How the World Works (1993)

http://www.theatlantic.com/magazine/archive/1993/12/how-the-world-works/305854/?single_page=true

by phreeza • 10 years ago

57 25 10 years ago

grillvogel2• 10 years ago

i do find east asian style capitalism preferable to the "fuck everyone over as much as possible to maximize everything" style that we have here

readams• 10 years ago

China is even deeper into the fuck everyone over as much as possible mindset.

grillvogel2• 10 years ago

https://en.wikipedia.org/wiki/East_Asian_model_of_capitalism

nothing to do with China

xenihn• 10 years ago

Looking at South Korea as a specific example, it seems to concentrate corporate power much, much more, since there is no collusion - state sponsorship for chosen corporations is out in the open.

Look at how powerful/influential Samsung is. We don't have an equivalent in the US. You can argue that the banking sector is as powerful (or more-so), but that's more than 1 corporation.

dilemma• 10 years ago

You have Apple, which is state sponsored (federal level). Tesla, too, is state sponsored.

jtrtoo• 10 years ago

Wouldn't the U.S. be considered a hybrid?

frsandstone• 10 years ago

It's time to make America great again.

mathattack• 10 years ago

tl;dr

Can someone summarize? Is he just saying that free trade isn't the only way to maximize national wealth? That perhaps Beggar Thy Neighbor can help ones own country if others don't follow suit? It was too drawn out for me to read the whole thing and rebut.

nostromo• 10 years ago

The author is arguing that Mercantilism and Protectionism make countries richer than does unbridled Free Trade.

I imagine OP posted this because it's at the core of the current US presidential debate. Interestingly, it's a debate happening within the parties, not just between them.

scribu• 10 years ago

That may be the overall conclusion, but I find the many distinctions the article draws between Anglo-American economics and others quite interesting in themselves.

For example, I thought the point about inequality was very well articulated:

"In the real world happiness depends on more than how much money you take home. If the people around you are also comfortable (though, ideally, not as comfortable as you), you are happier and safer than if they are desperate."

Edit: phrasing.

abalashov2• 10 years ago

As I said in a comment elsewhere, I don't think protectionism is really at the heart of the matter; the acceptance of various degrees of state-guided capitalist development are more thematically central to the "third way".

jsnk• 10 years ago

Protectionism in East Asia did help very capital intensive industries (automotive, chip fabrication, ship building etc) to grow during its infancy. But I doubt that if this is fundamentally the right way to look at why economic miracle happened in East Asia.

There has never been shortage of protectionist economies. In fact this was the norm for centuries all around the world and certainly in East Asia. What was it about post WWII that was so special that actually had impact on the economy?

[Edit] And let's not forget about North Korea. North Korea surely had the most protectionist economy in the world. It has shielded its own corporations from the hardships of global competition, and yet we never saw companies like Hyundai, Daewoo or Kia in North Korea.

manmal• 10 years ago

If you mean "what was so special about post WWII that the US succeeded by being laissez-faire" - then I'd argue that WWII was what happened. With Germany and Japan destroyed, the US had an advantage. Call it unfair or not. Germany looks very healthy now, with their focus on industry.

danielam2• 10 years ago

The funny thing about Germany now is that it's actually in a bit of a bind because its prosperity is perilously linked to export. The reason Merkel is so aggressive about maintaining the integrity of the EU is largely because Germany needs the free trade zone, common currency, etc to keep its export-driven market running (not to mention favorable access to cheap labor to its east). The author emphasizes the dangers of over-dependence on import, but the opposite is likewise true. Interestingly, when the 2008 recession hit, Poland was the only country in the EU left with positive growth and this is largely attributed to the strong domestic market that made it more resistant to failure in foreign markets.

aomurphy• 10 years ago

There's certainly never been a shortage of protectionist economies, it's pretty much the default of countries for obvious reasons of protecting vested interests. The best explanation I've ever read for the rise East Asian export economies post WWII is in the book "How Asia Works" [1]. The title is a little misleading, it's only about East and SE Asia, but it has a good broad overview of what made Japan, Taiwan, South Korea, and China all rapidly industrialized 1945+, and why South East Asia (particularly Malaysia) failed.

The main thrust of the argument is that markets need to be protected but also forced to export. Whether this is through tight currency controls (to get foreign currency you have to export), government support, or government force (Park arrested South Korean businessmen, and released them only when they agreed to focus on export). And ruthless culling of companies that failed in the global market. You also need very disciplined land reform, to create the initial capital generated by intense land use by small farmers - many SE Asian nations failed to do this, and South Korea, Japan, and Taiwan were all quite successful [2]. China is more muddled, but they also had a strong focus on exports and government support for that.

Exports are important, as otherwise protected companies stagnate and become uncompetitive, reliant on government support. With a focus on exports, countries can use their local market as a test bed and a market to build up to exporting to richer countries.

