Assuming a nuclear war can be avoided, perhaps future historians will remember the growth of the Chinese influence in the world as the event that saved individual liberty, prosperity, America, and Western civilization. At least, that’s the optimistic way to look at Chinese tyranny and its impatient imitators in the West.
This hope is inspired by the Cold War. When Communists were conspicuously and proudly in power in the Soviet Union (and in China and elsewhere), they served as a foil for Western rulers and citizens, who were constantly reminded of what not to become. Communist policies such as restrictions on international trade, central planning, tax tyranny, police surveillance, philosophical and artistic crushing, philosophical poverty, persecution of dissidents or eccentrics, enforced prudishness, or militarization of society suggested what the government of a free society should not do. Not that everything was perfect in “free societies,” far from it. McCarthyism was not a glorious episode of American history. The opponents of communism were often tempted to justify domestic repression in the name of combatting communist-style repression. But we faced a constant spectacle of the terminus (given the technology of the times) of what Friedrich Hayek called “the road to serfdom” (see The Road to Serfdom, University of Chicago Press, 1944).
These economic, philosophical, political, and aesthetic barriers crumbled with the fall of the Berlin Wall. Several decades then passed in a philosophical vacuum where democracy is, by default, a common and vague shared value, as if the German Democratic Republic, the Democratic Kampuchea, or the Democratic People’s Republic of Korea had never claimed to be the real democracies. (Alan Charles Kors notes this point in “The Ethics of Democracy,” Georgetown Journal of Law & Public Policy 18.) The new cold warriors, those against China, now seem liberated from all scruples against using dirigisme similar to that of the enemy.
A Wall Street Journal article illustrates what I mean: Alex Leary and Katy Stech Ferek, “Biden Builds on Trump’s Use of Investment Review Panel to Take On China,” July 7, 2021. We can observe how Leviathan grows, whether Democratic or Republican:
The evolving mission means the multiagency panel led by the Treasury Department [the Committee on Foreign Investment in the U.S., or CFIUS] is set to be a linchpin in the Biden presidency’s plans to square off with the world’s second largest economy and potential peer competitor of the U.S., current and former officials said. …
For much of its existence, Cfius only reviewed deals that were voluntarily submitted for scrutiny. Its more assertive course began under the Obama administration which grew alarmed at Chinese buying sprees of tech companies, and accelerated during the Trump administration.
Congress in 2018 expanded the committee’s powers with bipartisan legislation that gave it more power to look for deals that could potentially harm U.S. national security but weren’t submitted for review. The Biden administration continues to add staff to seek out those cases that it deems should be scrutinized.
Controls on foreign investments have also intensified in other countries. Although this movement seems to be directed at China, it is an easy prediction that it will soon hit companies in friendly countries. Trump himself showed the slippery way with tariffs on steel and aluminum from allied countries under the excuse of national security. Magnachip Semiconductor Corp. is a recent example of the new activism of CFIUS, which has blocked the sale of the company to Chinese interests. Magnachip is domiciled in Luxembourg, carries most of its operations in South Korea, and sells mainly in Germany and Asia, but has many American investors and is listed on the New York Stock Exchange.
Control of foreign investment or trade is like international sanctions: it “works” (from the American government’s viewpoint) because it threatens Americans with serious penalties.
Except for the extreme case of a raging war, I think there is no serious case for the government of a free country to prohibit its own citizens or subjects from selling goods and services, or corporations or shares of corporations, to any foreign buyer. Any company operating in the United States or listed on an American exchange is anyway overregulated by, and potentially under the total control of, the US government. And pretending that the government in DC will help the American economy prevail (whatever that means) over the Chinese economy by emulating Chinese dirigisme, that is, by limiting the economic freedom of Americans, is a tragic illusion. That is not how the Cold War was won or could have been won.
It is of course important to always distinguish Chinese residents and businesses on one hand and their tyrant on the other hand—illustrating the danger of using “China” for both the tyrant and the tyrannized. It is in the interests of most Americans—of most individual Americans—to be free to trade with China; if it were not, they would not have to be coerced by their own government to refrain from doing it.
