
The Rise of China and the Fall of the ‘Free Trade’ Myth - montrose
https://www.nytimes.com/2018/02/07/magazine/the-rise-of-china-and-the-fall-of-the-free-trade-myth.html
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ggm
I feel the article speaks to my own cultural bias, and I liked it but now I'm
suspicious I liked it because I agreed with so much it said.

The last comment, about re-joining the TPP: It is unstated but I feel true
(none the less) that if the US rejoins the TPP it will be a vastly different
outcome to a US led TPP. Australia was screwed over by the last trade round,
and significant economic disadvantage lay in the major US ally in the region
(Australia is one of "five eyes" in the secrets sharing intelligence circuit)
agreeing to roll over on trade for sectional US interests. The current TPP may
suck, but it sucks a lot less regarding US demands on IPR, and other US
favouring trade positions.

If the US rejoins, these will not be core issues for the current participants.
If they negotiate a China facing TPP you can be sure its both favouring China,
and very probably more equitable to the other participants than a US cast one,
for clear reasons: It helps China in the long term, to the be the centre of
the trading nexus.

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WalterBright
I don't think the author understands what free trade is:

"Regardless of the mystical properties claimed for it, the invisible hand of
self-interest depends on the visible and often heavy hand of government. To
take only one instance, British gunboats helped impose free trade on 19th-
century China — a lesson not lost on the Chinese."

I.e. the gunboats _removed_ the Chinese heavy hand on trade. The "invisible
hand" cannot operate when the government restricts it.

The role of government in free trade is to prevent forcible interference with
it.

"It was Hamilton’s formula, rather than free trade, that made the United
States the world’s fastest-growing economy in the 19th century and into the
1920s."

That's quite a reach. The US's biggest market at the time was itself, and the
Constitution ensured free trade between the states. It was the world's biggest
free trade zone.

"World War II proved only a brief interruption in Japan’s policy of
protection."

Japan was not an economic powerhouse before WW2. It was massively unable to
compete with the US economically. It could not replace the combat losses of
equipment. Etc.

~~~
twelvechairs
It doesn't help these days that when you hear a 'free trade agreement' being
signed between countries its usually not actual 'free trade'but highly
regulated for mutual self interest.

~~~
emodendroket
That doesn't seem to really clash with the author's thesis that "free trade"
advocates are not taking their own medicine.

~~~
rvern
Many are not, indeed. But if you care about the truth, you should argue
against the best arguments of the strongest advocates. You have to challenge
the arguments in the chapter on international trade of Tyler Cowen and Alex
Tabarrok’s _Modern Principles of Economics_ , and you have to refute the
central point. _The New York Times_ and Hacker News do not require that much.

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mirimir
I wonder about this:

> But to grasp China’s economic achievement, and its ramifications, it is
> imperative to ask: Why has a market economy directed by a Communist state
> become the world’s second-largest?

Was China ever really a communist state? They've said so, of course, and
talked the talk. But maybe it's more accurate to say the China remains a
Confucian state. With an overlay that looks a lot more like fascism / national
socialism than communism.

~~~
jonathanyc
Come on. China is no utopia—it isn’t even a country I would want to live
in—but equating them to Nazis instantly discredits your arguments.

The Chinese model is unique, and why shouldn’t it be? They are the first
country in history of their size to industrialize and become a world power.

Let’s stop making cute generalizations that only serve to make ourselves feel
better and think of what we actually don’t like about their system of
government so we can fix it in our own. “The Chinese are Nazis!!” doesn’t help
anyone.

~~~
mirimir
I never said Nazi. What I'm getting at is the emphasis on strong leadership,
and the belief that businesses should serve the national interest.

~~~
emodendroket
You said "national socialism," which is, quite literally, the ideology that
"Nazi" is shorthand for.

~~~
mirimir
OK, so I should have limited it to fascism, given that "national socialism"
has become so closely identified with German Nazism. It was opponents who
labeled the "National Socialist German Workers' Party" as the "Nazi Party".
And there was a lot more idealistic socialism there, before Hitler and his
associates took over and created what we know as Nazism.[0]

0)
[http://www.independent.org/pdf/tir/tir_19_04_06_znamenski.pd...](http://www.independent.org/pdf/tir/tir_19_04_06_znamenski.pdf).

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evadne
Very relevant book, [http://www.anthempress.com/kicking-away-the-
ladder](http://www.anthempress.com/kicking-away-the-ladder)

------
chj
I don't think China is the only winner of Free Trade here. China did have a
large surplus, but isn't that most of the profits go to American and European
companies? Why that money wasn't going back to America is a myth itself.

After three decades of industrialization, China's environment undergoes tragic
damage, and the country gradually loses the ability to feed itself. Today
China imports more than 20% of its food supply. As the aging workforce
retires, China's future outlook is not very bright. I hope you understand, not
all the grass is green in China.

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intended
The most recent thing I have heard about china, repeated by people who man
editorial positions in news papers you read, is that China is now the dominant
super power. America just doesn't know it yet.

I suspect this is entirely true.

And as added ammunition for this article - the poor prime minister, but
excellent finance minister of India - Manmohan Singh, focused on the Korean
Model a lot earlier on. It influenced the way the Indian markets opened.

There's only 1 book written about MMS, and in that book theres a telling
interaction, where Manmohan (Much before his days as PM) was upset that the
author (then a reporter), didn't mention Manmohan's stance on the Korean model
in an article.

