness of large nations. Likely not.
The US needs a simple fix, like higher general tariffs and border controls, but no industrial policy per se.
But anyone who thinks Singapore represents free trade or free enterprise is deeply deluded. Some right-wing think tanks say so, as it fits their narratives.
I actually agree that governments should be pro-business. Very pro-business, like Singapore.
But there is no such thing as global free, fair, or foul trade. Michael Pettis and Dani Rodrik are interesting scholars in this field.
International trade is always in large part an artifice of government regulations, taxes and subsidies.
“Does the field of foreign policy even have a model?” Well, Realism sort of does, but it’s a bad one.
Putin acts like Muscovite autocrats have been acting since before NATO, the founding of the US or even Anglo settlement of North America, and “Realists” tell us the problem was US policy and NATO expansion. NATO is the solution, not the problem. As the Swedes, Finns, Estonians, Latvians, Lithuanians and Poles have all rationally concluded.
Sanctions were way over-sold, and some of the Russian-phobic boycotts were stupid and counter-productive, but increasing the friction in Russian economic efforts is a reasonable way to help Ukraine.
There is a curious mixture of hubris and naivete when Westerners make foreign policy.
Plans to convert Iraq and Afghanistan into democracies, and constantly referring to various Islamo-fascists as "moderates."
Russia is Russia and not like Western Europe. China is China, and is not adapting Western values regarding human rights, free speech or even economic rights or models.
The idea that the Western liberal democracy is an ideal...is hardly universal.
Side point: The globalist commercial community is always Nevill Chamberlain. They always prefer peace and commerce (sensibly, from their point of view), regardless of human rights or impending threats. It was the same with the Nazis, pre-WWII.
Today the word is "escalation" whenever Ukraine or Israel take actions to defend themselves.
These are governments, not people. People have cultural preferences too, but we all, all of us, come from small tribes. Tribes in which a few may have dominated at times, but in which all members had to get along to some extent, had to be able to accept others speaking their piece.
You've got people in China and Russian pushing back against official statements and policy, and you've got people in the West bludgeoning people to get in line. It is all prehistoric tribal political variations writ large. There's nothing especially unique to Iraq/Afghanistan, Russia, China, or the West. The current status quo is merely just that, the status quo.
> Putin acts like Muscovite autocrats have been acting since before NATO
That sounds like a vindication of realism. Realism is actually disproven by Mearsheimer predicting a "back to the future" of a reunited Germany being rivalrous with France again, as if nothing had changed.
The crucial point is not Russian, it is autocrat. The nature of regimes makes a difference in their behaviour, one of my many points of disagreement with Realism.
The Iberian peninsula was run by autocrats for decades after the 1930s, but I don't believe invaded their neighbors. East Germany was a dictatorship, but didn't try to invade West Germany. The United States is a democratic republic, but has invaded lots and lots of countries (including both Canada & Mexico a ways back).
See also
https://www.notonyourteam.co.uk/p/russian-traumas
Capacity also matters. It is true that Russian nationalism and Russian imperialism cannot easily be separated. But Russian autocracies have a track record. I do not believe a Russian democracy would have the same patterns. https://www.lorenzofromoz.net/p/the-latest-iteration-of-continuing
I wouldn't say that Russia's strategy of expansion "keeps failing". A country doesn't get to be the largest in the world that way. Instead the one big failure they haven't recovered from is the collapse of the Soviet Union at the end of the cold war.
Keeps failing Westwards. The Soviet Union was smaller than the Russian Empire. The Russian Federation is smaller than the Soviet Union.
Thank you. Can you explain this sentence more please? "The crash of 2008 was attributed to “unbridled capitalism”, even though it was actually due to a monetary policy that allowed a big drop in NGDP."
An excellent piece.
My main problem is your “aside” that you favor a carbon tax.
While I agree that this is far less harmful than all the other policies proposed in the name of “climate change”, unless it replaces some other worse tax, why is a carbon tax a good idea?
The only legit reason would be the threat of AGW catastrophe - i.e. global temperatures increase 2 to 3 degrees, and then accelerate upwards from there. But given that most of the leftists advocating for “climate change” action don’t even support rapid expansion of nuclear energy, why in the world should we take their claims seriously?
And unless one imposes - and enforces - the carbon tax worldwide, why should we expect it to have much of a positive impact? And since you don’t believe in nation-building, how exactly would this be enforced worldwide?