If it is true that the deepening of Chinese totalitarianism will help Western people and their rulers rediscover the difference between a free country and an unfree one, we should thank the poor oppressed Chinese for their unwitting help. Perhaps they will in the process discover the difference themselves.
READER COMMENTS
Warren Platts
Jul 11 2021 at 1:43pm
Sorry Pierre, but that is an incredibly bad take: limiting Americans’ freedom to trade with the USSR was largely responsible for bringing down the Soviet Empire. Nixon’s “opening” of the PRC was a lifting of the same sorts restrictions that still exist on places like Cuba & North Korea.
Indeed, Nixon’s opening of the PRC represents a natural experiment in international relations. We have two sets of adversaries: (1) USSR, Cuba, North Korea; (2) China, Vietnam. For the first group, Americans’ freedom to trade were ruthlessly enforced: collapse & economic stagnation followed. In the second group, Americans’ restrictions on the freedom to trade were lifted: rapid economic growth ensued.
You want to say that “short of raging war,” Americans ought to be able to freely trade with the citizens of any regime, no matter how cruel or adversarial. What you left out is that this freedom to trade has made raging war a thousand times more likely. To start a war with the United States requires more than nefarious intentions: it also requires capability. You free traders gave that capability to the PRC on a silver platter. My daughter currently on deployment in the U.S. Navy thanks you!
And this is not quite right either. One cannot be anti-CCP and not be anti-China because “China”, as it exists today, is merely a reconstituted version of the old Qing/Manchu Empire with a new Han dynasty. “China” is a construct invented by the Kuomintang to legitimize their reconquest of the Qing Empire after it disintegrated.
The Kuomintang tried to plaster a republic on this empire but of course failed because democracies do not work for empires. Imagine if the British Empire gave the vote to every person living within its borders, including the hundreds of millions of Indians. The first thing they would vote for is dissolution of the Empire. The British knew how to run an empire; Sun Yat-sen did not.
However, the notion of a “Chinese people” covering everybody from Tibet to Manchuria fits hand-in-glove with the CCP. They know how to run an empire and they know that democracy represents an existential threat to empires. If the CCP were to fall, unless it were to be replaced by another iron-fisted dictatorship, the place would split into 10 or 20 different countries just like the USSR did, and just like the Qing Empire did after the last emperor was deposed.
Therefore, the very idea is there is a “Chinese Nation” that exists is fake and insulting. A Tibetan is no more a Chinese than a Latvian is a Russian.
Scott Sumner
Jul 11 2021 at 6:50pm
You said:
“If the CCP were to fall, unless it were to be replaced by another iron-fisted dictatorship, the place would split into 10 or 20 different countries just like the USSR did, and just like the Qing Empire did after the last emperor was deposed.
Therefore, the very idea is there is a “Chinese Nation” that exists is fake and insulting. A Tibetan is no more a Chinese than a Latvian is a Russian.”
By that logic, Russia is about to split up into 10 or 20 countries. After all, (even today) Russia is far more ethnically diverse than China.
Warren Platts
Jul 12 2021 at 7:23am
Well, no one denies that Putin is not an iron-fisted dictator! (Indeed, one sometimes wonders what glues the United States together.)
As for the ethnic diversity of China, I am no expert, but my Chinese contacts tell me that the Western perception of Han Chinese ethnic homogeneity is a stereotype. The Han are no more homogeneous than, say, western Europeans are. One might add that the Taiwanese are 96% Han, yet they show little inclination towards joining up with the Mainland.
Jon Murphy
Jul 12 2021 at 8:32am
I guess I don’t understand your point here. Any time a centralized power falls or weakens, factions pop up. Indeed, factions exist no matter what along many different margins: religious, political, ethnic, geographical, philosophical. Why, even the Fallout games speculate about factions developing along sports lines!
People are individuals. They will form groups and factions along many different margins. If you’re defining a nation as some homogenous group covering everyone within political borders, then there is no such thing as a nation.
