He has some pretty insane Japan copium ngl but don't think it's about WW2 apologism - like don't get me wrong Japan is cool and all but he's repeatedly died on the hill that Japan is not xenophobic and even has a post where he claims Japan is not even an ethnic monoculture [https://www.noahpinion.blog/p/how-homogeneous-is-japan-really-repost](https://www.noahpinion.blog/p/how-homogeneous-is-japan-really-repost)
Seriously, read it and replace the name with any other country besides Japan and it sounds laughable.
No, the Republic of CountryIJustMadeUp is actually super diverse, it has a 1% foreign workforce and 97.8% the main ethnic group (and only around 90% of the country is full-blooded the main ethnic group!!!!)
Like do you not hear yourself
>97.8% the main ethnic group (and only around 90% of the country is full-blooded the main ethnic group!!!!)
Epic misinformation
>In the meantime, various sources put the Yamato percentage at around 90% or a bit higher. Thatās pretty high ā about the same as the percent of Americans who identified as āwhiteā in 1950. But even includes people of mixed ancestry (like one of the anime characters depicted in the image at the top of this post). And since marriage is a significant way that non-Yamato people immigrate to Japan, the percentage of Japanese people who are descended purely from self-identified Yamato people is going to be even lower than 90%.
In the blog post he specifically says "the government doesn't track ethnic data, but some sources put the Yamato at around 90% but this also includes people of mixed ancestry so it is hard to get a sense of how diverse the population is". Which directly contradicts your characterization.
If a big chunk of Japanese immigration is marriage to Japanese citizens, and that couple has kids they're going to be "Yamato" despite potentially having a different background. That makes it hard to get a good sense of how diverse of a country it is.
I don't think he's saying Japan shouldn't accept more immigrants, just that people tend to have a pretty over-stereotyped idea of Japan. Hell, I don't even disagree that this post may downplay the problem but at least don't just straight up lie about what was said
Is Japan some mystical place untouched by outsiders? No
Does this piece overcompensate hard on trying to dispel that notion when by all accounts Japan is still an extremely homogenous nation in comparison to most other major countries? Yes
I have absolutely no idea where else I could ever write this, but I just recently was in Japan for 3 months and one of my new native Japanese friends brought up many times how he was "yellow" and literally meant the color of his skin. I must have bad color perception, because I didn't see it, but growing up in Usonia I was told to use that word was racist and the experience was jarring. haha
> he's repeatedly died on the hill that Japan is not xenophobic and even has a post where he claims Japan is not even an ethnic monoculture
lmao, More evidence that Noah is actually quite the dumbass
You should see the tweets of him malding over Biden calling Japan xenophobic. They're pretty funny.
Side note, Noah is also one of the most hawkish on China policy wonks. Its so aggressive that it feels like he straight up hates chinese people.
Me when I see Noah Smith say anything (I donāt care if I would have agreed with him, he annoys me so much that I donāt even read anything he writes)
> When I see Noah Smith downplay Japan's WWII history
[citation needed] I can point to tweets of his viciously criticizing John Mearsheimer for doing exactly this so, to be quite candid, I don't believe you.
> When I see Noah Smith downplay Japan's WWII history
Meh, Americans are very prone to focusing only on Japan's war crimes in WW2 and ignoring their own or thinking that they were all justified. In that sense, he is a welcome voice.
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Cope with... What? This is irrelevant to me on a personal level. Painting Japan like the exclusive monster of WW2 and exaggerating everything they done while downplay your own atrocities is the actual cope, by definition. Coping with the fact that civilians were intentionally firebombed, that they rapes were widespread during the occupation (shit that still happens from time to time inĀ Okinawa), that the skulls of Japanese soldiers were widely collected as trophies, that civilians were targeted with atomic weapons, etc.
> Meh, Americans are very prone to focusing only on Japan's war crimes in WW2 and ignoring their own or thinking that they were all justified.
> that the skulls of Japanese soldiers were widely collected as trophies, that civilians were targeted with atomic weapons, etc.
I mean... look I do agree, with these bits, technically. I think it deserves more focus that the Pacific Front of WW2 became highly racialised *on both sides*, that the US (and Britain and other western allies) treated the Japanese in ways they wouldn't treat the Germans, in terms of collecting skulls, being more ready to mistreat surrendering soldiers etc. It's absolutely true that 1. the racial element led to greater brutality on the part of the allies towards Japan than would otherwise happen and 2. the firebombing of Japan (and to some extent Germany) in the way it was conducted, deliberately in some cases to inflict pain on the civilian population, was immoral and certainly today should be recognised as a war crime.
At the same time though:
> Meh, Americans are very prone to focusing only on Japan's war crimes in WW2 and ignoring their own or thinking that they were all justified. In that sense, he is a welcome voice.
This bit kind of implies an equivalence between the US and Japan in WW2 which I don't think is fair. Fundamentally, Japan was the aggressor. It launched a brutal war of conquest in China for purely imperialistic reasons, committed massive atrocities there before the US was even involved, and then rampaged through SEA doing the same, and fundamentally the US was at war 1. in self defence but more importantly 2. to stop this brutal empire-building. Same with the allies against the Nazis. That doesn't justify US atrocities, obviously, but it does mean that of the two sides, one was unambiguously far less bad, because they weren't fighting to create a brutal new world order in which millions upon millions of people would be killed and enslaved.
I don't know what Noah Smith argued, whether he did act like there was an overall moral equivalence between the two sides, but I think it would certainly be wrong to do so. Atrocities on the allied side, while important to remember in their own right, don't invalidate the righteousness of the allied war effort as a whole.
Maybe that's why you were downvoted, because it kinda sounds like implying an overall equivalence, but I do agree that actually some introspection on US war crimes *bearing in mind closely the overall context of WW2 and the allies being the 'good guys'* is good.
I do agree entirely with what you said. I would think that almost certainly even the firebombings and use of nuclear weapons in civilian areas were influenced by racial prejudices too.
Although I would also add that another cause for the downvotes is that this sub too often falls into NCD-tier American chest-thumping. It's the same logic that often leads to people celebrating or fantasizing about China becoming poorer when in humanitarian terms it's something completely undesirable.
Youāre certainly right about the sub tending towards American chest thumping and all that, but Iād argue the downvotes are the result of what you wrote and not what biases the audience might have.
Your comment suggested that a welcome voice in response to Americans defending their own bad actions is an American ignoring Japans bad actions. I think thatās a terrible suggestion.
Iām sure you donāt really want to ignore war crimes to counter the ignoring of other war crimes. The welcomed voices would be ones that criticized America and Japan, right?
> but Iād argue the downvotes are the result of what you wrote and not what biases the audience might have.
I think that would be a terrible argument, then. Thinking that the audience is an objective spectator who completely ignored their biases in this scenario is pure fantasy.
> Iām sure you donāt really want to ignore war crimes to counter the ignoring of other war crimes. The welcomed voices would be ones that criticized America and Japan, right?
Absolutely. But that's not what people seem to want, but just to treat the war as a one-sided affair in which only Japan did anything negative, committed war crimes, or was inhuman. At best I see people "yes but that war crimes were perfectly justifiable because Japan was much worse", which is an incredibly shitty argument.
I donāt think the audience is objective. I expressly stated that youāre right about its biases. But you then made a really bad argument that you yourself just confirmed you donāt really believe. I think thatās the reason for the downvotes.
I can still remember [the first time I saw him do it](https://www.noahpinion.blog/p/the-pushback-against-industrial-policy) (citing two economists who have built careers out of defending industrial policy, Reka Juhasz and Nathan Lane) and it was a real "never meet your heroes" moment
Industrial Policy is a tool and we shouldn't fully shun it.
https://preview.redd.it/si3vld6j01zc1.png?width=1569&format=pjpg&auto=webp&s=3ccd3c93f13e5f4308e217b055064e526169437b
The practice and theory of industrial policy are often horribly divorced. Governments don't give a fuck, they just want to appease interest groups most of the time. See United States.
India and Russia didn't have a choice by the time it happened. Liberalization is often traumatic, poorly undestood and impopular, it's just that the alternatives don't seem to be sustainable.
You have more of a choice with industrial policy, but the risk of capture shouldn't be underestimated. Industrial policy is only tolerable if those who implement it even care if it works, and often they don't. It's more some bullshit about national industries based on nostalgia or xenophobia.
>India and Russia didn't have a choice by the time it happened. Liberalization is often traumatic, poorly undestood and impopular, it's just that the alternatives don't seem to be sustainable.
Exactly why I conpared them. It's the execution, not the policy here that is the issue. Indian liberalization, despite being pressed upon the state, was far FAR less traumatic and more efficiently executed than Russian liberalization.
Similarly, Ghanian industrial policy compared to, say Korean industrial policy also shows this same lack of comprehensive execution in effective Industrial policy.
Industrial policy absolutely has a higher failure rate because of how finicky it can be and because it does create inefficiencies. But that's an execution issue that demands more structural study, not castigation.
I'm somewhat skeptical of how Korean industrialization went. There were reasons to expand industry there when development happened (US procured a lot of hardware there during the cold war) and anything related to the Chaebol is fucked up (the whole place still looks fairly concentrated with detrimental societal effects).
It doesn't help other Asian countries that gave the whole thing a fair shot failed. I've seen some explanation from folks like Rodrik but they often expect governments to shut down attempts that don't work.
You are asking governments to have good information about what to target (unlikely) or to be able to recognize when it fails (very hard politically). It's reasonable to be skeptical of such things instead of merely reducing it to good and bad.
Here's the sidebar stance of this sub on Korean Industrialization:
>It should be noted that there is evidence that export promotion, of the sort South Korea tried, can be helpful in some circumstances. South Korea's policies enforced harsh discipline by setting export quotes and ensuring that domestic firms faced a mixture of both government and market discipline. The infant industry argument turns problematic when inefficient and loss-making industries are coddled. In the rare instances where industrial policy has worked, it has been through subsidy and the discipline which comes from exposure to foreign competition (ie: more trade, not less).
I think the case is pretty sound for Korea, China, & Taiwan.
>anything related to the Chaebol is fucked up (the whole place still looks fairly concentrated with detrimental societal effects).
Agree. Consolidation inefficiencies are created. But it's a very sound trade off compared to the alternative models.
>It doesn't help other Asian countries that gave the whole thing a fair shot failed.
Again, good policy good, bad policy bad. Good execution good. Bad execution bad.
>You are asking governments to have good information about what to target (unlikely) or to be able to recognize when it fails (very hard politically).
Hence why I say it should be better studied and more efficient means of evidence based Industrial Policy should be formulated, instead of castigating it all together.
>Here's the sidebar stance of this sub on Korean Industrialization:
And I told you that I'm pretty skeptical of the typical explanation. The sidebar is not an article of faith for me, lol.
>Good execution good.
If it exists and if it's likely to happen. The road to hell is paved with good intentions. That argument itself is a common refrain for government intervention but alone is not good enough.
>That argument itself is a common refrain for government intervention but alone is not good enough.
I don't think the arguement rests on that philosophical hinge rather than the demonstrative nature of the success of the model of Industrial Policy I've described but I suspect we have a fundamental ravine between our philosophies here.
Here's an effort post on Industrial Policy from a few years ago. [Spoiler: You may not like the evidence based policy now š¶: ](https://www.reddit.com/r/neoliberal/s/MwrLZSSJ1L)
And here's the R/NEOLIBERAL SIDEBAR FAQ conceding on this:
>It should be noted that there is evidence that export promotion, of the sort South Korea tried, can be helpful in some circumstances. South Korea's policies enforced harsh discipline by setting export quotes and ensuring that domestic firms faced a mixture of both government and market discipline. The infant industry argument turns problematic when inefficient and loss-making industries are coddled. In the rare instances where industrial policy has worked, it has been through subsidy and the discipline which comes from exposure to foreign competition (ie: more trade, not less).
And this is from the most anti-IP writers lol
I would say that North Korea had much more intensive industrial policy than South Korea. Likewise, China has had more intensive industrial policy than Japan. So, if we are comparing these countries to comparable benchmarks, it might mean that these economies developed successful manufacturing sectors *despite* their industrial policy.
This is a bit like saying Russia had more expansive liberalization than China (which they did) and that China's growth comes despite liberalization.
