The US outsourced its manufacturing to China in the name of comparative advantage. Bob bakes bread, Alice grow apples. Everyone is better off because of specialization.
In Thomas Friedman's latest nyt column, he refers to China's manufacturing dominance as a play to de-industrializing other countries. It may just be globalization is incompatible with political realities.
Or… Bob makes bread, Alice grows flowers. Alice needs bread; Bob likes flowers but can go without if he wants to. Who’s going to come off worse if they have an argument?
On the other hand, long-term planning is susceptible to disruption and unforeseen events, and when we have long-term government plans they have a way of taking on a life of their own and defending themselves even if they have outlived their usefulness.
> These populations are more than large enough to specialize in everything.
My impression is that population size is not very relevant in the math of trade specialization profit. It's still more profitable to play on relative strengths and weaknesses. You can find other things to worry about like security (from droughts and earthquakes perhaps), or political or strategic desires. In particular, trade is likely beneficial even when local production would be cheaper than remote production - just because there are other things that can be done localy and even stronger (like phone games or advertising-oriented browser feature destruction /s).
Why would European population of almost a billion people need to specialize on anything? What would it even specialize on. What does that world need that there need to be 10% or the world working on it?
>In particular, trade is likely beneficial even when local production would be cheaper than remote production - just because there are other things that can be done localy and even stronger
This only matters if you can not do both. If your population is large the amount of things which it can do especially good can easily be exhausted before you run out of people.
I don't even see how you can specialize. What does China specialize in? (Before answering, think about the things which China is not trying to produce or the services it is not trying to perform. Can you name even one?)
"Specialize" is not quite the right word. In trade economics (from the very crudest level), trade is beneficial to BOTH parties EVEN when etc etc etc. i.e. higher profit. It's really hard to beat trade.
It's not that anyone needs to specialize as in "otherwise it won't work". It's that it's more profitable and so people will tend to prefer that plus some extra money in their pocket.
And it's not specialize as in only do wine, cheese and perfume and nothing else. It's systematically favor some things that you are relatively better at than others, and trade for the others (not even 100%, you can export some plastic parts and import some similar plastic parts at the same time). Even if the other country could themselves be better at it. So for France, engineering of all kinds, wine, cheese, perfume, meds, etc but also any manufacturing that by chance has gotten and remained strong (say, like airplanes, some electrical equipment, whatever else that really any other country also could possibly manufacture).
I do not think that Europe or the US even could specialize in anything. The population is so large that for every good and service needed there is a group of people who are specializing in it right now.
What single good/service is not at all produced in Europe. Which single good/service is not produced in China?
At the scale of 1B people specialization becomes meaningless. You can't even accomplish it if you wanted to. All you could do is letting one of your industries get out competed by some other power.
I feel we are talking past each other so I will leave it at that.
The specialization you ... expect? is irrelevant.
Business jets are not produced in China, large efficient passenger jets are not produced in China, printed silk scarves branded Hermes, silent diesel electric submarines for export are not produced in China. (See what I did there?) And that's irrelevant to why trade exists.
Even an up-to-the-minute super competitive manufacturer has no incentive (except political and some risk-aversion) to do everything in-house or in one country. It does have incentives to trade with other countries and other companies. Even if it possibly had the machines and low cost employees on hand and already trained to do that, from an economics point of view it should (in the long term), sell some production units, focus on the others and trade for the difference.
>Business jets are not produced in China, large efficient passenger jets are not produced in China, printed silk scarves branded Hermes, silent diesel electric submarines for export are not produced in China. (See what I did there?) And that's irrelevant to why trade exists.
Literally every single one of these is false. China is producing every single one of these things.
Ironically to UK probably make that mistake first. A lot of manufacturing moved to Hong Kong, which was a British Territory until 1997. During the reform of the Chinese economy, Hong Kong invested in factories on the mainland. Then of course it was handed back to their jurisdiction.
UK probably made that mistake first by moving lots of manufacturing to their colonies, like North America and later the US. The UK said the same thing the western world said about China: they built low-level low-quality stuff, and we focused on the high-value manufacturing. But guess what? Smart people are everywhere, and ambitious people will not build "low-quality stuff" forever. Sooner or later, those who sweat on factory floors will have more know-how than those who enjoy draw boxes in a cushy office. Indeed, those who know only how to draw boxes will soon find that even their boxes, no matter how pretty, will not be relevant.
comparative advantage is disproven at this point, because economists are failed math majors who don't account for the innovation flywheel effect and general network effects. Silicon Valley software industry happened because of the proximity to the existing hardware industry there. Same thing for other forms of manufacturing and the US gave it away in the name of short term profits
In Thomas Friedman's latest nyt column, he refers to China's manufacturing dominance as a play to de-industrializing other countries. It may just be globalization is incompatible with political realities.