Warren Platts
Jul 12 2021 at 9:32am
As a disgruntled citizen of the PRC said to me on twitter today: “China is NOT a nation, China is a PRISON for nations.” Here’s a bit from the google translation:
Jon Murphy
Jul 12 2021 at 9:36am
Ok. Irrelevant. There are people who say the same thing about the US (indeed, that’s part of the impetus behind ANTIFA).
The point Scott and I are raising is your definition of “nation” is quite vague. It’s not really providing any useful analytical framing.
Warren Platts
Jul 12 2021 at 10:30am
Antifa? They are the opposite of these folks striving for freedom within the Chinese Empire. The former are self-avowed anarchists and Communists, whereas the latter are politically conservatives who hate Communism. Nice red herring.
As for the definition of “nation”, I use the standard definition: a relatively well-defined, usually ethnic, group of people who share a language, a history within a relatively well-defined geographic area, and a culture. A nation is not a mere faction. Any nation may contain will contain many factions. If such a group has their own sovereign state, then that is called a “nation-state”. However, a state may contain many nations. That is called an “empire”.
Here is an example of the proper usage of “nation” in a tweet from Edward Luttwak:
Luttwak here is making the point I have been trying to make: that “China” historically contains many nations. Therefore, “China” itself, is not a nation nor is it a nation-state. It is a state that is an empire.
Since you are an American, your confusion is understandable because the United States is almost uniquely peculiar in that we are not really a nation in the standard sense because most of the people that live here come from all over the world and, except for Native Americans, have only been here a few centuries at most, yet we speak loosely of the “American nation” all the time. Nor are we really an empire, although we used to be when we conquered the Philippine nation among others. The United States is simply a state—rather like the Vatican, I suppose one could say.
Jon Murphy
Jul 13 2021 at 10:39am
You’re being pretty hand-wavy with your definition and use of nation here. For example, you claim my point that ANTIFA sees the US as a “destroyer of nations” is a red herring, but then you essentially say that the US does act that way in your last paragraph.
IOW, you’re largely making distinctions without difference.
Warren Platts
Jul 14 2021 at 9:42am
I did not invent the distinction between ‘nation’ and ‘state’. The distinction is longstanding, and must be kept in mind when writing about such entities.
Mark Z
Jul 12 2021 at 5:38pm
With the exception of peripheral ethnic groups like Tibetans and the Uighurs (which collectively make up a tiny % of the population), I’d bet the overwhelming majority of Chinese would support being part of a unified China. Your quote by your friend is almost certainly cherry picked; most Chinese are probably pretty patriotic.
Your whole ‘China is a fake country’ schtick applies to pretty much every nation-state that has ever existed. Germany was a fake country until 1871; Italy until a few years earlier. Poland was a fake country for most of its existence until the 20th century. Arbitrary lines on maps ultimately defined these countries, and only afterward, gradually over several generations did all the people in them – many of whom spoke different languages or mutually unintelligible dialects, and did not originally think of themselves as members of those nation-states – come to identify with the greater nation-state. China is not exceptional in this respect at all.
Warren Platts
Jul 13 2021 at 7:53am
Your point is merely logical. Wait until the CCP finally collapses under its own weight and see what happens..
Jon Murphy
Jul 11 2021 at 2:25pm
I think this is an important point. The USSR tried to be entirely self-sufficient. Much like the fears expressed by Trump, they feared trade with the West would make them too dependent on the West, so they often forbade trade outside the Soviet Bloc (or, at least, severely tariffed it). And, on paper, it appeared impressive. Few economists saw the Soviets as the paper tiger they were (with Hutt being one of the few exceptions). Even months before the collapse, Samuelson said the Soviets proved you could plan an economy.
But when it all came crashing down, we saw how backward the Soviets really were.
It’s the same with China. We’re seeing a lot of cracks in their facade.