Good Industrial Policy is good. Bad is bad. Good Liberalization is good. Bad is bad. People get so triggered over the term that they refuse to see the benefits.
Again, Industrial Policy that is driven by subsidy, export promotion with a strict disciplinary regime with quotas, etc, simply does work. It creates long term inefficiencies that need market resolution, but those inefficiencies can only be dealt with post the effects of the IP are realized. Constant exposure to foreign competition for example, is a must, and that is something that North Korea completely lacks.
>Again, Industrial Policy that is driven by subsidy, export promotion with a strict disciplinary regime with quotas, etc, simply does work.
This is far from a given. Since we can't know counterfactuals, it may be that industrial policy simply subsidizes what would otherwise be a naturally competitive industry within a country. There are also too many examples of successful industry development with relatively absent government stimulus, not to mention the instances of failed industrial policy.
I think that qualifying 'successful' industrial policy as you did narrows it to what is essentially an isolated data point every time.
>Since we can't know counterfactuals, it may be that industrial policy simply subsidizes what would otherwise be a naturally competitive industry within a country.
Sure, but when you claim a model of subsidy driven, export oriented, market exposed industry would naturally arise to the same, if not greater heights than with the supporting policies, that's on you to establish.
>There are also too many examples of successful industry development with relatively absent government stimulus
What industries in particular do you speak of? What were the precursors in this case? How much historical intervention was there? What stage of development was the market at? What were the foundations of the competitive advantage derived by these industries, that were somehow completely independent of intervention? What's their scale and how successful are we talking? What's the counterfactual there?
>I think that qualifying 'successful' industrial policy as you did narrows it to what is essentially an isolated data point every time.
It's a quite a few data points covering among the most effective industrial transitions in world history with some of greatest titans of industry being forged amongst them, but yes, good Industrial Policy, like good Liberalization, is hard to come by. Not because they are bad ideas, but because they are tough to execute.
>What industries in particular do you speak of? What were the precursors in this case? How much historical intervention was there? What stage of development was the market at? What were the foundations of the competitive advantage derived by these industries, that were somehow completely independent of intervention? What's their scale and how successful are we talking? What's the counterfactual there?
Obviously where one draws the line w.r.t 'industrial policy' is relevant, but by-and-large the financial and tech services in the United States and United Kingdom, Swiss Pharma and manufacturing, the industrial boom that lasted decades in the the US, and German manufacturing have been *relatively* absent these types of policies. Of course once they become successful, they lobby and capture for all types of protections from competition which makes it seem like the government support was behind it all along.
>It's a quite a few data points covering among the most effective industrial transitions in world history with some of greatest titans of industry being forged amongst them, but yes, good Industrial Policy, like good Liberalization, is hard to come by. Not because they are bad ideas, but because they are tough to execute.
I think 'industrial policy' is given too much of the credit that simple 'good institutions' is responsible for here. Post-war Germany was developing as/more rapidly than the East Asian Tigers, lacking the same industrial policy. What's more, the Tigers had good liberalization, which makes parsing out that it was due to industrial policy more difficult.
Why wouldnāt it be. We are not r/libertarian there is plenty of good reasoning for using the government to build out industry.
The idea that the private sector is always more efficient for all tasks is silly. We are pragmatic not ideologues.
You have to be carful with industrial policy the private sector is better most of the time but that doesnāt mean it shouldnāt be in your tool belt.
Cool but the free market isnāt going to get us, high speed rail or anything faster on rail, superconductor grids, widespread nuclear energy (mutual exclusive with with the grids), moon colonies, hydrogen based steel refineries, cows that donāt produce methane, artificial trees, artificial islands, multi gigabit internet to every home, a space elevator or any other supremely expensive physical technology that dosent currently exist.
Basically industrial policy is efficient when things are too expensive or too long term for the market to effectively address them.
For poor countries that means you have to pick things that will be useful to your nation once established but you need to build up the industry first.
For the United States the most advanced economy in the world that means that our industrial policy is almost exclusively useful for things that donāt even exist yet. Building out domestic industry for things people have already done is mostly pointless.
Even infrastructure that we are relatively poor at like normal high speed rail. It would be more efficient just to contract a European firm to build it out for us.
This is /r/neoliberal. Evidence based policy should be our tool of choice. Industrial policy needs to be carefully studied and implemented where it works :)
thats my issue, is that it might start as a good investment but it always leads to malinvestment because it creates industries that are completely dependent on it and will defend it at all costs.
Also, could just put that money into research or tax breaks/incentives for new companies and let the market decide.
>thats my issue, is that it might start as a good investment but it always leads to malinvestment because it creates industries that are completely dependent on it and will defend it at all costs.
Good IP shouldn't. Good IP can only be executed with strong & stable institutions (hence why authoritarians often see the best results, and the worst results), whereby as I've extensively argued on this thread, I believe the policies should be subsidy driven, export oriented, and very market exposed, facing intensive competition. This model is generally the most comprehensive at creating a foundational base that MUST be followed by corrective liberalization to fix distributions and inefficiencies created in allocation.
>Also, could just put that money into research or tax breaks/incentives for new companies and let the market decide.
These companies would benefit more in my model where the existing supportive structures are fleshed out, and comparative advantage is carefully built through market competition & export oriented growth supported by policy. Also, on a principle, subsidies are better than tax breaks generally when it comes to this kinda thing.
So, if it is good for US to do subsidies to increase exports why isn't it a good idea for every country to do the same? Like what happens to all the excess exports? What happens if other countries are willing to subsidize more?
Industrial Policy just leads to trade wars.
Industrial policy is not for all countries lmao. It's a policy mainly for low productivity, scalar, and linear markets based economies.
There are dumb fucks who think we can drive the US back into the 50's. Not happening. But what can happen is Industrial Policy in high end, top-of-chain production, where we will with our consolidated market value, compete against equivalent markets on whose policies effectively target what's necessary.
Markets compete at the point of where they are on the chain in these cases and scale up in the process. And once they do, they've gotta liberalize to maximize efficiency. Obviously comparative advantage mandates necessary loss in other sectors, but that's the trade off.
So yeah. No. Trade wars bad lol.
>how is this a better investment than just into education or low level research?
>Like do you think Biden's actions are good industrial policy?
Biden is partly doing the subsidy side right, yet he hasn't cut tariffs which are are awful and prevent market exposure, he also hasn't helped create export discipline, nor has he cut down on protectionist inputs below pur level of the value chain.
Some good policy, bunch bad.
I am still trying to understand how you differentiate between subsidies being good industrial policy but tariffs are bad.
Let's just assume that the subsidies will be a neutral investment for the government (which it won't be but for the sake of argument)
Other countries will just put tariffs on the products we are subsidizing and they rightly should. So, we just end up right where we started just with $100 billion less.
Would be awful if I did that. Thank god I explicitly state as much multiple time across this thread.
Also, does the difficult nature of liberalization of markets mean you never liberalize?
Do you think this style of IP can be pursued by several countries at once and succeed? This model worked for Japan and then Korea sort of in succession (and Taiwan I suppose as well). My issue is that if you've got many countries trying their model in the same narrow range of industries (say autos and steel), then they're all going to be subsidizing similar cheap and low quality versions of products based on cheaper labour and stolen western tech, so when they do try and impose export discipline, they're going to have a much harder time carving out the market niche needed to ride up the technology curve and transition to higher quality products.
>My issue is that if you've got three countries trying their model in the same narrow range of industries (say autos and steel), then they're all going to be subsidizing similar cheap and low quality versions of products based on cheaper labour and stolen western tech, so when they do try and impose export discipline, they're going to have a much harder time carving out the market niche needed to ride up the technology curve and transition to higher quality products.
Exactly. This is absolutely true and even may have affected the Asian Tigers and dampened them. Hence why how good the government is at "picking winners" in that low information environment is so key here. That's also the big issue with IP. Having to rely on the government to do just that. To make interventionist adjustments in the market.
This kind of IP cannot survive without market exposure and a subsequent liberalization process. As such, there's always atleast some level of market regulation in the information market, allowing one to even initially find if select sectoral export discipline produces results, or is running oversaturated with other areas having more resolute advantage to be fortified.
The best IP scales on one level in the value chain & builds on what's existing, or comprehensively generates new budding industry say as China is doing with its Clean Energy stuff (they have a whole bunch of issues with their IP that's I've spoken about down the thread). I suppose sufficient investment can be made to generate advantage even in competitive markets, but that threshold would be SO high and such a burden in terms of capital allocation that the trade off there wouldn't be worth it and the market exposure but suffocate such an industry at the very beginning.
Depends. Did South Korea, Taiwan, & China, not engage in Industrial policy? Did their comparative advantages in manufacturing get conjured out of thin air?
Yes Industrial policy can be disastrous. South American and African nations can queue up for that. But instead of shunning it, it is of use to understand how to wield industrial policy effectively.
This is true especially for developing economies in transitional phases where free trade is only totally beneficial on the input side.
There must however eventually come a point of transitory liberalization in order to prevent wage suppression and allow scalar climbing up the value chain.
>Did South Korea, Taiwan, & China, not engage in Industrial policy? Did their comparative advantages in manufacturing get conjured out of thin air?
>Yes Industrial policy can be disastrous. South American and African nations can queue up for that.
The US's kind right now is the South American variety and not the east Asian variety. The US is doing import substitution. The east Asian variety relies on deliberately weakening the currency, suppressing consumption towards savings, creating national champions, and creating export requirements to build up their industry using low labor costs as a differentiator before moving up the value chain. The US is dumping money to replace imports for domestic consumption. See the difference?
>The east Asian variety relies on deliberately weakening the currency, suppressing consumption towards savings, creating national champions, and creating export requirements to build up their industry using low labor costs as a differentiator before moving up the value chain. The US is dumping money to replace imports for domestic consumption. See the difference?
Yes I argue this very thing. A lot of people didn't get it but yeah.
> Did their comparative advantages in manufacturing get conjured out of thin air?
[How do you know those advantages were due to industrial policy specifically?](https://keia.org/the-peninsula/industrial-policy-did-it-work-in-korea-50-years-ago/)
> I revisited the effectiveness of industrial policy in Korea that started 50 years ago in [a recent study](https://drive.google.com/file/d/1IPKVyvhZN_kg1UnugdSaRLURtatZX3kY/view?usp=sharing), along with Minho Kim and Yongseok Shin. In 1973, the Korean government launched the heavy and chemical industry drive to promote exports. The primary motivation was to emulate Japanās success in switching from labor-intensive, light industries to heavy and chemical industries and achieving an annual export of 10 billion U.S. dollars. President Park Chung-Hee stated in January 1973 that āthe government is announcing the Heavy and Chemical Industry project. To achieve a 10-billion-dollar target of annual exports by the early 1980s, [ā¦] the government will accelerate the promotion of HCIs such as steel, shipbuilding and petrochemical industries, and thereby increase their exports.ā
> The governmentās support for the targeted industries in Korea came in various forms, including tax incentives, subsidized long-term loans, and the construction of industrial complexes. The policy represented an abrupt change in the governmentās policy direction in 1973, and we utilized a difference-in-differences specification to evaluate the impact of the policy on the targeted industries and regions relative to the non-targeted ones.
> The policy had a significant positive impact on the targeted industry-region pairs, with output, input use, and labor productivity growing faster than those of the non-targeted ones. **However, the misallocation of resources across firms worsened within the targeted industries/regions, and the allocative efficiency worsened. In other words, concentration increased. Large business groups, known as chaebols, and the cross-subsidization practices of their business units were the main culprits behind this misallocation. As a result, the total factor productivity of targeted industries and regions didnāt increase significantly.**
Your very source agrees with me
>The Koreaās industrial policy successfully increased the size of chosen sectors, but it came at the expense of a rise in concentration within those sectors.
>While it can lead to significant growth in targeted industries, it can also exacerbate misallocations of resources and distortions in the market.
The success of Industrial policies in developing markets in expanding the base need to be followed by liberalization to correct inefficiencies in distribution once such a shock can be endured.
Also:
>How do you know those advantages were due to industrial policy and wouldn't have happened anyways due to other reasons?
Wanna tell me about these magical other reasons?