What I'd really like is a good overview of ISI policy in the successful East Asian Countries versus Latin America which has an even longer history of ISI.

[1] http://www.amazon.com/How-Asia-Works-Joe-Studwell/dp/0802121... [2] To an extent too succesful: Japan spends a lot of money today protecting inefficient small farms created by land reform. But it's a small price in comparison.

hackaflocka• 10 years ago

Education, innovativeness, willingness to absorb others' innovations, love of science.

When I read "Made in Japan" -- I saw all of these as contributors to the Japanese miracle.

It wasn't so much (to me anyway) that the Japanese economy had protection, but that the Japanese people were so darn innovative that they couldn't be stopped. The other East Asian countries share many of the Japanese traits (even if not all).

abalashov2• 10 years ago

I don't think the essence of the German-Asian argument (to use the author's framing), or, for that matter, the "third way" championed by the Asian Tiger economies, is so much protectionism--though protectionism is undeniably crucial--as a certain degree of state-guided capitalism. This is covered by the "process vs. result" part of the article.

In the Anglo-American view, there are two possibilities and two possibilities only: (1) unbridled laissez-faire capitalism with a minimum of regulation, and (2) Soviet-style central planning. In reality, there's a fairly smooth continuum of in-between options, where the power and dynamism of markets can be harnessed but still subordinated to broad development goals and national macroeconomic priorities.

Spooky232• 10 years ago

What was it about post WWII that was so special that actually had impact on the economy?

Lots of special things in post WW2.

- Europe was bombed and smashed into oblivion.

- A whole generation of English, French, Austrian, German, and Russian workers and professionals who would have been at career peak were instead in graves under WWI battlefields of France and Eastern Europe.

- Colonial empires imploded.

- The US had unprecedented leverage over most of the world diplomatically and commercially.

B1FF_PSUVM• 10 years ago

Well worth the reading time, if nothing else to point out where an almost unheard of (but much practiced) alternative to the dominant free-trade discourse is based.

It also helps to know that thirty years ago the fear of Japan's economic growth had the US press shitting bricks, and probably not just because that was good for circulation ...

dctoedt• 10 years ago

The author is James Fallows [0], a long-form journalist on public policy subjects; computer user going back to Electric Pencil in the pre-IBM-PC days [1]; multi-lingual international traveler; private pilot; beer connoisseur; Rhodes Scholar; former chief White House speech writer; and family man. For many years I've been reading pretty much everything he writes.

[0] https://en.wikipedia.org/wiki/James_Fallows -- see also http://www.theatlantic.com/author/james-fallows/

[1] For (several) laughs, see http://www.theatlantic.com/magazine/archive/1982/07/living-w...

danielam2• 10 years ago

Let's not forget the broader geopolitical context and the relations among nations that can result (this basically expands and refines the author's main point). For example, South Korea's material prosperity is also the result of American geopolitics. If you had told someone not 75 years ago that a nation of rice farmers would become an advanced industrialized country in the time that it did, you would have been laughed out of the room. The US needed South Korea to be what it is and the country benefited from it economically. In other words, it was in the broader American political and economic interest to encourage South Korean growth.

fanzhang• 10 years ago

This article was written in 1993, a year where Japanese GDP per capita was 25%+ more than the US's. This was the peak of American fear against Japan taking over the world, economically.

With the empirical foregone conclusion that Japan was better than the USA, many people including this author seemed keen to find reasons. Many people ultimately traced it back to the fundamental values of the US.

Yet looking 23 years forward in the future, the US GDP per capita is now about 50% greater than Japan's. In fact, Japan has barely moved in these 23 years, and it's interesting to note everything the author citing above as Japan's philosophical advantage being recast by more recent commentators as weaknesses. To wit, here are the following praised ideas, and the most recent critique of them in light of some developments in the last 23 years:

- "Nation/group above the individual" -- Japanese stagnation has been strongly blamed on a culture where companies have less ability to hire young but very talented employees because that would upset the age-competence hierarchy, and other such rigid structure.

- "Deliberate development needed for growth" -- Witness the Chinese high-speed rails to nowhere, the failure of the US federal forway into being a solor company VC.

- Close association of banks/conglomerates -- Theories abound of Japanese zombie banks and companies with negative value being propped up by bad loans.

And sorry for bashing on Japan -- I have nothing against them personally. They just happen to be a stand in for a star of the alternate non-Anglo economic theory in the essay above.

(These cycles of being anti-US-value when another system is dominate has been surprisingly common. Communism was championed most strongly within the US itself exactly at times when the US was in a recession but the USSR was doing well. For example the early 1930s or early 1980s.)

damptowel• 10 years ago

Japan's decline might have been a political phenomenon.

https://vimeo.com/110710752

How the World Works (1993)

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