Warren Platts
Jul 11 2021 at 4:33pm
Untrue. The Soviet Union and United States enjoyed substantial trade prior to the Cold War. For example, in 1931, the USSR absorbed 2/3 of all U.S. agricultural and metal-working equipment. But after WW2, the U.S. cracked down on trade, starting in 1947. MFN trading status was revoked entirely in 1951. MFN was never again reinstated. In 1992, MFN was granted to Russia and other former Soviet states. According to a New York Times article at the time, “Not having most-favored-nation status meant that tariffs on Russian goods are 5 to 10 times those on goods from most-favored nations.” Thus to the extent Russia sought self-sufficiency, that was because they were forced to by the West.
https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=1035&context=ncilj
Jon Murphy
Jul 11 2021 at 5:35pm
Not quite. Recall Lenin’s initial push for true Socialist markets followed by Stalin’s attempts to create buffers against the West. Here is the description of Soviet trade policy from the Introduction of the LOC’s The Soviet Union: A Country Study:
And from later on:
See also the discussion on pages 112, 488, 529, 591, and 603
Pierre Lemieux
Jul 11 2021 at 10:04pm
Jon: Thanks for the reference, which seems to confirm a generally known fact. I just ordered the book from Interlibrary Loans.
Pierre Lemieux
Jul 11 2021 at 9:53pm
Warren: Thanks for the reference, which does remind us that free trade with the Soviet Union was restrained in many ways by the US government. As I said, it was far from perfect. Sometimes, we have the impression that the US government did not understand that free trade is between individuals and not between governments. Note however what the author, who does not offer much economic analysis, strongly suggests that the obstacles were much worse on the Soviet side (p. 24):
Warren Platts
Jul 12 2021 at 6:07am
Agree that the Soviets were not free traders. One could add that they were a geographically huge country blessed with rich natural resources and that they were constantly preparing for war in a hostile world. Therefore, it is natural that they would seek a relatively large degree of self-sufficiency and that their level of foreign trade as a percentage of their total economy would be much less than places like Denmark or Japan.
Nonetheless, their level of foreign trade was depressed even more than it otherwise would have been because of western sanctions. From Jon’s reference above:
The Soviets attempted major trade reforms in the mid to late 1980s, but by then it was too late. In any case, Reagan was not going to allow MFN. George H. W. Bush tried to grant MFN to the USSR starting in 1989, but Congress wouldn’t let him. Thus to the extent that trade is good for an economy, the Cold War trade sanctions imposed by the West must have had detrimental effects on the Soviet economy and thus contributed to the ultimate collapse.
Jon Murphy
Jul 12 2021 at 6:19am
Again, you’re assigning too much importance to the role of foreign trade to the Soviet economy. Trade represented about 1% of Soviet GDP, and most of that was foreign aid exports.
On the margin, Western sanctions probably did harm the Soviets. But that margin is very small. The sanctions harmed the West to a far greater degree given trade was a larger part of the Western economy.
It’s highly improbable that trade sanctions contributed in a substantial way to the defeat of the Soviet Union.
Jens
Jul 12 2021 at 7:32am
This is a question to Jon Murphy
Does this include transfers that were done under the umbrella of the Comecon ?
Jon Murphy
Jul 12 2021 at 8:56am
Yes. That is my understanding.
Warren Platts
Jul 12 2021 at 9:11am
Jon, you are only off by a factor of 8! From your reference above:
Imports were 4% & exports were 4%, so together, that’s 8% of the Soviet economy. For comparison, according to FRED, for the U.S. in 1985 exports accounted for 7% of GDP whereas imports accounted for 9.6% of GDP for a total 16.6%. So about half of U.S. trade is considered “minor”. Whatever. That’s still a lot more than 1%.
Meanwhile, U.S. trade with USSR was only 1% of total U.S. trade. Therefore, western trade sanctions could not have caused material harm to our economy.
More importantly, and I should have emphasized this in my previous post, was the content of the trade that was barred and allowed. And this is all from your reference. We would send them mainly grain. Then they would send hydrocarbons to Europe and timber to Japan and vodka to USA. They could not export many manufactured goods to the West because their machinery was junk. This was in no small part a result of the fact the West exported few high-tech goods to the Soviets.
Meanwhile, a Cold War was going on that required huge defense expenditures on both sides. But because of the trade barriers, the Soviets were at a huge disadvantage. The late Jerry Pournelle wrote a book called The Strategy of Technology that described the conundrum that the Soviets faced. (Jerry is also the guy that called out Samuelson’s estimates of Soviet GDP based on his analysis of satellite photos.) From the preface:
Thus the strategic goal of the trade embargo was not to achieve victory in the Cold War by imposing higher prices on Soviet consumers. Rather, the goal was to keep the USSR technologically backwards so that if they wanted to keep up with the USA & NATO in an arms race, they would get bankrupted—which is what happened.