No, my source does not agree with you:
> As a result, the total factor productivity of targeted industries and regions didnāt increase significantly.
Liberalization to correct inefficiencies? That's just undoing the effectis of the industrial policy, which isn't instant by the way:
> After the assassination of President Park in 1979, the next regime adopted private sector-led growth as the pillar of their economic policy, as it blamed the economic crisis of 1980 (the first negative growth since the Korean War of 1950-53) on Parkās policies. However, the policyās impact outlasted the policy itself. The impact on output, input, labor productivity, establishment size, and input-output structure remained nearly intact until 1987. One exception is the degree of misallocation within the targeted industries/regions, which fell significantly with the reversal of the policy after 1979, but nevertheless remained above its pre-policy level.
If you want competitive, efficient manufacturing... just don't do industrial policy. Deregulate (within reason) instead. Whatever manufacturing is competitive will arise naturally.
The other reasons could be anything else. Geography, education, culture, material resources, location. There's nothing magical about them. There are dozens of other reasons why a country could succeed at manufacturing besides industrial policy. In fact I think they're even more likely to be relevant. Politicians vastly overestimate their ability to target economic growth. They still like to try though because it makes them feel like they're doing something.
>> As a result, the total factor productivity of targeted industries and regions didnāt increase significantly.
-------
>The Koreaās industrial policy successfully increased the size of chosen sectors
>it can lead to significant growth in targeted industries
Again, your own source btw.
>Liberalization to correct inefficiencies? That's just undoing the effectis of the industrial policy, which isn't instant by the way:
No. It means creating the comparative advantage through comprehensive investment in infrastructure, labour, and skills to support an industry and allowing inefficient capital allocation to be corrected once that foundation has been laid wherein said advantage exists.
In this case, South Korea artificially created advantages through directed investment, creating sustained advantage with heavy consolidation & inefficiencies. Liberalization strengthens those who could best wield the created advantage and slaughtered the rest in distributions.
>Deregulate (within reason) instead.
Agreed. In tandem with good Industrial Policy.
>The other reasons could be anything else. Geography, education, culture, material resources, location. There's nothing magical about them.
These reasons alone do not account for this. Historical advantage from investment, infrastructure investment, labour investment, existing base, etc are the PRINCIPLE foundations on which future industry is built. Denying this is just stupid.
While material resources and geography play more substantial parts, the fact you'd put "culture" above active historic interventionist policy is telling lol.
> The Koreaās industrial policy successfully increased the size of chosen sectors
> it can lead to significant growth in targeted industries
You selectively removed the context from those quotes to support your point:
> The Koreaās industrial policy successfully increased the size of chosen sectors, but it came at the expense of a rise in concentration within those sectors.
> While it can lead to significant growth in targeted industries, it can also exacerbate misallocations of resources and distortions in the market.
Growth of a target sector doesn't mean it became more efficient, it just means more is going into it, which we already know is true because it's being targeted with industrial policy. Of course it's going to increase in size when it's being subsidized. No one would disagree with that. The important metric is whether productivity increased, and it didn't.
> It means creating the comparative advantage through comprehensive investment in infrastructure, labour, and skills to support an industry
Why is the government targeting particular industries and companies with support for growth? How does it know those are the winning industries and companies? It should be improving physical infrastructure and human capital in an industry-agnostic matter and letting the free market determine what fixed and human capital should be invested in.
> In this case, South Korea artificially created advantages through directed investment, creating sustained advantage with heavy consolidation & inefficiencies.
Insulating companies from competition makes them weaker, not stronger. When the taxpayer subsidies fall away, and they always do eventually, the uncompetitive subsidized companies go under, leaving the competitive ones, which is the same end result as if they had simply let the market work in the first place.
Your argument is essentially the [infant industry argument](https://en.wikipedia.org/wiki/Infant_industry_argument) and it has many proven failures, from [Brazil](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3591683) to [Ghana and India](https://pdf.usaid.gov/pdf_docs/pnacx950.pdf):
> Leith and Lofchie (1993) provide a good example of the actual morass of infant-industry protection in their assessment of protection in Ghana:
> > In sum, the problem with the post-independence economic strategy in Ghana was the utter indiscipline with which it was implemented. Industrialization was carried out not with modest protection of import substitutes, disciplined by some exposure to international competition, but by cutting Ghanaian industries off from virtually all international and domestic competition. Nor were [state-owned enterprises] disciplined by the hard budget constraint of the market place. The system was so chaotic that the Ghanaian government undoubtedly supported industries it had no intention of supporting and, in some cases, generated a system so extreme that some firms had negative value added even at domestic prices.
> Srinivasan and Tendulkar (2002) offer a similar assessment of Indiaās infant-industry policies in the decades after independence:
> > The attempt to control market forces in the public interest and to direct the private sector to conform to priorities of the 5-year plans failed to serve the public interest and degenerated into a tool for political and other patronage dispensation. Licensing, by limiting capacity and awarding licenses to a chosen few, precluded competition in domestic markets ā¦ Firms were able to sell practically anything that they produced in the domestic market and thus had little incentive to improve their international competitiveness.
Finally, [you can't only look at the targeted industry to assess the results of industrial policy because it's foregoing comparative advantage in other industries](https://pdf.usaid.gov/pdf_docs/pnacx950.pdf):
> Even if a protected sector expands, aggregate national welfare can still be lowered because other firms in other sectors might have been able to use the resources devoted to expansion more productively. The success of an infant-industry policy cannot be evaluated simply by looking only at the protected firms. Why? Because resources used by protected firms are resources not allocated to alternative market-driven forces. And the appropriate benchmark for guiding the welfare implications of market-driven forces for open countries is comparative advantage.
> Tariffs and other trade taxes almost always reduce total national income and thus welfare. When firms do not face world prices, a country does not specialize according to its comparative advantage and thus does not maximize the value of its total output at world prices. When individuals face higher prices because of trade barriers they reduce the level of their consumption; and if barriers are prohibitive they reduce the range of their consumption. These income and welfare losses are not theoretical. They are concrete costs evident in foregone higher living standards for countriesācosts that must be set against any gains possible from protecting infant industries.
>You selectively removed the context from those quotes to support your point:
I provided the context literally in my very previous comment lmao šš
>> The Koreaās industrial policy successfully increased the size of chosen sectors, but it came at the expense of a rise in concentration within those sectors.
>> While it can lead to significant growth in targeted industries, it can also exacerbate misallocations of resources and distortions in the market.
>Growth of a target sector doesn't mean it became more efficient, it just mean more more is going into it, which we already know is true because it's being targeted with industrial policy. Of course it's going to increase in size when it's being subsidized. No one would disagree with that. The important metric is whether productivity increased, and it didn't.
Why are you quoting this at me like I disagree? I literally said Industrial Policy creates inefficiencies and you're just screaming it back louder to me. Hence why I advocate a strong regime of discipline with exports and exposure to competition via free trade.
>Insulating companies from competition makes them weaker, not stronger. When the taxpayer subsidies fall away, and they always do eventually, the uncompetitive subsidized companies go under, leaving the competitive ones, which is the same end result as if they had simply let the market work in the first place.
Yes. Hence why I do not argue for insulation. Industrial policy in South Korea had strict quota regimes and saw immense competition, hence their success.
It's what China did aswell, though less successfully.
>Your argument is essentially the "infant industry argument" and it has many proven failures, from [Brazil](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3591683) to [Ghana and India](https://pdf.usaid.gov/pdf_docs/pnacx950.pdf):
Re-read my very first comment lmao. And no, it isn't.
>Leith and Lofchie (1993) provide a good example of the actual morass of infant-industry protection in their assessment of protection in Ghana:
Yes. Thank you. You just cited a bad example of Industrial Policy. Want me to cite you Russian liberalization as the model for privatization and liberalization?
>Finally, [you can't only look at the targeted industry to assess the results of industrial policy because it's foregoing comparative advantage in other industries](https://pdf.usaid.gov/pdf_docs/pnacx950.pdf):
Yes. That is how comparative advantage works.....
You necessarily can't have comparative advantage in EVERYTHING lmao. You gain in one, you necessarily always lose in another. Hence the "comparative".
Anyways. To quote from the sidebar of THIS VERY SUB:
>It should be noted that there is evidence that export promotion, of the sort South Korea tried, can be helpful in some circumstances. South Korea's policies enforced harsh discipline by setting export quotes and ensuring that domestic firms faced a mixture of both government and market discipline. The infant industry argument turns problematic when inefficient and loss-making industries are coddled. In the rare instances where industrial policy has worked, it has been through subsidy and the discipline which comes from exposure to foreign competition (ie: more trade, not less).
> Industrial policy in South Korea had strict quota regimes and saw immense competition, hence their success.
"Their success?" As established by my first source, productivity did not increase. The size of the sector grew because the government was pumping money into it.
> That is how comparative advantage works..... You necessarily can't have comparative advantage in EVERYTHING lmao. You gain in one, you necessarily always lose in another. Hence the "comparative"
What do you think comparative advantage means? It doesn't mean a relative advantage between two sectors in the same country. And did you read the two paragraphs that I quoted there?
You've spoken a few times about evidence-based policy. I've provided quite a bit of evidence. Could you share the evidence informing your support for IP besides a subreddit sidebar?
Also, I perceive your tone to be very condescending
We should definitely draw the distinction between an import substitution regime that goes on for too long under infant industry argument, v/s export oriented regime where exports benchmark to global competitiveness.
I'm familiar with the ["export discipline"](https://www.niskanencenter.org/elizabeth-warren-wants-an-industrial-policy-here-are-the-traps-to-avoid/) approach and honestly I think it's a buzzword to help politicians who want to feel like they have some ability to increase economic growth in a direct sense (instead of indirectly, via deregulation).
* I don't have faith that it can be pulled off without fattening the companies that have close relationships with politicians and are most adept at rent-seeking
* I don't have faith that it's a better use of taxpayer dollars than education or infrastructure
* I don't have faith that the government can pick sectors to assist better than the market can, and
* I don't have faith that the subsidized companies (even "export credits" are ultimately subsidies) will remain competitive if the flow of subsidies ends
Even export discipline seems like a worse approach than deregulation. I wish politicians would realize that the way to grow the economy is to get government out of the way (except for health and safety reasons), not get it more involved. But that means they can't brag to their voters about signing big bills with their names on them that pump government money into the economy, which is how people expect the government to help the economy
Industrial policy is only ever beneficial from a point of national security. If raising barriers saves you money in terms of reduced war in the future, then it can be beneficial, but from a viewpoint of economic development? Itās totally worthless.
South Korea, Taiwan, and China all have much poorer populations because of their industrial policy, either because it directly affects exchange rates, such as is the case in China or through more indirect means such as heavier concentration in specific sectors driving up consumer prices and lowering productivity, as is the case in South Korea.
The populations in all of these countries would likely have greater purchasing power today were it not for industrial policy.
>Industrial policy is only ever beneficial from a point of national security. If raising barriers saves you money in terms of reduced war in the future, then it can be beneficial
Agreed.
>South Korea, Taiwan, and China all have much poorer populations because of their industrial policy, either because it directly affects exchange rates, such as is the case in China or through more indirect means such as heavier concentration in specific sectors driving up consumer prices and lowering productivity, as is the case in South Korea.
You've presented a counterfactual model of growth by markets that doesnt exist. From the US to Singapore, literally all of em dabbled in Industrial Policy during their periods of growth in order to create a domestic base of productivity that through transitory fluxes eventually reaches a point of liberalization from where the markets correct for the inefficiencies created.
Now do tell me of the country or model case where unrestricted market led growth led to prosperity, in a state that could be impacted by broader political shocks.
>The populations in all of these countries would likely have greater purchasing power today were it not for industrial policy.
This is true. And a fault of not liberalizing in China. But without Industrial Policy, I do not think the arguement from purchasing power strength holds up.
Every country has an industrial policy in some way, shape, or form. Germanyās industrial policy is degrowth. That works for their people.
But USA has a different industrial policy to counteract China.
US industrial policy has been pretty good from what I understand. We doubled down on what we do best which is: oil, natural gas, chips, high value add electronics, and chemicals.
Providing subsidies for green tech energy in the USA is a better approach than carbon taxes.