Given your excellent stance against industrial policy, it is surprising to see you advocate one that is almost sure to be ineffective at addressing its supposed goal.
My first thought was about how every country want to be a net exporter. But, of course this is an impossibility, net export must equal 0 in the aggregate, at least until Elon builds his Mars colony.
"The world’s far too complex to be managed by experts."
I think I need to print this in 1 foot letters and frame it.
This perhaps does not quite count as a model of foreign policy, but it is a pattern.
https://hwfo.substack.com/p/global-peace-by-us-president
"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things. All governments which thwart this natural course, which force things into another channel, or which endeavour to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical."
Adam Smith got it right 250 years ago.
"But Olson reckoned very few goods, if any, are truly strategic."
Well, there is at least one truly strategic good: oil
You can't successfully prosecute a war of conquest without plentiful access to it. It's unfortunate that Russia has a lot of oil within its borders.
The people who are constantly telling us that China is a threat but seem silent about Russia, seem to forget this. China must import all of its oil and it knows this; they are very unlikely to be stupid enough start war in which they will be easily cutoff from the resource that would allow them to fight it. Russia on the other hand can fight wars of its choosing because no one can cut if off from its oil supply.
I've been arguing for some time that Russia is far more of a threat than China. I thought people would wake up with the Ukraine invasion, but when pundits have their minds made up, facts aren't enough to cause them to change their minds.
Russia's poor performance makes it appear less of a threat.
The biggest threat is nuclear, where it has an order of magnitude more weapons than China. There has already been one close call.
Why does the OOM of nuclear weapons matter at all?
Once you cross the threshold of “plenty”, that is, which surely China has as well.
Genuinely curious why you believe this matters.
Not quite how it looks from Australia. Nuclear issues aside, Europe should be able to easily counter-balance Russia, having much greater population and wealth.
Wait « We were told by the same experts that the shutoff of Russian gas would severely damage Europe’s economy. If they can’t even get those two predictions right », is this a joke?
Is the closing of a big number of industrial sites in Germany, France and the UK not proving this.
No economy in the EU is really growing except if it is too small (Malta) or fueled by insane levels of debt (Spain). Economists prediction that the Russuan cutting of gas would gut the economy is right in many levels
Very, very late coming onto this post, given I replied on a different one, got interested and read some other posts.
All I would suggest is a read of 'How Asia Works' by Joe Studwell, and 'Trade Wars are Class Wars' to a lesser extent by Michael Pettis and Matthew Klein. The former is about industrial policy in East Asia and the commonalities between the seemingly disparate East Asian economies. It changed my mind completely - I was a soft neoliberal before (still am, actually, with regards to developed countries at least). The set of policy prescriptions are quite clear, and I think it gives a good indication of why those policies worked, which then gives one an indication of when those policies might NOT work. To be clear, Studwell suggests that these sets of policies, if implemented, will work only for a time, after which it's best to switch to standard neoliberal stuff. (His view is that virtually none of those countries handled that transition well, with the exception of South Korea which was forced to by circumstance due to the East Asian crisis in 1997).
The latter is less development focussed, but more or less on the same page re. development. It's more focussed on what happens when some of those policies are continued past their sell - by date, the subsequent effect on global trade imbalances, and the effect of that on the real economy.
I haven't read that, but in general I totally disagree with Pettis on international macro. Trade barriers and subsidies don't help countries develop, nor do they reduce trade deficits (which are caused by deficient domestic saving.)
Singapore and Hong Kong followed a "neoliberal" approach, and did better than South Korea.
Trade wars are not class wars, they are suicide. You only hurt yourself. Countries with trade surpluses should not be criticized, they should be praised.
In their conception of things, Singapore and Hong Kong are entrepot city states, with limited learnings that can be applied to other countries with a hinterland. I tend to agree.
I don't think you can say they did better than South Korea. South Korea was poorer than India when they started out, now they are a developed country. Singapore was already twice as rich as Malaya at the time of independence. LKY and his guys were amazing and Singapore is a marvel, but that 'fishing village' myth is just that, a myth. Singapore was a fishing village at the time of Stamford Raffles, not in the modern times.
Between Singapore and HK, it was Singapore that followed the less neoliberal approach. Even now, whatever you want to say about the political situation, HK is arguably more neoliberal from an economic perspective, and has done worse. I've been to both, and honestly I've never had such a negative surprise visiting Hong Kong. As someone who grew up in Asia, and thought of HK as an Asian place that was rich, I knew HK was unequal, but most of the city didn't seem that much better than your average South East Asian urban areas. If their GDP/capita is to be taken at face value, the translation from that to average actual living standards must be really modest if inequality is high. By contrast Singapore has always felt like a first world city.
