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How Asia Works
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All the comments and stories posted to Hacker News that reference this book.There's a similar book, "How Asia Works".[1] This has a good survey of industrial policy in Asia, what worked and what didn't.Summary:
Step 1: Mechanize agriculture, to free up people for an industrial labor force
Step 2: Support export-oriented industries.
Step 3: Transition to a developed country.
Trouble comes when you botch step 2.
⬐ barry-cotterKorea didn’t do step 1 and it did fine. Their post war land reform lead to farms so small that there were no tractors in the country until something ridiculous like 1970.⬐ pas⬐ NeedMoreTeaThey had a big population boom, also they very much did a lot of reforms needed to increase economic output (eg. private property laws, market liberalization, free trade agreements, clear-ish laws, education, healthcare, dense urbanization, public transportation).Absolutely.Steps 1 and 2 are increasingly frowned upon with WTO or trade agreement requiring acceptance of foreign finance into your markets, preventing the levels of subsidy most of the developed world went through, or trying to require honouring of foreign IP. Which seems to look increasingly like taking away the ladder the developed world used to "get there".
The honouring of IP is particularly comical (and to read about here seeing outrage at China borrowing some overseas IP), as from what I can remember everyone who managed to develop did so by stealing IP, subsidising etc whilst providing enough walls to ensure the fledgling industry couldn't simply be bought up by someone higher up the food chain.
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...
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.