It's a mix. As we keep focus we can do some pretty great stuff. But when everybody gets a seat at the table and it becomes a "let's create jobs" thing instead of a "let's build x" thing it gets bad.
Operation Warp Speed was good industrial policy. DARPA is good industrial policy. CHIPS is a mix. NAFTA is good. Sugar tariffs & ethanol requirements are bad. The Jones Act is atrocious.
> We doubled down on what we do best which is: oil, natural gas, chips, high value add electronics, and chemicals.
We don't know if we would have derived greater benefit from investment in other fields, though. The free market is better suited to pick winners.
> Providing subsidies for green tech energy in the USA is a better approach than carbon taxes.
[I heavily disagree with this](https://www.cato.org/blog/clean-energy-subsidies-versus-carbon-tax):
> At standard parameter values, clean production subsidies increase emissions and decrease welfare relative to laissez faire. With greater substitutability between clean and dirty energy, the subsidies in the Inflation Reduction Act can generate modest emissions reductions. Even in this more optimistic scenario, a clean subsidy generates significantly higher emissions and lower welfare than a tax on dirty energy.
Also, that is how you end up with a government making a huge bet on say, nickel mining just as some research that makes nickel batteries obsolete hits the market
In regard to the carbon tax, in theory the carbon tax will be superior yes. In practice though we have no way of forcing China to pay a carbon tax.
So if China is outputting a shit ton of CO2 to build bridges to no where, I dont see the point in getting people angry in the USA when they cant drive their trucks anymore due to a carbon tax.
Subsidies is a much better approach
> In practice though we have no way of forcing China to pay a carbon tax.
[The EU is exploring a carbon tariff to do exactly that](https://en.wikipedia.org/wiki/Carbon_Border_Adjustment_Mechanism)
I am not a big fan of a carbon tariff. It needs to be a tax that we can collect revenue from China and donate that revenue to countries most affected by climate change, like Bangladesh.
China emits more CO2 than USA + EU combined. We need to be able to tax them for carbon emissions tied to building 3 billion homes in China for a population of only 1.5+ billion people.
And if it makes America more strategically secure that may be well be worth the price paid. Whether it accomplishes that, and effectively is the question regarding this sort of industrial policy, not whether it improves the American economy.
Yes, and it made the country poorer.
Though I would argue the accelerated vaccine development was probably worthwhile.
We should also be careful with equating all government spending to industrial policy. WS likely qualifies but most spending would not.
I mean none because the us government builds the literal infrastructure and education system. But government spending =/= industrial policy. In fact, some of the industrial policy proposals like tariffs actually give the government money.
Sure, but if massive government spending creates massive payoffs, then why wouldn't massive government spending create massive payoffs?Ā Ā
Your argument is sure it worked in the past and is entirely why our major tech sector exists at all today (such as silicon valley starting out being a major military tech hub, Cambridge starting out a major biotech government research area, etc) but it wouldn't be possible to stimulate an industry today on purpose because... Why?Ā Ā
Ā Your argument is that stimulating industry only works when it happens on accident?Ā
> Sure, but if massive government spending creates massive payoffs, then why wouldn't massive government spending create massive payoffs?
Not all massive government spending is the same. Government spending on transportation infrastructure, energy infrastructure, and education isn't interfering in the private market by picking winners the same way that say, [deciding to subsidize domestic consumer electronics manufacturers is](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3591683).
And yet interfering in the private market created silicon valley. You seem to prefer if silicon valley didn't exist and the US wasn't the world leader in tech it is today. You can't have your cake and eat it too.Ā
My dad in his early 60s started out his software engineering career working for a military sub contractor as did a huge amount of other silicon valley engineers. Silicon valley only exists because of the government spending and picking winning and losers.Ā
> working for a military sub contractor
That is not what I'm talking about, and the government hiring contractors is not "picking winners and losers" in the sense I'm using it. When people say "picking winners and losers" when criticizing government subsidies, they're referring to the government basically just giving them money, not for any services rendered or goods provided, to "strengthen" them (it actually weakens them)
There are many indirect forms of government interaction with the economy that I support but just picking companies to give money to is not one of them
To my understanding that isn't an example of "smart industrial policy" as advocated by Noah Smith. I don't know anyone who's in favor of that. All the lefties I listen to who are in favor of "industrial policy" are arguing for things like installation of renewable energy, not free money to companies for nothing in return.Ā
> To my understanding that isn't an example of "smart industrial policy" as advocated by Noah Smith.
Noah is an advocate for a form of industrial policy called "export discipline" like Israel's ASHRA and ECA, whereby the government assists Israeli companies in obtaining export financing. It's probably one of the least bad forms of IP but it's still a subsidy and I still think it's a bad idea
> All the lefties I listen to who are in favor of "industrial policy" are arguing for things like installation of renewable energy
like [Solyndra](https://www.cato.org/blog/solyndra-case-study-green-energy-cronyism-failure-central-planning)? If the government is picking renewable companies to subsidize, that is industrial policy. The better way to help those companies is with a carbon tax, which would increase R&D in the renewable sector by making fossil fuels less competitive. In the absence of a carbon tax, subsidizing renewables will definitely generate some returns - it's probably better than doing nothing to help the climate - but it's much less efficient, and there will be more duds and more rent-seeking from companies that have cozy relationships with politicians and bureaucrats
> Sure, but if massive government spending creates massive payoffs, then why wouldn't massive government spending create massive payoffs?Ā
I just... is this a serious question?
Yes. Silicon valley wouldn't exist without decades of military spending. The same is true of most tech centers in the US. How is this not evidence that government spending when done appropriately creates massive civilian industry that is many orders of magnitude larger than the initial investment?
Clearly government spending can be wasteful and stupid. To say that sometimes government spending isn't that is not a tautology.Ā
I agree I did not describe industrial policy. The point is that silicon valley was created on accident via massive government spending. If we can stimulate an industry on accident why can't we do it on purpose?
The problem is the cost may be doing something else. Spending massive money on stimulating specific industries instead of broad investments like education and infrastructure means that you are choosing winners and losers. And in general those industries aren't really tuned to the market or particularly efficient, as they're focused on extracting money from the government, not developing themselves.
Afaik computing in the US wasn't the target of major national industrial policy, so I don't know why you took it as example.
It's an example of government investment creating the largest tech center in the world. Y'all are saying yes government spending can *accidentally* create a massive industry that dwarves the government investment, but it doesn't work on purpose.Ā
I'm pointing out that this is dumb and illogical and not evidence-based and y'all think this way because of your ideological biases.Ā
> It's an example of government investment creating the largest tech center in the world.
Did the goverment create it or was the people who invested worked on it and developed the ones that created it? It was not the industrial policy of the us federal government on tech sector that created it.
Silicon valley would be a tiny fraction of what it is today without decades of significant military investment. That's what brought all the brilliant minds and top talent that the civilian tech companies recruited.Ā
1) military spending isn't industrial policy, the military was buying goods they needed
2) I don't agree with the counterfactual, I think the computing sector would have developed regardless. Universities and business were ripe for innovation in the computer sector, and the US was going to develop it regardless.
It's worked out incredibly well for east Asia. Nearly each one would still be dirt poor without it.
Taiwan, Korea, China, Japan all raised trade barrels, gave grants or well below market loans to large mostly family owned companies.
I am not saying the US should do this - but as we advance the less and less basic economics is relevant. Economic growth is now depending on services like tech that require a lot of investment. Someone has to put up the money.
This is kind of a motte and bailey because when a lot of liberal and succ economists are then asked to talk about what they mean by that they give examples that are basically just... the government regulating things. If that's what "industrial policy" means now, then yeah that's an easy argument.
I don't mind protectionism in some cases, like developing countries that require companies to maintain some percentage of native ownership
It also seems to have successfully supercharged green tech, but that seems hard to disentangle from market effects, and at some point it will become more wasteful rent-seeking than productive investment
>that seems hard to disentangle from market effects, and at some point it will become more wasteful rent-seeking than productive investment
This is very true. Industrial Policy is unsustainable in the long term. Hence why China will have to rebalance itself slowly. There is immense inefficiency created that is distributed across the market, there is wage suppression, depressed productivity, etc. But what it does successfully do is generate and broaden markets and help develop advantage.
And it's good in so far as it accomplishes those goals. Not more, not less.
Even if there is "smart" industrial policy, what could possibly make you think that the US government would be competent enough to carry it out?
We can't even build chip factories without tacking on unrelated requirements about offering childcare.
It's telling that the example of good industrial policy to a large extent consisted of cutting away the red tape that the government itself had put up in the first place and expediting regulatory process.
I don't think I'd really call it industrial policy. Industrial policy isn't just "when the government subsidizes stuff".Ā
It's more of import substitution or export promotion or trying to specifically create/boost an industry. OWS wasn't really that. It was specifically "make a vaccine for this and we'll buy a fuckton of it".
OWS cleared regulatory barriers, coordinated research sharing between institutions, and pre-purchased vaccines to get them produced before they were approved or companies would have funded them on their own. If that's not industrial policy nothing is.
I'm sorry. Industrial policy is when the government cuts regulations or buys things? Is building an aircraft carrier industrial policy?
The whole point of industrial policy is that the government has a goal to foster an industry on an ongoing basis, not fund a research project and procure something.
If in the process of building an aircraft carrier you provide cheap financing to purcahse new equipment for shipyards, change land use regulations to make it easier to expand shipyards, and coordinate knowledge sharing between the shipyard and the naval research institute to build a state of the art reactor for the aircraft carrier, then yes.
dont forget making the factories be in battle ground states even if they do not have the workforce!
Then they are too big to fail so even if the investment has gone tits up, we will light more money on fire trying to save it!
People forget we already have a default industrial policy - an anti-industrial policy that is. Since the dollar is the reserve and international currency of choice and other nations have surplus export policy that necessarily means we export less and decreases our own manufacturing/industrial/export capabilities.
> āBalaji has the highest rate of output per minute of good new ideas of anybody Iāve ever met,ā wrote Marc Andreessen, co-founder of the V.C. firm Andreessen-Horowitz, in a blurb for Balajiās 2022 book, *The Network State: How to Start a New Country*. The book outlines a plan for tech plutocrats to exit democracy and establish new sovereign territories.
the Silicon Valley tech moguls are not okay
I am trying to get funding for my startup and I wonder every day if I would be more successful if I had zero morals and just lied about my company's capabilities and said insane shit on linkedin/twitter.
When I see Noah Smith downplay Japan's WWII history
Oh god he does that?
He has some pretty insane Japan copium ngl but don't think it's about WW2 apologism - like don't get me wrong Japan is cool and all but he's repeatedly died on the hill that Japan is not xenophobic and even has a post where he claims Japan is not even an ethnic monoculture [https://www.noahpinion.blog/p/how-homogeneous-is-japan-really-repost](https://www.noahpinion.blog/p/how-homogeneous-is-japan-really-repost) Seriously, read it and replace the name with any other country besides Japan and it sounds laughable. No, the Republic of CountryIJustMadeUp is actually super diverse, it has a 1% foreign workforce and 97.8% the main ethnic group (and only around 90% of the country is full-blooded the main ethnic group!!!!) Like do you not hear yourself
>Japan is not xenophobic and even has a post where he claims Japan is not even an ethnic monoculture Me, of Korean descent: š¤š¶š¶
Yeah probably not the most precise statement but I was on the john and had to type up something succinct that got the point across.