~~~
candiodari
True, but China is also at the very top of it's game, and it's success came at
a rather extreme cost. Mind-boggling debt, smog in all the major cities up to
LETHAL levels at times (and something like 80% of the time above cancer-
in-10-years levels), no army to speak of, legendary levels of corruption (and
centuries of history of corruption).

And to top it all off, China's labor market is currently the highest it'll be
for the next century or so. It's all downhill from here. China's economic
dominance through cheap labor is under severe threat, and they're losing. That
loss is causing economic unreast (tens of millions of job losses) in the
China.

China also legendary when it comes to outright lying about their
accomplishments. From scientific advancements in Fusion energy to amounts of
iron ore in ports, China has been caught lying so often that economists
seriously think 80%-90% of government statistics are outright falsified, with
often strong arguments about the remaining 10%. Unfortunately, their
leadership is equally famous for believing the lies, right up to the point
that they marched a fleet of ships under British cannons, with substandard
hulls and without ammunition. You see, the general of that fleet had assured
them the ammunition was there, several of his officers had written the central
government that he was lying. Whichever was the truth, the fleet was
devastated, the general survived and wasn't even fired. Thousands of soldiers
and something like 40% of the total Chinese navy was lost. Legendary.

There are so many things that could go incredibly wrong here. Economists
aren't kidding when they say China might start WW3. They might have to.

~~~
Bucephalus355
This. I mean I feel like anyone could make an awesome economy if they were
given trillions and trillions of loans, told they could ignore all
environmental regulations, and had, at least initially, a bottomless pool of
cheap labor with no rights.

Of course it looks like they’re “winning”. They will lose, and ultimately it
will be a tragedy for the Chinese people when standards of living collapse and
the true ability to repress people with modern technology begins to show.

~~~
emodendroket
> This. I mean I feel like anyone could make an awesome economy if they were
> given trillions and trillions of loans, told they could ignore all
> environmental regulations, and had, at least initially, a bottomless pool of
> cheap labor with no rights.

I mean, how is this different from the US or British Industrial Revolutions?

------
cheriot
Free trade vs protectionism is not a one dimensional spectrum. I can't
recommend How Asia Works highly enough as a source of nuance in why
protectionism has worked for some and not others.

[https://www.amazon.com/How-Asia-Works-Joe-
Studwell/dp/080212...](https://www.amazon.com/How-Asia-Works-Joe-
Studwell/dp/0802121322)

------
vfulco
Finally after the middle class in US has been hollowed out and everything that
could be shipped over there was, we get the real story. There are scoundrels
in (former) US government and industry who sold out this country lock, stock,
barrel for their own greed.

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emodendroket
I more or less agreed with the thesis before reading the piece, but I found
this piece quite interesting. I usually like Pankaj Mishra (and have since I
read his stinging takedown of Niall Ferguson's work). Thank you for sharing
this.

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gonvaled
The US has been the champion of free trade assuming that it was win-win or
that if would win when others loose.

As soon as it looses while others are winning (in some areas) they are trying
to bend (again) the rules on their favor.

The American era has been a waste: one country trying by all means to impose
its agenda, to claim its divine right to progress and dominance, to unfairly
try to control the rest of the economic actors. Let's hope the Chinese era is
more fair and balanced.

~~~
rm_-rf_slash
Ha! Chinese economic policy is proudly mercantilistic. They have no
pretentions towards a balanced playing field. China will do what is best for
China.

~~~
gonvaled
As has the US, to the point (just one example) of lying on the Security
Council to justify taking control of relevant geopolitical resources. It didnt
even work.

Not only covertly America First, but also incompetent.

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jvm
I sense a lot of mood affiliation in the title that I'm sure will earn the New
York Times a lot of clicks. China is the biggest success story of free trade
in the history of the world, and the contrarian take presented here is absurd
to the point of silly.

Liberalization is a matter of degree. You can't cherry pick a particular
protectionist policy South Korea had and then say, "Oh look see they used
import substitution and still had a good outcome." You have to also explain
why that import substitution policy didn't ruin the Korean economy the way it
did Argentina, or in an extreme example, Maoist China. And what you'll find is
that they became much more liberal in other ways.