As I said, by treating China to the exact opposite strategy, the U.S. has conducted a grandly irresponsible natural experiment in international relations. With China, not only has the overall level of trade been huge, we have also gladly exported our best high technologies, such as ballistic missile tech on Clinton’s watch, to massive offshoring of manufacturing techniques and management skills, to our best computer chips. Thus, in addition to all the free gifts, this allows massive reverse engineering, not to mention the IP theft enabled by cyber. Thus instead of imposing enormous expenditure, we have imposed savings worth trillions upon trillions.
And the result, predictably, has been the opposite of the Soviet Union. Instead of fomenting collapse, we fomented the the greatest spurt of economic and military growth in human history. And of course their military is aimed straight back at us. It’s just been suicidally stupid..
However, if we wish to prevail in Cold War 2, thanks to the natural experiment, we now know what to do. We can finally lay to rest, once and for all, the economic myth that free trade with Communist adversaries leads to peace!
Jon Murphy
Jul 12 2021 at 9:33am
You’re right. 4% of GNP for the USSR. The 1% was trade with the US (and vice versa. US trade with the USSR was also about 1%). That 4% puts the USSR as the country with the lowest trade relative to the size of their economy in the world.
Either way, the point remains: trade was not a source of economic growth for the USSR by policy design. They wanted to be self-sufficient and they used trade primarily as a political tool (indeed, the USSR used “predatory pricing” tactics for the trade to try to control other communist countries. But that led to their bankruptcy. So, what trade the USSR did actually harmed them because it wasn’t free).
Look, at this point I’m going to request that you provide citations that show that trade sanctions had the large negative effects you claim. The current empirical evidence says otherwise. What do you have?
Pierre Lemieux
Jul 12 2021 at 11:07am
Warren:
An important methodological point. Not counting multiple “we,” you say, in many instances, things like:
I suggest that if you tried to see what is “China” and what is “the U.S.”, you would realize that either your argument is a Rousseauist collectivist one (if not a Marxist one!), or else that most of your arguments collapse (because only methodological individualism is analytically useful). “Nations” don’t trade. Individuals do or else governments (their Nomenklatura individuals or courtiers) do when they coercively prevent ordinary individuals from trading freely.
Such a methodological revolution would also force you to ask questions like, “Why do sanctions work?“
Warren Platts
Jul 12 2021 at 12:01pm
You’re getting philosophical on me again, Pierre!;-) I guess I would turn the question around and ask what an individual is. My answer is that an individual is an entity that has emergent properties that its parts do not have. E.g., a water molecule is an individual — as opposed to a mere collection of atoms — because it has, as a whole, emergent properties that its constituent atoms do not have.
Similarly, individual humans have lots of emergent properties that their cells and organs do not have.
It is the same for national economies. They have emergent properties that the individual human actors that are the parts of the economy do not have. For example, current account deficits are emergent properties of national economies that individual humans do not have. Therefore, I would say that a national economy just *is* an individual, and can be directly studied as such.
See Michael Pettis’s latest book Trade Wars are Class Wars, where he mainly analyzes national balance sheets, savings rates, and openness to capital inflows to explain the U.S. trade deficit. Indeed, he explicitly makes the point that it is a mistake to try to explain the trade deficit as the summation of individual decisions of thrifty German & Chinese individuals versus improvident American individuals!
Jon Murphy
Jul 12 2021 at 12:30pm
The problem is that defines everything, so it’s not a very good definition of “individual.” And what’s more, you cannot apply microeconomic models of individuals to nations given the assumptions of the models. So, from a logical and empirical point of view, it doesn’t make sense to model a nation as an individual.
But, these objections aside, what’s the logical stopping point? There’s no reason why trade should be modeled with nations as individuals and not, say, the planet as an individual. Or the solar system. Or the universe. Or the multiverse. Etc. Given that modeling different things as individuals provides different outcomes (macro models with microfoundations have different outcomes than macro models without microfoundations), the arbitrariness of your definition provides us with no sound method of conducting analysis.
