Bring back Mercantilism
Conservation Finance posts references to a real gem of an article.
Ha-Joon Chang writes that almost all rich countries got wealthy by protecting infant industries and limiting foreign investment.
The article fails to deliver, falling in the same trap of “the unseen” that so many economists and laymen are victims of.
[…]had the Japanese government followed the free-trade economists back in the early 1960s, there would have been no Lexus. Toyota today would at best be a junior partner to a western car manufacturer and Japan would have remained the third-rate industrial power it was in the 1960s—on the same level as Chile, Argentina and South Africa.
Why was the Lexus necessary to exist? Yes, we may see it today and judge it as a valuable thing, but why would it have been necessarily superior? How do we know that the resources destroyed by the restrictions (the missed opportunities, the unrealized enterprises) would not have been put to a better use?
This is a variant of the post-hoc fallacy. Because economic development happened after some economic restrictions, the latter caused the first. One must actually present a causal relationship between the two. Why were these industries to benefit and not others? How do we know the government can make these choices consistently? If entrepreneurs are not willing to risk their own money, what trust can we have of the government risking the money of others?
People tend to see the great public works project, but not the things (often mundane) that were not constructed, had people been free to chose for themselves. And it is these things, as proven that people are willing to sponsor, that make up the decidedly superior economic outcomes. The economy is not about cars, it’s about people getting what they want, whatever that is.
Where are you, Bastiat?