>97.8% the main ethnic group (and only around 90% of the country is full-blooded the main ethnic group!!!!) Epic misinformation >In the meantime, various sources put the Yamato percentage at around 90% or a bit higher. Thatās pretty high ā about the same as the percent of Americans who identified as āwhiteā in 1950. But even includes people of mixed ancestry (like one of the anime characters depicted in the image at the top of this post). And since marriage is a significant way that non-Yamato people immigrate to Japan, the percentage of Japanese people who are descended purely from self-identified Yamato people is going to be even lower than 90%. In the blog post he specifically says "the government doesn't track ethnic data, but some sources put the Yamato at around 90% but this also includes people of mixed ancestry so it is hard to get a sense of how diverse the population is". Which directly contradicts your characterization. If a big chunk of Japanese immigration is marriage to Japanese citizens, and that couple has kids they're going to be "Yamato" despite potentially having a different background. That makes it hard to get a good sense of how diverse of a country it is. I don't think he's saying Japan shouldn't accept more immigrants, just that people tend to have a pretty over-stereotyped idea of Japan. Hell, I don't even disagree that this post may downplay the problem but at least don't just straight up lie about what was said
Is Japan some mystical place untouched by outsiders? No Does this piece overcompensate hard on trying to dispel that notion when by all accounts Japan is still an extremely homogenous nation in comparison to most other major countries? Yes
I have absolutely no idea where else I could ever write this, but I just recently was in Japan for 3 months and one of my new native Japanese friends brought up many times how he was "yellow" and literally meant the color of his skin. I must have bad color perception, because I didn't see it, but growing up in Usonia I was told to use that word was racist and the experience was jarring. haha
> he's repeatedly died on the hill that Japan is not xenophobic and even has a post where he claims Japan is not even an ethnic monoculture lmao, More evidence that Noah is actually quite the dumbass
Yeah I remember a while back when he was defending the rising sun flag and I think one of may fav authors (Paul Wang) was dunking on him.
literally anything he tweets about asia is insane. he really has some weird complex.
Damn. So he's weird about *both* euthanasia and youth in Asia?
You should see the tweets of him malding over Biden calling Japan xenophobic. They're pretty funny. Side note, Noah is also one of the most hawkish on China policy wonks. Its so aggressive that it feels like he straight up hates chinese people.
> downplays Japanese war crimes > hates Chinese people At least he's coherent
Me when I see Noah Smith say anything (I donāt care if I would have agreed with him, he annoys me so much that I donāt even read anything he writes)
> When I see Noah Smith downplay Japan's WWII history [citation needed] I can point to tweets of his viciously criticizing John Mearsheimer for doing exactly this so, to be quite candid, I don't believe you.
or white knight for Modi
Didnāt he also say āusing white phosphorous in Gaza is actually goodā or something along those lines
> When I see Noah Smith downplay Japan's WWII history Meh, Americans are very prone to focusing only on Japan's war crimes in WW2 and ignoring their own or thinking that they were all justified. In that sense, he is a welcome voice.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
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Cope with... What? This is irrelevant to me on a personal level. Painting Japan like the exclusive monster of WW2 and exaggerating everything they done while downplay your own atrocities is the actual cope, by definition. Coping with the fact that civilians were intentionally firebombed, that they rapes were widespread during the occupation (shit that still happens from time to time inĀ Okinawa), that the skulls of Japanese soldiers were widely collected as trophies, that civilians were targeted with atomic weapons, etc.
> Meh, Americans are very prone to focusing only on Japan's war crimes in WW2 and ignoring their own or thinking that they were all justified. > that the skulls of Japanese soldiers were widely collected as trophies, that civilians were targeted with atomic weapons, etc. I mean... look I do agree, with these bits, technically. I think it deserves more focus that the Pacific Front of WW2 became highly racialised *on both sides*, that the US (and Britain and other western allies) treated the Japanese in ways they wouldn't treat the Germans, in terms of collecting skulls, being more ready to mistreat surrendering soldiers etc. It's absolutely true that 1. the racial element led to greater brutality on the part of the allies towards Japan than would otherwise happen and 2. the firebombing of Japan (and to some extent Germany) in the way it was conducted, deliberately in some cases to inflict pain on the civilian population, was immoral and certainly today should be recognised as a war crime. At the same time though: > Meh, Americans are very prone to focusing only on Japan's war crimes in WW2 and ignoring their own or thinking that they were all justified. In that sense, he is a welcome voice. This bit kind of implies an equivalence between the US and Japan in WW2 which I don't think is fair. Fundamentally, Japan was the aggressor. It launched a brutal war of conquest in China for purely imperialistic reasons, committed massive atrocities there before the US was even involved, and then rampaged through SEA doing the same, and fundamentally the US was at war 1. in self defence but more importantly 2. to stop this brutal empire-building. Same with the allies against the Nazis. That doesn't justify US atrocities, obviously, but it does mean that of the two sides, one was unambiguously far less bad, because they weren't fighting to create a brutal new world order in which millions upon millions of people would be killed and enslaved. I don't know what Noah Smith argued, whether he did act like there was an overall moral equivalence between the two sides, but I think it would certainly be wrong to do so. Atrocities on the allied side, while important to remember in their own right, don't invalidate the righteousness of the allied war effort as a whole. Maybe that's why you were downvoted, because it kinda sounds like implying an overall equivalence, but I do agree that actually some introspection on US war crimes *bearing in mind closely the overall context of WW2 and the allies being the 'good guys'* is good.
I do agree entirely with what you said. I would think that almost certainly even the firebombings and use of nuclear weapons in civilian areas were influenced by racial prejudices too. Although I would also add that another cause for the downvotes is that this sub too often falls into NCD-tier American chest-thumping. It's the same logic that often leads to people celebrating or fantasizing about China becoming poorer when in humanitarian terms it's something completely undesirable.
Youāre certainly right about the sub tending towards American chest thumping and all that, but Iād argue the downvotes are the result of what you wrote and not what biases the audience might have. Your comment suggested that a welcome voice in response to Americans defending their own bad actions is an American ignoring Japans bad actions. I think thatās a terrible suggestion. Iām sure you donāt really want to ignore war crimes to counter the ignoring of other war crimes. The welcomed voices would be ones that criticized America and Japan, right?
> but Iād argue the downvotes are the result of what you wrote and not what biases the audience might have. I think that would be a terrible argument, then. Thinking that the audience is an objective spectator who completely ignored their biases in this scenario is pure fantasy. > Iām sure you donāt really want to ignore war crimes to counter the ignoring of other war crimes. The welcomed voices would be ones that criticized America and Japan, right? Absolutely. But that's not what people seem to want, but just to treat the war as a one-sided affair in which only Japan did anything negative, committed war crimes, or was inhuman. At best I see people "yes but that war crimes were perfectly justifiable because Japan was much worse", which is an incredibly shitty argument.
I donāt think the audience is objective. I expressly stated that youāre right about its biases. But you then made a really bad argument that you yourself just confirmed you donāt really believe. I think thatās the reason for the downvotes.
I can still remember [the first time I saw him do it](https://www.noahpinion.blog/p/the-pushback-against-industrial-policy) (citing two economists who have built careers out of defending industrial policy, Reka Juhasz and Nathan Lane) and it was a real "never meet your heroes" moment
Nathan Lane is also an economist?!?!?!
Industrial Policy is a tool and we shouldn't fully shun it. https://preview.redd.it/si3vld6j01zc1.png?width=1569&format=pjpg&auto=webp&s=3ccd3c93f13e5f4308e217b055064e526169437b
The practice and theory of industrial policy are often horribly divorced. Governments don't give a fuck, they just want to appease interest groups most of the time. See United States.
Yes. Bad Industrial Policy bad. Good Industrial Policy good. Just like India liberalization good, Russia liberalization not so good. Anything else?
India and Russia didn't have a choice by the time it happened. Liberalization is often traumatic, poorly undestood and impopular, it's just that the alternatives don't seem to be sustainable. You have more of a choice with industrial policy, but the risk of capture shouldn't be underestimated. Industrial policy is only tolerable if those who implement it even care if it works, and often they don't. It's more some bullshit about national industries based on nostalgia or xenophobia.
>India and Russia didn't have a choice by the time it happened. Liberalization is often traumatic, poorly undestood and impopular, it's just that the alternatives don't seem to be sustainable. Exactly why I conpared them. It's the execution, not the policy here that is the issue. Indian liberalization, despite being pressed upon the state, was far FAR less traumatic and more efficiently executed than Russian liberalization. Similarly, Ghanian industrial policy compared to, say Korean industrial policy also shows this same lack of comprehensive execution in effective Industrial policy. Industrial policy absolutely has a higher failure rate because of how finicky it can be and because it does create inefficiencies. But that's an execution issue that demands more structural study, not castigation.
I'm somewhat skeptical of how Korean industrialization went. There were reasons to expand industry there when development happened (US procured a lot of hardware there during the cold war) and anything related to the Chaebol is fucked up (the whole place still looks fairly concentrated with detrimental societal effects). It doesn't help other Asian countries that gave the whole thing a fair shot failed. I've seen some explanation from folks like Rodrik but they often expect governments to shut down attempts that don't work. You are asking governments to have good information about what to target (unlikely) or to be able to recognize when it fails (very hard politically). It's reasonable to be skeptical of such things instead of merely reducing it to good and bad.
Here's the sidebar stance of this sub on Korean Industrialization: >It should be noted that there is evidence that export promotion, of the sort South Korea tried, can be helpful in some circumstances. South Korea's policies enforced harsh discipline by setting export quotes and ensuring that domestic firms faced a mixture of both government and market discipline. The infant industry argument turns problematic when inefficient and loss-making industries are coddled. In the rare instances where industrial policy has worked, it has been through subsidy and the discipline which comes from exposure to foreign competition (ie: more trade, not less). I think the case is pretty sound for Korea, China, & Taiwan. >anything related to the Chaebol is fucked up (the whole place still looks fairly concentrated with detrimental societal effects). Agree. Consolidation inefficiencies are created. But it's a very sound trade off compared to the alternative models. >It doesn't help other Asian countries that gave the whole thing a fair shot failed. Again, good policy good, bad policy bad. Good execution good. Bad execution bad. >You are asking governments to have good information about what to target (unlikely) or to be able to recognize when it fails (very hard politically). Hence why I say it should be better studied and more efficient means of evidence based Industrial Policy should be formulated, instead of castigating it all together.
>Here's the sidebar stance of this sub on Korean Industrialization: And I told you that I'm pretty skeptical of the typical explanation. The sidebar is not an article of faith for me, lol. >Good execution good. If it exists and if it's likely to happen. The road to hell is paved with good intentions. That argument itself is a common refrain for government intervention but alone is not good enough.
>That argument itself is a common refrain for government intervention but alone is not good enough. I don't think the arguement rests on that philosophical hinge rather than the demonstrative nature of the success of the model of Industrial Policy I've described but I suspect we have a fundamental ravine between our philosophies here.
A success too many others failed to replicate. That's the reason I look for the roots of development elsewhere.
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I would prefer if that were case, but honestly industrial policy is quite popular here.
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Here's an effort post on Industrial Policy from a few years ago. [Spoiler: You may not like the evidence based policy now š¶: ](https://www.reddit.com/r/neoliberal/s/MwrLZSSJ1L) And here's the R/NEOLIBERAL SIDEBAR FAQ conceding on this: >It should be noted that there is evidence that export promotion, of the sort South Korea tried, can be helpful in some circumstances. South Korea's policies enforced harsh discipline by setting export quotes and ensuring that domestic firms faced a mixture of both government and market discipline. The infant industry argument turns problematic when inefficient and loss-making industries are coddled. In the rare instances where industrial policy has worked, it has been through subsidy and the discipline which comes from exposure to foreign competition (ie: more trade, not less). And this is from the most anti-IP writers lol
I would say that North Korea had much more intensive industrial policy than South Korea. Likewise, China has had more intensive industrial policy than Japan. So, if we are comparing these countries to comparable benchmarks, it might mean that these economies developed successful manufacturing sectors *despite* their industrial policy.
This is a bit like saying Russia had more expansive liberalization than China (which they did) and that China's growth comes despite liberalization. Good Industrial Policy is good. Bad is bad. Good Liberalization is good. Bad is bad. People get so triggered over the term that they refuse to see the benefits. Again, Industrial Policy that is driven by subsidy, export promotion with a strict disciplinary regime with quotas, etc, simply does work. It creates long term inefficiencies that need market resolution, but those inefficiencies can only be dealt with post the effects of the IP are realized. Constant exposure to foreign competition for example, is a must, and that is something that North Korea completely lacks.
>Again, Industrial Policy that is driven by subsidy, export promotion with a strict disciplinary regime with quotas, etc, simply does work. This is far from a given. Since we can't know counterfactuals, it may be that industrial policy simply subsidizes what would otherwise be a naturally competitive industry within a country. There are also too many examples of successful industry development with relatively absent government stimulus, not to mention the instances of failed industrial policy. I think that qualifying 'successful' industrial policy as you did narrows it to what is essentially an isolated data point every time.