Jon Murphy
Jul 12 2021 at 12:33pm
Besides, Warren, does not your definition of “individual” here conflict with your claim that “the very idea is there is a “Chinese Nation” that exists is fake and insulting”? After all, the Chinese nation has emergent properties that are distinct from its parts. Therefore, an individual Chinese Nation does indeed exist and, it would seem, is a relevant analytical unit. Indeed, we should be able to treat it just as we would an individual Chinese person.
Warren Platts
Jul 12 2021 at 1:38pm
We’re really delving into the rabbit holes today! I am using ‘individual’ in an ontological sense. Can we say a national economy is real? Pierre seems to want to say no. I want to say yes, on the basis that national economies have measurable emergent properties, such as current account balances that humans do not have.
There are all sorts of individuals. A biological species, such as Salmo trutta is an individual. The Solar System is an individual. The Milky Way is an individual. (However, it does not follow that these indivduals have thoughts, beliefs, tastes and felt preferences any more than a water molecule does.)
Does Planet Earth have an economy? Yes. For the global economy, one can say that S must equal I. But for national economies, that is not the case. As for extending the economy to the Solar System, there is no point at our present state of technological development, but there may come a day when we speak of a Martian economy versus Earth’s economy.
As for macro models with microfoundations versus macro models without microfoundations, I say let the chips fall where they may. If a macro model without microfoundations explains the facts, predicts the future, and offers policy recommendations that produce good outcomes, then that is a good model, microfoundations be damned!
As for the reality of the “Chinese Nation” I tried to explain this in another post but it seems to have disappeared. Anyway, briefly, the strict, dictionary sense of ‘nation’ is a group of roughly ethnically homogeneous people who share a common language, culture, and history within a certain geographic area. In that strict sense, neither USA nor China is a nation. However, Tibetans and Navahoes are nations. Slovenians are a nation; Slovenia is a nation-state, but Tibet is not. The Navaho reservation is a quasi-nation-state.
Thus when I say that China is not a nation, I’m simply saying that China does not fit the strict definition of ‘nation. That is not to deny the reality of China. It is a state, but not a nation-state. Technically, China is an empire because it is composed of many nations. China is still a real individual because it has emergent properties that 1.4 billion PRC citizens not have.
Jon Murphy
Jul 13 2021 at 10:44am
Yeah, your long response doesn’t really explain the contradictions; you just double down on them. You claim you’re speaking ontologically, but you don’t actually introduce any ontology.
Jon Murphy
Jul 13 2021 at 11:09am
Besides, Warren, you seem to be going well out of your way to avoid answering the simple, Chapter 1 of Econ 101 question Pierre asks. The amorphous, rambling dissertation of “individual” you give is not what economists mean when we say “an individual.” The question asked that you need to answer is “who chooses?“
Warren Platts
Jul 14 2021 at 9:08am
Yes. Some Economists tend to disdain evolutionary and neurobiology because these fields have nothing to do with money and thus cannot possibly play an explantatory role in economics. Hence, willfully unaware of centuries of scientific and philosophical progress, by default, their operative theory of “agents” is Cartesian: immaterial “mind” is substantially different from matter. Thus the only “individuals” are agents possessed of minds. Thus, collectives like ant colonies, species, governments or nation-states are mere “agglomerations”, as you say, useful fictions at best that are per se incapable of any sort of goal-directed behavior. Therefore, because these economists operate under a moth-eaten, 17th century theory of mind, all such ascriptions are ruled out on ontological (or ideological: Marxist!) grounds. Not very scientific, if you ask me…
Jon Murphy
Jul 14 2021 at 9:51am
This is a really strange rabbit hole you’re going down, but hey, you do you.
Warren Platts
Jul 15 2021 at 4:13pm
You’re kind of proving my point here. Not only do you not deny the Cartesian dualist theory of mind, the very idea that there might be an alternative view appears risible to you.