Don't take the title too literally. It stems from Pettis' observation the current trade imbalances benefits elites both in trade surplus and deficit countries at the expense of everyone else. I'm not sure why trade surplus countries should be praised, any more than trade deficit countries should be criticised?
I would really like to hear your thoughts on Studwell's book in particular, or at least on the summary of the book. Like yourself I didn't think much of trade barriers, etc. That book really made me understand under what circumstances they could be useful, how and why.
Clearly South Korea is highly successful, but that's because of its mostly free market policies, and despite its government intervention. It is a highly open economy, with very little protectionism. It has a very high trade to GDP ratio, far above Japan.
I agree that Hong Kong's living standards are disappointingly low, but that's mostly because of the one sector that's run by the government--housing. I will concede that Singapore has more "state capacity" than HK, and that this is a factor.
To be clear, I don't think trade surpluses are good in and of themselves, rather I favor the policies that lead to trade surpluses--i.e., high saving policies.
Not sure what you mean about elites. Are you saying that if a country has a deficit, it benefits the elites, and that if it switched to a surplus, that would also benefit the elites? Compared to what?
I've read some recent articles by Pettis that show a very questionable understanding of international macro theory. He seems to think that tariffs are a way of creating jobs. When you tax trade, you get less trade (both imports and exports). That's bad for almost everyone outside of very narrow special interest groups. People have tried to refute Ricardo for 200 years--no one has succeeded.
The original Ricardian argument was based on exogenous comparative advantage (wool in Scotland, wine in Portugal). That theory is clearly correct and robustly supports free trade.
Now, with endogenous comparative advantage, global efficiency is the same, but there is room for distributional impacts being more important than efficiency. Farmer suggests that the total cumulative production is the main driver of productivity.
https://www.sciencedirect.com/science/article/pii/S254243512200410X
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Industrial policy and other kinds of top-down policy were discredited soundly decades ago by Mises, Hayek, and Friedman. Has something changed that contradicts what these three taught us?
Excellent! Another great post!
"The sad truth is that policymakers do not know how to fix regional problems. [...] In contrast, I think we do know how to fix Illinois (be more like Indiana.)"
Does not the sad truth hold for Illinois and Indiana as well? Illinois is considerably more productive per capita than Indiana, and this hasn't changed in at least 25 years https://ssti.org/blog/useful-stats-capita-gross-state-product-1998-2018 (1998-2018 and more readily available recent figures show the same).
Here I was thinking about Illinois's population loss and fiscal crisis, which occur despite it's high productivity.
Bangladesh is more free-market than Pakistan? I wasn't previously aware of that generalization. I know India & Bangladesh sided with Russia in the Cold War (against Pakistan, the US & China) and many Bangladeshis have pro-Russian sentiment now as a result. I also wouldn't have been able to guess off the top of my head whether the contemporary Netherlands is more free-market than Germany.
This argues that strategic bombing of German factories actually did win the war https://www.astralcodexten.com/p/your-book-review-how-the-war-was as it forced them to disperse factories inefficiently and invest heavily in airplanes & anti-aircraft weapons.
> But Olson reckoned very few goods, if any, are truly strategic. Instead, there are only strategic needs: feeding a population, moving supplies, producing weapons. And no amount of pounding, literal or figurative, seems able to alter the target countries’ ability to meet those needs, one way or another.
That's false. Germany really did starve the places it occupied in WW2, and the US managed to not only strategically damage German logistics but completely cripple the Japanese merchant fleet via submarine warfare & sea mines. Starvation was happening for Japanese troops as early as their first campaign against US troops on Guadalcanal.
> But that’s no reason to be despondent. Cultural change can happen more quickly than you might think.
Not necessarily for the better. Nobody knows how to steer culture, and as Robin Hanson has been arguing the forces of selection that long operated on it (and people like Henrich write about) are now greatly weakened so that instead we have accelerating drift.
I agree that policies like bombing have some effect. And yet in the end, we still had to beat the German's on the battlefield, which wasn't easy (even with help from the Russians.)
But I'd stand by the claim that things like sanctions often disappoint their proponents. BTW, I seem to recall that our bombing campaign in Vietnam was much more intense than in WWII.
Serbia would be an example of a country bombed into defeat.