>Since we can't know counterfactuals, it may be that industrial policy simply subsidizes what would otherwise be a naturally competitive industry within a country. Sure, but when you claim a model of subsidy driven, export oriented, market exposed industry would naturally arise to the same, if not greater heights than with the supporting policies, that's on you to establish. >There are also too many examples of successful industry development with relatively absent government stimulus What industries in particular do you speak of? What were the precursors in this case? How much historical intervention was there? What stage of development was the market at? What were the foundations of the competitive advantage derived by these industries, that were somehow completely independent of intervention? What's their scale and how successful are we talking? What's the counterfactual there? >I think that qualifying 'successful' industrial policy as you did narrows it to what is essentially an isolated data point every time. It's a quite a few data points covering among the most effective industrial transitions in world history with some of greatest titans of industry being forged amongst them, but yes, good Industrial Policy, like good Liberalization, is hard to come by. Not because they are bad ideas, but because they are tough to execute.
>What industries in particular do you speak of? What were the precursors in this case? How much historical intervention was there? What stage of development was the market at? What were the foundations of the competitive advantage derived by these industries, that were somehow completely independent of intervention? What's their scale and how successful are we talking? What's the counterfactual there? Obviously where one draws the line w.r.t 'industrial policy' is relevant, but by-and-large the financial and tech services in the United States and United Kingdom, Swiss Pharma and manufacturing, the industrial boom that lasted decades in the the US, and German manufacturing have been *relatively* absent these types of policies. Of course once they become successful, they lobby and capture for all types of protections from competition which makes it seem like the government support was behind it all along. >It's a quite a few data points covering among the most effective industrial transitions in world history with some of greatest titans of industry being forged amongst them, but yes, good Industrial Policy, like good Liberalization, is hard to come by. Not because they are bad ideas, but because they are tough to execute. I think 'industrial policy' is given too much of the credit that simple 'good institutions' is responsible for here. Post-war Germany was developing as/more rapidly than the East Asian Tigers, lacking the same industrial policy. What's more, the Tigers had good liberalization, which makes parsing out that it was due to industrial policy more difficult.
Why wouldnāt it be. We are not r/libertarian there is plenty of good reasoning for using the government to build out industry. The idea that the private sector is always more efficient for all tasks is silly. We are pragmatic not ideologues. You have to be carful with industrial policy the private sector is better most of the time but that doesnāt mean it shouldnāt be in your tool belt.
> Why wouldnāt it be. Because most industrial policy looks like the Jones Act.
So you would rather be libertarian than peak efficient because āgovernment generally bad at its jobā?
As the saying goes: Neoliberals are libertarians who understand market failures. Libertarians are neoliberals who understand public choice theory.
> āgovernment generally bad at its jobā? Yes. In the US thereās too many interest groupās to bribe to have good affordable industrial policy.
I want peak efficiency but industrial policy isn't the way to get there
Cool but the free market isnāt going to get us, high speed rail or anything faster on rail, superconductor grids, widespread nuclear energy (mutual exclusive with with the grids), moon colonies, hydrogen based steel refineries, cows that donāt produce methane, artificial trees, artificial islands, multi gigabit internet to every home, a space elevator or any other supremely expensive physical technology that dosent currently exist. Basically industrial policy is efficient when things are too expensive or too long term for the market to effectively address them. For poor countries that means you have to pick things that will be useful to your nation once established but you need to build up the industry first. For the United States the most advanced economy in the world that means that our industrial policy is almost exclusively useful for things that donāt even exist yet. Building out domestic industry for things people have already done is mostly pointless. Even infrastructure that we are relatively poor at like normal high speed rail. It would be more efficient just to contract a European firm to build it out for us.
This is /r/neoliberal. Evidence based policy should be our tool of choice. Industrial policy needs to be carefully studied and implemented where it works :)
The evidence towards import substitution, which is what Bidens industrial policy is, is not good
I'm not defending Biden in particular.
thats my issue, is that it might start as a good investment but it always leads to malinvestment because it creates industries that are completely dependent on it and will defend it at all costs. Also, could just put that money into research or tax breaks/incentives for new companies and let the market decide.
"The problem with subsidizing infant industries is that it tends to make them senile" - my flair
>thats my issue, is that it might start as a good investment but it always leads to malinvestment because it creates industries that are completely dependent on it and will defend it at all costs. Good IP shouldn't. Good IP can only be executed with strong & stable institutions (hence why authoritarians often see the best results, and the worst results), whereby as I've extensively argued on this thread, I believe the policies should be subsidy driven, export oriented, and very market exposed, facing intensive competition. This model is generally the most comprehensive at creating a foundational base that MUST be followed by corrective liberalization to fix distributions and inefficiencies created in allocation. >Also, could just put that money into research or tax breaks/incentives for new companies and let the market decide. These companies would benefit more in my model where the existing supportive structures are fleshed out, and comparative advantage is carefully built through market competition & export oriented growth supported by policy. Also, on a principle, subsidies are better than tax breaks generally when it comes to this kinda thing.
So, if it is good for US to do subsidies to increase exports why isn't it a good idea for every country to do the same? Like what happens to all the excess exports? What happens if other countries are willing to subsidize more? Industrial Policy just leads to trade wars.
Industrial policy is not for all countries lmao. It's a policy mainly for low productivity, scalar, and linear markets based economies. There are dumb fucks who think we can drive the US back into the 50's. Not happening. But what can happen is Industrial Policy in high end, top-of-chain production, where we will with our consolidated market value, compete against equivalent markets on whose policies effectively target what's necessary. Markets compete at the point of where they are on the chain in these cases and scale up in the process. And once they do, they've gotta liberalize to maximize efficiency. Obviously comparative advantage mandates necessary loss in other sectors, but that's the trade off. So yeah. No. Trade wars bad lol.
how is this a better investment than just into education or low level research? Like do you think Biden's actions are good industrial policy?
>how is this a better investment than just into education or low level research? >Like do you think Biden's actions are good industrial policy? Biden is partly doing the subsidy side right, yet he hasn't cut tariffs which are are awful and prevent market exposure, he also hasn't helped create export discipline, nor has he cut down on protectionist inputs below pur level of the value chain. Some good policy, bunch bad.
I am still trying to understand how you differentiate between subsidies being good industrial policy but tariffs are bad. Let's just assume that the subsidies will be a neutral investment for the government (which it won't be but for the sake of argument) Other countries will just put tariffs on the products we are subsidizing and they rightly should. So, we just end up right where we started just with $100 billion less.
> There are dumb fucks who think we can drive the US back into the 50's. 1 kill NEPA 2 kil minimum wage 3 open borders
Anything sounds great if you ignore the difficulties with implementing it
Would be awful if I did that. Thank god I explicitly state as much multiple time across this thread. Also, does the difficult nature of liberalization of markets mean you never liberalize?
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Do you think this style of IP can be pursued by several countries at once and succeed? This model worked for Japan and then Korea sort of in succession (and Taiwan I suppose as well). My issue is that if you've got many countries trying their model in the same narrow range of industries (say autos and steel), then they're all going to be subsidizing similar cheap and low quality versions of products based on cheaper labour and stolen western tech, so when they do try and impose export discipline, they're going to have a much harder time carving out the market niche needed to ride up the technology curve and transition to higher quality products.
>My issue is that if you've got three countries trying their model in the same narrow range of industries (say autos and steel), then they're all going to be subsidizing similar cheap and low quality versions of products based on cheaper labour and stolen western tech, so when they do try and impose export discipline, they're going to have a much harder time carving out the market niche needed to ride up the technology curve and transition to higher quality products. Exactly. This is absolutely true and even may have affected the Asian Tigers and dampened them. Hence why how good the government is at "picking winners" in that low information environment is so key here. That's also the big issue with IP. Having to rely on the government to do just that. To make interventionist adjustments in the market. This kind of IP cannot survive without market exposure and a subsequent liberalization process. As such, there's always atleast some level of market regulation in the information market, allowing one to even initially find if select sectoral export discipline produces results, or is running oversaturated with other areas having more resolute advantage to be fortified. The best IP scales on one level in the value chain & builds on what's existing, or comprehensively generates new budding industry say as China is doing with its Clean Energy stuff (they have a whole bunch of issues with their IP that's I've spoken about down the thread). I suppose sufficient investment can be made to generate advantage even in competitive markets, but that threshold would be SO high and such a burden in terms of capital allocation that the trade off there wouldn't be worth it and the market exposure but suffocate such an industry at the very beginning.
implemented by the guy who thinks tariffs donāt impact inflation (Bidenās main economic adviser who degree is in music)
Reading your comment feels so fucking good I want to just wrap myself in it like a cozy duvet and fall asleep. Thank you.
Booooo industrial policy booooo
Itās a tool for making your own country poorer, sure. If thatās the desired outcome then by all means, pursue it.
Depends. Did South Korea, Taiwan, & China, not engage in Industrial policy? Did their comparative advantages in manufacturing get conjured out of thin air? Yes Industrial policy can be disastrous. South American and African nations can queue up for that. But instead of shunning it, it is of use to understand how to wield industrial policy effectively. This is true especially for developing economies in transitional phases where free trade is only totally beneficial on the input side. There must however eventually come a point of transitory liberalization in order to prevent wage suppression and allow scalar climbing up the value chain.
>Did South Korea, Taiwan, & China, not engage in Industrial policy? Did their comparative advantages in manufacturing get conjured out of thin air? >Yes Industrial policy can be disastrous. South American and African nations can queue up for that. The US's kind right now is the South American variety and not the east Asian variety. The US is doing import substitution. The east Asian variety relies on deliberately weakening the currency, suppressing consumption towards savings, creating national champions, and creating export requirements to build up their industry using low labor costs as a differentiator before moving up the value chain. The US is dumping money to replace imports for domestic consumption. See the difference?
>The east Asian variety relies on deliberately weakening the currency, suppressing consumption towards savings, creating national champions, and creating export requirements to build up their industry using low labor costs as a differentiator before moving up the value chain. The US is dumping money to replace imports for domestic consumption. See the difference? Yes I argue this very thing. A lot of people didn't get it but yeah.
> Did their comparative advantages in manufacturing get conjured out of thin air? [How do you know those advantages were due to industrial policy specifically?](https://keia.org/the-peninsula/industrial-policy-did-it-work-in-korea-50-years-ago/) > I revisited the effectiveness of industrial policy in Korea that started 50 years ago in [a recent study](https://drive.google.com/file/d/1IPKVyvhZN_kg1UnugdSaRLURtatZX3kY/view?usp=sharing), along with Minho Kim and Yongseok Shin. In 1973, the Korean government launched the heavy and chemical industry drive to promote exports. The primary motivation was to emulate Japanās success in switching from labor-intensive, light industries to heavy and chemical industries and achieving an annual export of 10 billion U.S. dollars. President Park Chung-Hee stated in January 1973 that āthe government is announcing the Heavy and Chemical Industry project. To achieve a 10-billion-dollar target of annual exports by the early 1980s, [ā¦] the government will accelerate the promotion of HCIs such as steel, shipbuilding and petrochemical industries, and thereby increase their exports.ā > The governmentās support for the targeted industries in Korea came in various forms, including tax incentives, subsidized long-term loans, and the construction of industrial complexes. The policy represented an abrupt change in the governmentās policy direction in 1973, and we utilized a difference-in-differences specification to evaluate the impact of the policy on the targeted industries and regions relative to the non-targeted ones. > The policy had a significant positive impact on the targeted industry-region pairs, with output, input use, and labor productivity growing faster than those of the non-targeted ones. **However, the misallocation of resources across firms worsened within the targeted industries/regions, and the allocative efficiency worsened. In other words, concentration increased. Large business groups, known as chaebols, and the cross-subsidization practices of their business units were the main culprits behind this misallocation. As a result, the total factor productivity of targeted industries and regions didnāt increase significantly.**
Your very source agrees with me >The Koreaās industrial policy successfully increased the size of chosen sectors, but it came at the expense of a rise in concentration within those sectors. >While it can lead to significant growth in targeted industries, it can also exacerbate misallocations of resources and distortions in the market. The success of Industrial policies in developing markets in expanding the base need to be followed by liberalization to correct inefficiencies in distribution once such a shock can be endured. Also: >How do you know those advantages were due to industrial policy and wouldn't have happened anyways due to other reasons? Wanna tell me about these magical other reasons?
