Bhuvan—On Tariff Protectionism
I read this interview of Ha-Joon Chang, the noted development economist. A few counterintuitive things that stood out to me:
One of the stated objectives of the tariffs imposed by Trump is to reindustrialize. There are successful examples of countries reindustrializing like Sweden, Finland, Switzerland, and Singapore. The reason why they were able to revive manufacturing is not because of tariffs but deliberate policies like industrial policies and retraining workers who lost jobs due to the decline of traditional manufacturing.
People misunderstand Alexander Hamilton's advocacy of tariffs to protect infant industries. Apart from tariffs, he also supported the development of infrastructure, banking, financial infrastructure, and subsidies through industrial policy.
Even when the US increased tariffs starting around 1860, the reason why they worked is the "capitalist class" was willing to invest given the advantage of a huge internal domestic market and American industry managed to catch up with the Europeans. However, this time is different due to the political ideology of "neoliberalism" which prefers lower wages, higher profits and returning money to shareholders through buybacks. This can be seen from the fact that US real wages have been stagnant from 1970 to 2010 and have barely risen after.
The American logic of looking at trade deficits is "bizarre" because they run a goods deficit but a services surplus. They also dole out subsidies to their agriculture sector. By this logic, is it ok for the "Korean government to accuse the Americans of unfair practices in the agricultural sector?"
I don't agree with everything that he has to say but his is an interesting perspective nonetheless.
That's it for today. If you liked this, give us a shout by tagging us on Twitter.