I think the worry is about “dumping” and using subsidies to artificially lower the price, take over the market and then jacking up the prices. If the Chinese manufacturers just have naturally way more competitive prices, as they’ve done before in stuff, I don’t think that’s as big of an issue and doesn’t get the same butthurt
It’s not that they couldn’t do that in theory, but my counter has always been that, also in theory, every single Western government is equally capable of lowering the price by adopting Chinese industrial policy. We are just so ideologically committed to market logic that we can’t imagine doing that.
The worry is that if someone is using a lot of subsidies it will mean others have to too to stay competitive and soon everyone is doing it and it can escalate to a trade war. Can be nice for the consumer, if it doesn’t end in a crash of that sector
There is a difference between using subsidies for beggar thy neighbour trade war versus for keeping domestic output and employment stablized. The West can do the latter whether or not other countries are doing the former.
If the purpose of manufacturing is to create employment, local production to increase self-sufficiency and not just profits for capitalists, then price setting by public sector archives it. Any imports from abroad financed in local currency represents a real gain for the country in this case.
Countries are doing the latter, but it always also does the former. If one country is giving subsidies, especially generous ones as China have done historically, it forces the others to give subsidies to stay competetive. That’s a game bigger countries can play but smaller and less wealthy countries can’t really compete.
I disagree, every country with sufficient knowledge and resources can set up their own manufacturing. Do I think Ghana will be able to make as efficient windmills as China? On their own not anytime soon. Not because of money but because they lack expertise, things take planning and time to build up.
But they can start somewhere, taking advantage of the powers the state has. The problem isnt financial but real.
When your country can produce high value added goods, e.g. European countries but not at internationally competitive prices due exchange rates, labor costs etc, the clear solution is to have the state set prices to be competitive with imports.
First world countries have another advantage though , their currencies are highly demanded internationally so their trade isn’t simply limited to barter like arrangement wherein you only get what you give.
It’s just much harder to be financially competetive when the big countries are pouring in massive subsidies. Of course they could keep domestic manufacturing on life support and hope for domestic consumption to keep it alive, but when foreign big multinationals receiving generous subsidies are competing on the local market, at what cost do you want to keep your domestic company afloat. And do smaller countries have money to even do that
It’s not really a cost to keep domestic industry, the cost is that labor and other resources are used. If the goal is to keep output and employment then it works fine.
If you take the cost in money terms it’s massive. But money isn’t real. If you take it in real terms, the alternative is unemployment and loss of manufacturing knowledge and self sufficiency which is worse.
And do smaller countries have money to even do that
Well, India has this thing called Minimum Support Price, basically a floor price for many agricultural goods to make sure the farmers have a market to sell to. US and WTO hate it because it “distorts markets” yet functionally it keeps the country food sufficient and keeps farmers employed.
It has been downgraded and weakened over the years by the neoliberals but it still exists because taking it away completely is politically NOT financially expensive. In terms of real, it creates income and employment for farmers, it keeps output afloat.
I mean money isn’t real but the workers and materials cost money and workers and material producers expect a payment. And if you want to pay people, you need to make the production somehow sustainable. And then you’ll also compete with other manufacturers, some big multinationals from USA, China etc. who can afford to pay massive subsidies so their products can be artificially cheap compared to your domestic stuff. So you might be producing stock nobody wants to buy, so you don’t get money for them, making the thing less sustainable.
India isn’t exactly a “small country”. It has the 5th largest nominal GDP, world’s largest population…
I think the worry is about “dumping” and using subsidies to artificially lower the price, take over the market and then jacking up the prices. If the Chinese manufacturers just have naturally way more competitive prices, as they’ve done before in stuff, I don’t think that’s as big of an issue and doesn’t get the same butthurt
It’s not that they couldn’t do that in theory, but my counter has always been that, also in theory, every single Western government is equally capable of lowering the price by adopting Chinese industrial policy. We are just so ideologically committed to market logic that we can’t imagine doing that.
The worry is that if someone is using a lot of subsidies it will mean others have to too to stay competitive and soon everyone is doing it and it can escalate to a trade war. Can be nice for the consumer, if it doesn’t end in a crash of that sector
There is a difference between using subsidies for beggar thy neighbour trade war versus for keeping domestic output and employment stablized. The West can do the latter whether or not other countries are doing the former.
If the purpose of manufacturing is to create employment, local production to increase self-sufficiency and not just profits for capitalists, then price setting by public sector archives it. Any imports from abroad financed in local currency represents a real gain for the country in this case.
Countries are doing the latter, but it always also does the former. If one country is giving subsidies, especially generous ones as China have done historically, it forces the others to give subsidies to stay competetive. That’s a game bigger countries can play but smaller and less wealthy countries can’t really compete.
I disagree, every country with sufficient knowledge and resources can set up their own manufacturing. Do I think Ghana will be able to make as efficient windmills as China? On their own not anytime soon. Not because of money but because they lack expertise, things take planning and time to build up.
But they can start somewhere, taking advantage of the powers the state has. The problem isnt financial but real.
When your country can produce high value added goods, e.g. European countries but not at internationally competitive prices due exchange rates, labor costs etc, the clear solution is to have the state set prices to be competitive with imports.
First world countries have another advantage though , their currencies are highly demanded internationally so their trade isn’t simply limited to barter like arrangement wherein you only get what you give.
It’s just much harder to be financially competetive when the big countries are pouring in massive subsidies. Of course they could keep domestic manufacturing on life support and hope for domestic consumption to keep it alive, but when foreign big multinationals receiving generous subsidies are competing on the local market, at what cost do you want to keep your domestic company afloat. And do smaller countries have money to even do that
It’s not really a cost to keep domestic industry, the cost is that labor and other resources are used. If the goal is to keep output and employment then it works fine.
If you take the cost in money terms it’s massive. But money isn’t real. If you take it in real terms, the alternative is unemployment and loss of manufacturing knowledge and self sufficiency which is worse.
Well, India has this thing called Minimum Support Price, basically a floor price for many agricultural goods to make sure the farmers have a market to sell to. US and WTO hate it because it “distorts markets” yet functionally it keeps the country food sufficient and keeps farmers employed.
It has been downgraded and weakened over the years by the neoliberals but it still exists because taking it away completely is politically NOT financially expensive. In terms of real, it creates income and employment for farmers, it keeps output afloat.
I mean money isn’t real but the workers and materials cost money and workers and material producers expect a payment. And if you want to pay people, you need to make the production somehow sustainable. And then you’ll also compete with other manufacturers, some big multinationals from USA, China etc. who can afford to pay massive subsidies so their products can be artificially cheap compared to your domestic stuff. So you might be producing stock nobody wants to buy, so you don’t get money for them, making the thing less sustainable.
India isn’t exactly a “small country”. It has the 5th largest nominal GDP, world’s largest population…