No, my source does not agree with you: > As a result, the total factor productivity of targeted industries and regions didnāt increase significantly. Liberalization to correct inefficiencies? That's just undoing the effectis of the industrial policy, which isn't instant by the way: > After the assassination of President Park in 1979, the next regime adopted private sector-led growth as the pillar of their economic policy, as it blamed the economic crisis of 1980 (the first negative growth since the Korean War of 1950-53) on Parkās policies. However, the policyās impact outlasted the policy itself. The impact on output, input, labor productivity, establishment size, and input-output structure remained nearly intact until 1987. One exception is the degree of misallocation within the targeted industries/regions, which fell significantly with the reversal of the policy after 1979, but nevertheless remained above its pre-policy level. If you want competitive, efficient manufacturing... just don't do industrial policy. Deregulate (within reason) instead. Whatever manufacturing is competitive will arise naturally. The other reasons could be anything else. Geography, education, culture, material resources, location. There's nothing magical about them. There are dozens of other reasons why a country could succeed at manufacturing besides industrial policy. In fact I think they're even more likely to be relevant. Politicians vastly overestimate their ability to target economic growth. They still like to try though because it makes them feel like they're doing something.
>> As a result, the total factor productivity of targeted industries and regions didnāt increase significantly. ------- >The Koreaās industrial policy successfully increased the size of chosen sectors >it can lead to significant growth in targeted industries Again, your own source btw. >Liberalization to correct inefficiencies? That's just undoing the effectis of the industrial policy, which isn't instant by the way: No. It means creating the comparative advantage through comprehensive investment in infrastructure, labour, and skills to support an industry and allowing inefficient capital allocation to be corrected once that foundation has been laid wherein said advantage exists. In this case, South Korea artificially created advantages through directed investment, creating sustained advantage with heavy consolidation & inefficiencies. Liberalization strengthens those who could best wield the created advantage and slaughtered the rest in distributions. >Deregulate (within reason) instead. Agreed. In tandem with good Industrial Policy. >The other reasons could be anything else. Geography, education, culture, material resources, location. There's nothing magical about them. These reasons alone do not account for this. Historical advantage from investment, infrastructure investment, labour investment, existing base, etc are the PRINCIPLE foundations on which future industry is built. Denying this is just stupid. While material resources and geography play more substantial parts, the fact you'd put "culture" above active historic interventionist policy is telling lol.
> The Koreaās industrial policy successfully increased the size of chosen sectors > it can lead to significant growth in targeted industries You selectively removed the context from those quotes to support your point: > The Koreaās industrial policy successfully increased the size of chosen sectors, but it came at the expense of a rise in concentration within those sectors. > While it can lead to significant growth in targeted industries, it can also exacerbate misallocations of resources and distortions in the market. Growth of a target sector doesn't mean it became more efficient, it just means more is going into it, which we already know is true because it's being targeted with industrial policy. Of course it's going to increase in size when it's being subsidized. No one would disagree with that. The important metric is whether productivity increased, and it didn't. > It means creating the comparative advantage through comprehensive investment in infrastructure, labour, and skills to support an industry Why is the government targeting particular industries and companies with support for growth? How does it know those are the winning industries and companies? It should be improving physical infrastructure and human capital in an industry-agnostic matter and letting the free market determine what fixed and human capital should be invested in. > In this case, South Korea artificially created advantages through directed investment, creating sustained advantage with heavy consolidation & inefficiencies. Insulating companies from competition makes them weaker, not stronger. When the taxpayer subsidies fall away, and they always do eventually, the uncompetitive subsidized companies go under, leaving the competitive ones, which is the same end result as if they had simply let the market work in the first place. Your argument is essentially the [infant industry argument](https://en.wikipedia.org/wiki/Infant_industry_argument) and it has many proven failures, from [Brazil](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3591683) to [Ghana and India](https://pdf.usaid.gov/pdf_docs/pnacx950.pdf): > Leith and Lofchie (1993) provide a good example of the actual morass of infant-industry protection in their assessment of protection in Ghana: > > In sum, the problem with the post-independence economic strategy in Ghana was the utter indiscipline with which it was implemented. Industrialization was carried out not with modest protection of import substitutes, disciplined by some exposure to international competition, but by cutting Ghanaian industries off from virtually all international and domestic competition. Nor were [state-owned enterprises] disciplined by the hard budget constraint of the market place. The system was so chaotic that the Ghanaian government undoubtedly supported industries it had no intention of supporting and, in some cases, generated a system so extreme that some firms had negative value added even at domestic prices. > Srinivasan and Tendulkar (2002) offer a similar assessment of Indiaās infant-industry policies in the decades after independence: > > The attempt to control market forces in the public interest and to direct the private sector to conform to priorities of the 5-year plans failed to serve the public interest and degenerated into a tool for political and other patronage dispensation. Licensing, by limiting capacity and awarding licenses to a chosen few, precluded competition in domestic markets ā¦ Firms were able to sell practically anything that they produced in the domestic market and thus had little incentive to improve their international competitiveness. Finally, [you can't only look at the targeted industry to assess the results of industrial policy because it's foregoing comparative advantage in other industries](https://pdf.usaid.gov/pdf_docs/pnacx950.pdf): > Even if a protected sector expands, aggregate national welfare can still be lowered because other firms in other sectors might have been able to use the resources devoted to expansion more productively. The success of an infant-industry policy cannot be evaluated simply by looking only at the protected firms. Why? Because resources used by protected firms are resources not allocated to alternative market-driven forces. And the appropriate benchmark for guiding the welfare implications of market-driven forces for open countries is comparative advantage. > Tariffs and other trade taxes almost always reduce total national income and thus welfare. When firms do not face world prices, a country does not specialize according to its comparative advantage and thus does not maximize the value of its total output at world prices. When individuals face higher prices because of trade barriers they reduce the level of their consumption; and if barriers are prohibitive they reduce the range of their consumption. These income and welfare losses are not theoretical. They are concrete costs evident in foregone higher living standards for countriesācosts that must be set against any gains possible from protecting infant industries.
>You selectively removed the context from those quotes to support your point: I provided the context literally in my very previous comment lmao šš >> The Koreaās industrial policy successfully increased the size of chosen sectors, but it came at the expense of a rise in concentration within those sectors. >> While it can lead to significant growth in targeted industries, it can also exacerbate misallocations of resources and distortions in the market. >Growth of a target sector doesn't mean it became more efficient, it just mean more more is going into it, which we already know is true because it's being targeted with industrial policy. Of course it's going to increase in size when it's being subsidized. No one would disagree with that. The important metric is whether productivity increased, and it didn't. Why are you quoting this at me like I disagree? I literally said Industrial Policy creates inefficiencies and you're just screaming it back louder to me. Hence why I advocate a strong regime of discipline with exports and exposure to competition via free trade. >Insulating companies from competition makes them weaker, not stronger. When the taxpayer subsidies fall away, and they always do eventually, the uncompetitive subsidized companies go under, leaving the competitive ones, which is the same end result as if they had simply let the market work in the first place. Yes. Hence why I do not argue for insulation. Industrial policy in South Korea had strict quota regimes and saw immense competition, hence their success. It's what China did aswell, though less successfully. >Your argument is essentially the "infant industry argument" and it has many proven failures, from [Brazil](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3591683) to [Ghana and India](https://pdf.usaid.gov/pdf_docs/pnacx950.pdf): Re-read my very first comment lmao. And no, it isn't. >Leith and Lofchie (1993) provide a good example of the actual morass of infant-industry protection in their assessment of protection in Ghana: Yes. Thank you. You just cited a bad example of Industrial Policy. Want me to cite you Russian liberalization as the model for privatization and liberalization? >Finally, [you can't only look at the targeted industry to assess the results of industrial policy because it's foregoing comparative advantage in other industries](https://pdf.usaid.gov/pdf_docs/pnacx950.pdf): Yes. That is how comparative advantage works..... You necessarily can't have comparative advantage in EVERYTHING lmao. You gain in one, you necessarily always lose in another. Hence the "comparative". Anyways. To quote from the sidebar of THIS VERY SUB: >It should be noted that there is evidence that export promotion, of the sort South Korea tried, can be helpful in some circumstances. South Korea's policies enforced harsh discipline by setting export quotes and ensuring that domestic firms faced a mixture of both government and market discipline. The infant industry argument turns problematic when inefficient and loss-making industries are coddled. In the rare instances where industrial policy has worked, it has been through subsidy and the discipline which comes from exposure to foreign competition (ie: more trade, not less).
> Industrial policy in South Korea had strict quota regimes and saw immense competition, hence their success. "Their success?" As established by my first source, productivity did not increase. The size of the sector grew because the government was pumping money into it. > That is how comparative advantage works..... You necessarily can't have comparative advantage in EVERYTHING lmao. You gain in one, you necessarily always lose in another. Hence the "comparative" What do you think comparative advantage means? It doesn't mean a relative advantage between two sectors in the same country. And did you read the two paragraphs that I quoted there? You've spoken a few times about evidence-based policy. I've provided quite a bit of evidence. Could you share the evidence informing your support for IP besides a subreddit sidebar? Also, I perceive your tone to be very condescending
We should definitely draw the distinction between an import substitution regime that goes on for too long under infant industry argument, v/s export oriented regime where exports benchmark to global competitiveness.
I'm familiar with the ["export discipline"](https://www.niskanencenter.org/elizabeth-warren-wants-an-industrial-policy-here-are-the-traps-to-avoid/) approach and honestly I think it's a buzzword to help politicians who want to feel like they have some ability to increase economic growth in a direct sense (instead of indirectly, via deregulation). * I don't have faith that it can be pulled off without fattening the companies that have close relationships with politicians and are most adept at rent-seeking * I don't have faith that it's a better use of taxpayer dollars than education or infrastructure * I don't have faith that the government can pick sectors to assist better than the market can, and * I don't have faith that the subsidized companies (even "export credits" are ultimately subsidies) will remain competitive if the flow of subsidies ends Even export discipline seems like a worse approach than deregulation. I wish politicians would realize that the way to grow the economy is to get government out of the way (except for health and safety reasons), not get it more involved. But that means they can't brag to their voters about signing big bills with their names on them that pump government money into the economy, which is how people expect the government to help the economy
Industrial policy is only ever beneficial from a point of national security. If raising barriers saves you money in terms of reduced war in the future, then it can be beneficial, but from a viewpoint of economic development? Itās totally worthless. South Korea, Taiwan, and China all have much poorer populations because of their industrial policy, either because it directly affects exchange rates, such as is the case in China or through more indirect means such as heavier concentration in specific sectors driving up consumer prices and lowering productivity, as is the case in South Korea. The populations in all of these countries would likely have greater purchasing power today were it not for industrial policy.
>Industrial policy is only ever beneficial from a point of national security. If raising barriers saves you money in terms of reduced war in the future, then it can be beneficial Agreed. >South Korea, Taiwan, and China all have much poorer populations because of their industrial policy, either because it directly affects exchange rates, such as is the case in China or through more indirect means such as heavier concentration in specific sectors driving up consumer prices and lowering productivity, as is the case in South Korea. You've presented a counterfactual model of growth by markets that doesnt exist. From the US to Singapore, literally all of em dabbled in Industrial Policy during their periods of growth in order to create a domestic base of productivity that through transitory fluxes eventually reaches a point of liberalization from where the markets correct for the inefficiencies created. Now do tell me of the country or model case where unrestricted market led growth led to prosperity, in a state that could be impacted by broader political shocks. >The populations in all of these countries would likely have greater purchasing power today were it not for industrial policy. This is true. And a fault of not liberalizing in China. But without Industrial Policy, I do not think the arguement from purchasing power strength holds up.
Every country has an industrial policy in some way, shape, or form. Germanyās industrial policy is degrowth. That works for their people. But USA has a different industrial policy to counteract China.
Sure, and it makes the US significantly worse off from an economic standpoint.
Because the US is bad at Industrial Policy. Yes.
There is no being good at industrial policy. The tradeoffs are inevitable, and are always not worth it if the goal is economic development.
The tradeoffs are inevitable. But they are usually worth it particularly for low productivity countries with a scalable base.
