Argentina recently imposed import-license requirements for mobile-phones. Its motive is to replace imports with local production, and hence create jobs. The trade policy, coupled with tax incentives, led Research in Motion, the makers of BlackBerrys, to begin assembling phones in Tierra del Fuego. Similarly, Brazil is trying to replace imports by local manufacturing using tax breaks. As a result, Foxconn is setting up a Brazilian plant to assemble iPads.
Both these examples, taken from this week’s Economist, would
make Ha-Joon Chang smile. Not only is he a great believer in the role of
manufacturing in prosperity (see here how he crushed Bhagwati in an onlinedebate), he also believes such industrial policy is exactly the right tool to
His latest book, “23 things they don’t tell you about
capitalism”, makes the point once again, repeating his favorite stories from
previous books (see my previous review here).
The author is quite talented at
convincing people that capitalism is often a bad idea. His approach consists in
making extremes out of free-market ideas, and giving a few examples to prove they’re
not true. Arguing by examples does not usually convince economists, who prefer
regressions. But the latter should pay attention rather than dismiss it so
He is most interesting when arguing that education does not
matter much for growth. A university education does not make you more
productive. What matters more is the capacity of organization of leaders, whether
in business or government. He’s also fun when he gives example of how economists
don’t do good policy. The rest is mostly summarized as “free-market policies
don’t always work, but quite to the contrary”.
All in all, this is another great book by Ha-Joon Chang, but
nothing new. As for Brazil and Argentina, let’s see what happens to their industries
in the years to come.