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
promote development.
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
easily.
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.
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2 comments:
On my Blackberry's box, it says the device is made in China. But nobody would say Chinese producers get a big chunk of the profits. How come it's really difficult to understand that what matters is value chain, not where it assembles?
Hey Yose! seems like posting about Ha-Joon Chang really attarcts your comments! True that value-added is what matters for GDP, not assembly since a lot of the components are imported. But assembly work means FDI which create jobs and technological spillovers, unlike imports... And Chinese producers might not get a big chunk of the profits of balckberrys, but it still gets the FDI, jobs and grows at 10%... So assembly matters I would say, the question is more whether ou should force it (as in Argentina) or incentivize it (as in East Asia)!
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