On Thu, 25 Feb 2010 21:51:03 -0500, "Ed Huntress"
wrote:


"Hawke" wrote in message
...
On 2/22/2010 7:35 PM, Ed Huntress wrote:
wrote in message
...

Hey Ed, I saw you mentioned in your last post that you just read Bad
Samaritans. I read that a year or so ago after I saw the author on Book
TV. I was wondering what you thought about it. Me, I thought he was on
the
button in a lot of areas. The hypocrisy countries show on protectionism
is
pretty amazing. When you read about how his country, Korea, went from
nothing to the modern world in 40 years and did it by protecting
targeted
industries, it makes the free traders look like idiots. At least to me.
What's your take on it?

Hawke

Chang is a rare combination of economic historian and iconoclast; he
doesn't
accept the standard histories without checking them out on his own. That
produces some very interesting reading, of which _Bad Samaritans_ is a
good
example.

I got the feeling that he isn't done, that he'll eventually take on the
conventional wisdom about trade and put New Trade Theory to the test.
However, he said a couple of times that developed economies benefit from
the
fewest trade restrictions, while making it clear that it is not in the
interest of developing economies to play along. Meantime, I had just
finished Krugman's _The Return of Depression Economics_, and I was
interested to see the parallels and contrasts in how they viewed the
economic collapses of Latin American countries and the Asian Tigers over
the
past few decades, including the involvement of the IMF and the World
Bank.

Both Chang and Krugman are macroeconomists. I want to see either one of
them
really take on the microeconomic results of free trade. Krugman tips his
hat
to it but doesn't get into thorough analysis. Maybe Chang is the one who
will do it.

All it all, both books opened my eyes to several issues and both were
worth
reading.



I haven't read any of Krugman's newer books. The last one I read was
something like the Unwinding(?). It's clear to me that Krugman knows his
field. Chang just confirmed what I had known from other things I've read.
The biggest protectionists are the most successful countries. They were
all protectionist when they needed it and when they become the elephant in
the room, economically, they decry other countries doing what they did. It
would be nice if countries like ours would own up to the truth and just go
ahead and protect what they think is critical to the country and let what
isn't be subject to free trade. I'm not going to hold my breath waiting
for us to do that though. Free trade nutbars are too firmly in control
these days.

Hawke

You may know that I wrote a series of long articles about China trade early
in the last decade, and I had a chance then to talk to a lot of the
government people involved with trade. FWIW, this is my short take:

Everyone involved at that level knows that Chang is right. They also know
that having China and other developing countries get rich as soon as
possible is in the best interest of the US. That's the best way for them to
become a market for us, and to level off trade, through a combination of
increased domestic consumption on their part, increased consumption of
imports, and rising costs -- which are inevitable as they become wealthier.

There are several caveats there, of course, but the relevant point here is
that we really don't try very hard to force them into a "fair trade" model.
That's hokum for the yokels, as Krugman puts it, for use by politicians when
an industry or two in their district have just tanked, and the yokels are
looking for someone to blame. We pay it lip service to keep the lid on
public discontent. The reps start yelling about "unfair trade" and hold
Congressional hearings until it dies away. Of course it's unfair. There's no
such thing as "fair trade," and we wouldn't like it if we had it. How do you
compete "fairly" with 80 cents/hour wages, when manufacturing technology is
a commodity available to anyone in the world? The idea is absurd. We, along
with all other developed countries, are deeply committed to making it
"unfair" with a system of indirect subsidies, starting with our military and
government expenditures on research and government-supported higher
education, and to the aerospace and electronics industries; moderate but
crucial tariffs; direct subsidies to agriculture; and on and on. These are
things that the Japanese seized on decades ago and tried, in some areas, to
go us one better. The Europeans did it largely with direct subsidies and
import quotas.

It may in fact be the Chinese who precipitated their downfall, but almost
every time, it was because the US companies set themselves up for it through
a combination of hubris and ignorance. That's what happened to the US
machine tool industry in the early '80s, when the "culprit" was Japan. The
real culprit was a 1930s business model that they refused to change. It's
also what happened to our car industry. That was a 1950s business model.

But our system of trade supports is uneven, and a captive of ideological
nonsense. It was summed up by the top execs of Mitsubishi, I think it was,
who were quoted in David Halberstam's book _The Reckoning_, asking "What we
don't understand is, why don't you protect yourselves?" We go after the
chimeras, like "dumping," as if it were all a matter of adhering to some
fantasy about "free trade," when the real issue is what we should do
tactically to keep the jobs that have a future. We do very little.

This is not to say I know any better how to do it, or that anyone I know has
any great insights. Alan Tonelson of the US Business and Industry Council,
whom you'll see on CNN from time to time, is a friend of mine who knows the
subject far better than I do, and he's helped me out several times. But I
don't think that Alan looks at the big picture, either. He sees it as a
perpetual trade war and a zero-sum game.

I'm trying hard, once again, to see the big picture on trade. But don't get
me started. d8-)
================

Some time back the standard excuse was "you can't make an omelet
without breaking eggs."

This problematique appears to arise because of the failure to
clearly disorientate between short term gain, as in "take the
money and run," for a very few sociopaths, and the long term
interests of the American people/society/economy as a whole.

From the viewpoint of the financiers and "buy-ruin-sell"
scam-artist management, everything is going fine, thank you very
much. They have their second homes in Switzerland or other safe
havens, and their assets widely diversified in many banks and
currencies.

By contrast, the vast majority of people in the developed
countries [not just the United States] have taken it on the shin
but good, with the high paying, high value, high multiplier jobs
and small businesses, on which a viable middle class depends,
being exported or destroyed in droves, and the tax burden for
governmental operations increasingly shifted onto their
shoulders.

The majority of the accountability for this situation lies with
our elected representatives. They spend entirely too much time
in the company of the elite few in their gated communities and
country clubs, breathing the Potomac swamp gas, and forget about
the 99% of the American citizens that live in the real world
where the good jobs with benefits (and the value of their assets
such as their homes and IRAs/401ks/pensions) are disappearing.


Unka George (George McDuffee)
...............................
The past is a foreign country;
they do things differently there.
L. P. Hartley (1895-1972), British author.
The Go-Between, Prologue (1953).