If you're going to claim that liberalism doesn't matter you need to show your
work. You need to show that in aggregate, countries that liberalize their
economies do less well than countries with less liberal economies. But when
you look at the data, you will find just the opposite: Countries that move in
a liberal direction, like China, South Korea, and Chile, tend to improve their
outcomes, while those that do not, like Argentina or Zimbabwe, tend to
stagnate. And almost every wealthy country in the world is either highly
liberalized or sitting on an ocean of crude oil. The fact that even liberal
countries have illiberal policies doesn't disprove the benefits of
liberalization.

Most likely, Asia succeeded in spite of protectionism, not because of it.

~~~
blindwatchmaker
China succeeded because it was in the prime position to take advantage of
western manufacturing looking to move production facilities elsewhere for wage
arbitrage. Right place, right time to reap massive export surpluses - and they
were smart enough to use the opportunity to have built up a domestic
market/technical knowledge base when wages inevitably started to raise and
manufacturers began to move elsewhere again. You're going to see a lot less
'liberalization', and probably some reversals, in China in the coming years.

~~~
rvern
Rather mostly China succeeded because it had a population larger than any
other country. Production depends primarily on resources and human labor is
one of the most valuable resources. It is no surprise that population count is
strongly correlated with nominal GDP.

This should be completely obvious.

It also refutes the author’s argument. Why has a market economy directed by a
Communist state become the world’s second-largest?! Would Friedman find it
hard to explain why China, run by a Communist Party, has emerged as central to
the global capitalist economy!? China has 19% of the world population but
roughly 10% of the world GDP. It is 79th in GDP per capita at purchasing power
parity. We should not evaluate a country’s economic policies by looking at its
nominal GDP without also looking at its population—this is nothing Friedman
would have difficulty explaining.

~~~
jvm
> Rather mostly China succeeded because it had a population larger than any
> other country

…is that also why India "succeeded"?

~~~
rvern
Yes, at least in the sense of succeeding the article talks about. India is the
third country in the world by GDP at purchasing power parity, which is
consistent with its population being second largest.

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rukittenme
This article makes me sad. Not because I believe its true but because other
people will.

I really don't want to write a 3000 word comment in response to this article.
After all, only a few people will read it and those that do will not read it
with the seriousness of a New York Times article.

I'm very disappointed in this piece. Half truths, omitted details, and bad
history all rolled into Communist apologia.

For those who do not have time to read paste the headline: one sided "free"
trade agreements benefit one side. Who would have thought? All other
"conclusions" the author draws from this fact have no bearing on reality.

~~~
emodendroket
I don't really care for commentary like this. Either argue with the piece or
don't; don't bore us with how you're sad that people will find it persuasive
without bothering to refute any of its ideas.

~~~
rukittenme
> Either argue with the piece or don't

There are more options than A or B. By expressing displeasure with the article
I can at the least demonstrate there are other viewpoints.

There is a large wealth of knowledge and information out there. All of it
detailing how China owes its economic success to economic liberalization.

This article stands out for its contrarianism. That's why it will get some
many clicks and comments as opposed to yet another study proving what we
already know. If anything I should be lamenting the "death" of "popular
knowledge". If knowledge isn't constantly in flux its "boring" and not worth
reading. Thus knowledge must constantly change for papers like the NYTimes to
continue to exist.

Imagine if a Creationist wrote an article in "Nature" (the scientific
journal). What would you say in response? What would you say if it was well
received? Would you rebut the same old lies over and over and over again or
would you just be sad that the world never seems to learn?

~~~
emodendroket
Considering the piece is a polemic against a different view, I don't see how
you could possibly read and it and walk away confused as to whether a
different view exists.

~~~
rukittenme
Yes of course but you could be confused as to the popularity of the two views.

Again, why doesn't the journal Nature run a piece detailing how "evolution got
it wrong"? Because it is incorrect and unnecessarily muddies the water.
Because "Nature" has a shred of credibility and wishes to keep it. It is
certainly possible to point to blind spots in our knowledge and say "Hah, you
can't explain that!" Or to point at past errors and say "Hah, you're always
getting it wrong!"

It is up to the paper or journal to screen such plainly and obviously
fallacious information. Or at the very least categorize it in such a way that
it is plainly evident that these are emerging or not-widely-held viewpoints.

~~~
emodendroket
It is less than "plainly obvious," to me, that Japan, South Korea, and China
(not to mention the older historical examples of the United States, the United
Kingdom, and Germany, which are mentioned but get less attention in the piece)
were all successful in their project of industrialization in spite of, rather
than because of, common traits of the paths they all took to get there.
Certainly I would not consider it comparable to arguing against evolution to
claim the opposite.