You asked a question in your article you would like me to answer, namely: “Who chooses?” And the answer is: nobody chooses because free will is an illusion. That is, neurobiology tells us there is no soul-like “you” residing somewhere in your brain. All apparent human decisions happen as mechanistically as a chess engine deciding its next move.
Thus you guys are making fun of a sentence like ‘the United States has a bilateral trade deficit with China’ because there is no such thing as a national economy over and above the sum of individual human traders. Meanwhile, you all want to build models based on microfoundations of Cartesian “individuals” making free “choices” when in reality those are the individuals that do not exist! Irony!
Warren Platts
Jul 12 2021 at 11:25am
Jon, please READ your own reference. It’s 4% *each* for imports and exports. They sum to 8%. Half of USA’s trade at the time. That’s how you measure trade: you add imports plus exports. This is Econ 1 stuff. Cf. Mark Perry’s numerous blog posts on the subject.
As for references, I’ve already provided several, and google is your friend.
Jon Murphy
Jul 12 2021 at 11:51am
Yes. Half. And at the bottom of the list.
Again, trade was simply not that important for the USSR. Trade sanctions did not have that much of an effect, as the empirical and theoretical evidence shows. The USSR simply was not adjusting along that margin; they wanted to be self-sufficient and their trade was, by policy design, within the communist bloc and third world.
I really don’t know what else to say here.
Warren Platts
Jul 12 2021 at 1:06pm
Jon, I actually agree with you. Yes, as a matter of their own policy, they wanted a large degree of self-sufficiency and pretty much limited trade to within the Eastern block. The question is how much of that policy was a reaction to Western trade embargos.
There is a Rand study from the late ’80s where they try to analyze Soviet views on trade with the U.S. According to this study, the Soviets were indeed faced with a dilemma. They wanted tech transfers, yet, as you say, they were afraid of being perceived and of actually becoming overly dependent on the West. One Soviet article the Rand study cites is enlightening imho, however:
This seems to backup what I was saying earlier that the main effect of the sanctions was to stifle Soviet technological development and thus make a future arms race prohibitively expensive. And since the Soviets themselves were worrying about the effects of Western embargoes, the embargoes must have been effective. imho.
I will grant that this all is an area of active debate. Cf. Hufbauer. The overall level of trade was indeed small, but I think he & you neglect the qualitative importance of the technology embargoes.
Jon Murphy
Jul 12 2021 at 1:48pm
In the 80’s, the sanctions may have been effective (though the RAND study doesn’t indicate that they were). But you’re making a logical fallacy: the Soviet policy was self-sufficiency (something you’ve advocated for in the past, mind you). Their position was a result of their behavior not the sanctions.
Again, trade was not the margin they were adjusting along. To point out at the end of their regime that their policy of self-sufficiency failed is not evidence that the trade sanctions worked.
Warren Platts
Jul 14 2021 at 9:23am
Jon, you are the one who is committing the logical fallacy. You seem to think that causal chains cannot have more than one link. Thus, for the Soviet Union, it’s:
policy –> behavior
End of story.
But that begs the question of what causes the policy. You are arguing that the policy is 100% homegrown with zero consideration of the behavior of foreign actors. But that’s not how strategy works. The enemy always has a say. Thus:
sanctions –> policy –> behavior
There is no logical fallacy here. It is an empirical question. And the Soviet writings cited by the Rand study proves that the Soviets were concerned about the Western sanctions. So of course, they’re going to have a policy of self-sufficiency: if you cannot trade for the best Western tech, then you must be self-sufficient and invent the tech yourself, if you want it.
But yes, this does fly in the face of the dogma that 100% free trade 100% of the time is always for the best.
Jon Murphy
Jul 14 2021 at 9:47am
All I am saying is the cause must precede the effect. The empirical evidence shows that the USSR adopted a policy of self-sufficiency well before US sanctions were imposed. It was the explicit goal of the Soviets when they took over to be self-sufficient. Thus, US sanctions could not have the effect of causing policy to tilt toward self-sufficiency because the policy of self-sufficiency preceded the sanctions as all the historical and empirical evidence shows. This isn’t even a question for economic historians or Sovietologists.
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