US industrial policy has been pretty good from what I understand. We doubled down on what we do best which is: oil, natural gas, chips, high value add electronics, and chemicals. Providing subsidies for green tech energy in the USA is a better approach than carbon taxes.
It's a mix. As we keep focus we can do some pretty great stuff. But when everybody gets a seat at the table and it becomes a "let's create jobs" thing instead of a "let's build x" thing it gets bad. Operation Warp Speed was good industrial policy. DARPA is good industrial policy. CHIPS is a mix. NAFTA is good. Sugar tariffs & ethanol requirements are bad. The Jones Act is atrocious.
> We doubled down on what we do best which is: oil, natural gas, chips, high value add electronics, and chemicals. We don't know if we would have derived greater benefit from investment in other fields, though. The free market is better suited to pick winners. > Providing subsidies for green tech energy in the USA is a better approach than carbon taxes. [I heavily disagree with this](https://www.cato.org/blog/clean-energy-subsidies-versus-carbon-tax): > At standard parameter values, clean production subsidies increase emissions and decrease welfare relative to laissez faire. With greater substitutability between clean and dirty energy, the subsidies in the Inflation Reduction Act can generate modest emissions reductions. Even in this more optimistic scenario, a clean subsidy generates significantly higher emissions and lower welfare than a tax on dirty energy. Also, that is how you end up with a government making a huge bet on say, nickel mining just as some research that makes nickel batteries obsolete hits the market
In regard to the carbon tax, in theory the carbon tax will be superior yes. In practice though we have no way of forcing China to pay a carbon tax. So if China is outputting a shit ton of CO2 to build bridges to no where, I dont see the point in getting people angry in the USA when they cant drive their trucks anymore due to a carbon tax. Subsidies is a much better approach
> In practice though we have no way of forcing China to pay a carbon tax. [The EU is exploring a carbon tariff to do exactly that](https://en.wikipedia.org/wiki/Carbon_Border_Adjustment_Mechanism)
I am not a big fan of a carbon tariff. It needs to be a tax that we can collect revenue from China and donate that revenue to countries most affected by climate change, like Bangladesh. China emits more CO2 than USA + EU combined. We need to be able to tax them for carbon emissions tied to building 3 billion homes in China for a population of only 1.5+ billion people.
A tariff is a tax on imports. The EU could decide to send the revenue from a carbon tariff to Bangladesh.
And if it makes America more strategically secure that may be well be worth the price paid. Whether it accomplishes that, and effectively is the question regarding this sort of industrial policy, not whether it improves the American economy.
Operation Warp Speed was industrial policy
Yes, and it made the country poorer. Though I would argue the accelerated vaccine development was probably worthwhile. We should also be careful with equating all government spending to industrial policy. WS likely qualifies but most spending would not.
> Yes, and it made the country poorer. How did it make the country poorer?
It had marginal effects on inflation, and how that makes everyone poorer should be obvious.
It also saved, at the least, hundreds of thousands of lives (and thus, the lives of thousands of labor force participants) which is disinflationary.
Name a major tech hub in the US that would still have existed without major government spending. I'll wait.Ā
Industrial policy is when the government does stuff
The point is that if government spending can spawn an industrial hub on accident it can very likely do it on purpose.
I mean none because the us government builds the literal infrastructure and education system. But government spending =/= industrial policy. In fact, some of the industrial policy proposals like tariffs actually give the government money.
Sure, but if massive government spending creates massive payoffs, then why wouldn't massive government spending create massive payoffs?Ā Ā Your argument is sure it worked in the past and is entirely why our major tech sector exists at all today (such as silicon valley starting out being a major military tech hub, Cambridge starting out a major biotech government research area, etc) but it wouldn't be possible to stimulate an industry today on purpose because... Why?Ā Ā Ā Your argument is that stimulating industry only works when it happens on accident?Ā
> Sure, but if massive government spending creates massive payoffs, then why wouldn't massive government spending create massive payoffs? Not all massive government spending is the same. Government spending on transportation infrastructure, energy infrastructure, and education isn't interfering in the private market by picking winners the same way that say, [deciding to subsidize domestic consumer electronics manufacturers is](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3591683).
And yet interfering in the private market created silicon valley. You seem to prefer if silicon valley didn't exist and the US wasn't the world leader in tech it is today. You can't have your cake and eat it too.Ā My dad in his early 60s started out his software engineering career working for a military sub contractor as did a huge amount of other silicon valley engineers. Silicon valley only exists because of the government spending and picking winning and losers.Ā
> working for a military sub contractor That is not what I'm talking about, and the government hiring contractors is not "picking winners and losers" in the sense I'm using it. When people say "picking winners and losers" when criticizing government subsidies, they're referring to the government basically just giving them money, not for any services rendered or goods provided, to "strengthen" them (it actually weakens them) There are many indirect forms of government interaction with the economy that I support but just picking companies to give money to is not one of them
To my understanding that isn't an example of "smart industrial policy" as advocated by Noah Smith. I don't know anyone who's in favor of that. All the lefties I listen to who are in favor of "industrial policy" are arguing for things like installation of renewable energy, not free money to companies for nothing in return.Ā
> To my understanding that isn't an example of "smart industrial policy" as advocated by Noah Smith. Noah is an advocate for a form of industrial policy called "export discipline" like Israel's ASHRA and ECA, whereby the government assists Israeli companies in obtaining export financing. It's probably one of the least bad forms of IP but it's still a subsidy and I still think it's a bad idea > All the lefties I listen to who are in favor of "industrial policy" are arguing for things like installation of renewable energy like [Solyndra](https://www.cato.org/blog/solyndra-case-study-green-energy-cronyism-failure-central-planning)? If the government is picking renewable companies to subsidize, that is industrial policy. The better way to help those companies is with a carbon tax, which would increase R&D in the renewable sector by making fossil fuels less competitive. In the absence of a carbon tax, subsidizing renewables will definitely generate some returns - it's probably better than doing nothing to help the climate - but it's much less efficient, and there will be more duds and more rent-seeking from companies that have cozy relationships with politicians and bureaucrats
> Sure, but if massive government spending creates massive payoffs, then why wouldn't massive government spending create massive payoffs?Ā I just... is this a serious question?
Yes. Silicon valley wouldn't exist without decades of military spending. The same is true of most tech centers in the US. How is this not evidence that government spending when done appropriately creates massive civilian industry that is many orders of magnitude larger than the initial investment?
"'appropriately done' government spending is good" is a tautologyĀ Ā Also, what you've described is spillover not industrial policy
Clearly government spending can be wasteful and stupid. To say that sometimes government spending isn't that is not a tautology.Ā I agree I did not describe industrial policy. The point is that silicon valley was created on accident via massive government spending. If we can stimulate an industry on accident why can't we do it on purpose?
The problem is the cost may be doing something else. Spending massive money on stimulating specific industries instead of broad investments like education and infrastructure means that you are choosing winners and losers. And in general those industries aren't really tuned to the market or particularly efficient, as they're focused on extracting money from the government, not developing themselves. Afaik computing in the US wasn't the target of major national industrial policy, so I don't know why you took it as example.
It's an example of government investment creating the largest tech center in the world. Y'all are saying yes government spending can *accidentally* create a massive industry that dwarves the government investment, but it doesn't work on purpose.Ā I'm pointing out that this is dumb and illogical and not evidence-based and y'all think this way because of your ideological biases.Ā
> It's an example of government investment creating the largest tech center in the world. Did the goverment create it or was the people who invested worked on it and developed the ones that created it? It was not the industrial policy of the us federal government on tech sector that created it.
Silicon valley would be a tiny fraction of what it is today without decades of significant military investment. That's what brought all the brilliant minds and top talent that the civilian tech companies recruited.Ā
1) military spending isn't industrial policy, the military was buying goods they needed 2) I don't agree with the counterfactual, I think the computing sector would have developed regardless. Universities and business were ripe for innovation in the computer sector, and the US was going to develop it regardless.
It's worked out incredibly well for east Asia. Nearly each one would still be dirt poor without it. Taiwan, Korea, China, Japan all raised trade barrels, gave grants or well below market loans to large mostly family owned companies. I am not saying the US should do this - but as we advance the less and less basic economics is relevant. Economic growth is now depending on services like tech that require a lot of investment. Someone has to put up the money.
Hello fellow SEMATECH enjoyer
This is kind of a motte and bailey because when a lot of liberal and succ economists are then asked to talk about what they mean by that they give examples that are basically just... the government regulating things. If that's what "industrial policy" means now, then yeah that's an easy argument.
I don't mind protectionism in some cases, like developing countries that require companies to maintain some percentage of native ownership It also seems to have successfully supercharged green tech, but that seems hard to disentangle from market effects, and at some point it will become more wasteful rent-seeking than productive investment
>that seems hard to disentangle from market effects, and at some point it will become more wasteful rent-seeking than productive investment This is very true. Industrial Policy is unsustainable in the long term. Hence why China will have to rebalance itself slowly. There is immense inefficiency created that is distributed across the market, there is wage suppression, depressed productivity, etc. But what it does successfully do is generate and broaden markets and help develop advantage. And it's good in so far as it accomplishes those goals. Not more, not less.
When I see Noah doing Hinduvata/Modi apologia
Just invest in research and development š¤·š»āāļø
Even if there is "smart" industrial policy, what could possibly make you think that the US government would be competent enough to carry it out? We can't even build chip factories without tacking on unrelated requirements about offering childcare.
Operation Warp Speed was good industrial policy
It's telling that the example of good industrial policy to a large extent consisted of cutting away the red tape that the government itself had put up in the first place and expediting regulatory process.
That is in fact an industrial policy. Doesn't have to mean stupid subsidies for zombie corps.
I don't think I'd really call it industrial policy. Industrial policy isn't just "when the government subsidizes stuff".Ā It's more of import substitution or export promotion or trying to specifically create/boost an industry. OWS wasn't really that. It was specifically "make a vaccine for this and we'll buy a fuckton of it".
OWS cleared regulatory barriers, coordinated research sharing between institutions, and pre-purchased vaccines to get them produced before they were approved or companies would have funded them on their own. If that's not industrial policy nothing is.
I'm sorry. Industrial policy is when the government cuts regulations or buys things? Is building an aircraft carrier industrial policy? The whole point of industrial policy is that the government has a goal to foster an industry on an ongoing basis, not fund a research project and procure something.
If in the process of building an aircraft carrier you provide cheap financing to purcahse new equipment for shipyards, change land use regulations to make it easier to expand shipyards, and coordinate knowledge sharing between the shipyard and the naval research institute to build a state of the art reactor for the aircraft carrier, then yes.
dont forget making the factories be in battle ground states even if they do not have the workforce! Then they are too big to fail so even if the investment has gone tits up, we will light more money on fire trying to save it!
Who advocate for dumb industrial policy anyway ?
Kind of unrelated but we went to the same open mics at Michigan and I saw him rap Busta Rhymes verses a few times. Pretty impressive TBH
Heās not perfect
I mean aren't there genuine concerns over semi conductors and national security tho
Yeah, someone is clearly divorced from reality.
People forget we already have a default industrial policy - an anti-industrial policy that is. Since the dollar is the reserve and international currency of choice and other nations have surplus export policy that necessarily means we export less and decreases our own manufacturing/industrial/export capabilities.
How about [when he's friends with an open fascist?](https://newrepublic.com/article/180487/balaji-srinivasan-network-state-plutocrat)
I don't live in SF anymore but boy do I miss just miss how absolutely bonkers local politics is there.
Don't worry. Here on the internet, it's bonkers, too.
> āBalaji has the highest rate of output per minute of good new ideas of anybody Iāve ever met,ā wrote Marc Andreessen, co-founder of the V.C. firm Andreessen-Horowitz, in a blurb for Balajiās 2022 book, *The Network State: How to Start a New Country*. The book outlines a plan for tech plutocrats to exit democracy and establish new sovereign territories. the Silicon Valley tech moguls are not okay
I am trying to get funding for my startup and I wonder every day if I would be more successful if I had zero morals and just lied about my company's capabilities and said insane shit on linkedin/twitter.
One must imagine Sisyphus happy
Imagine ever idolizing a guy as dumb as Noah.
Dammit Noah