Japan’s recovery from the devastation of World War II was assisted by another war. Japanese manufacturers and the service industries around military bases received a big lift when they helped U.S. forces during the Korean War.
A little over a decade later, South Korea got a similar boost when its manufacturers helped the U.S. military during the Vietnam War.
Both countries also followed a model of state-led industrialization that the United States would probably not have tolerated a generation later during the heyday of stricter trade rules and neoliberal investment regimes. The U.S.’ need for economically strong non-communist allies in the region, during and after the Korean and Vietnam Wars, also contributed to this tolerance for the “unorthodox” economic strategies of Japan and South Korea.
The future path is clear: The state has to be involved in pushing the market toward renewable energy, whether that state is “communist” or “capitalist” or something in between.
China is already the world’s second-biggest economy. It doesn’t need a boost from the Ukraine war, but still it is getting one. Chinese exports to Russia, whose trade with many countries has been reduced by international sanctions, surged by nearly 70% in the first 11 months of last year. Chinese combustion-engine cars, which are no longer as popular in the Chinese market, have now monopolized the Russian market, and China’s factories are benefiting from the cheap energy that Russia has difficulty selling elsewhere.
Meanwhile, China continues to engage in state-led industrialization in which it chooses to subsidize winners (renewable energy) and withdraw support from losers (combustion-engine cars) in the marketplace.
The Biden administration is not happy with China’s stronger economic relationship with Russia or its economic strategy. The president recently announced additional tariffs against Chinese products, including steel and aluminum. The tariffs on Chinese electric cars will increase fourfold. In his press conference, President Joe Biden said:
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This, of course, is how many other countries managed to catch up to Western economies, by defying the economic laws of comparative advantage as well as market-determined levels of supply and demand. The United States tolerated its allies breaking the rules. It has no such patience for China.
The backlash from China to the new U.S. tariffs was predictable. According to one Chinese government official, “China opposes the unilateral imposition of tariffs which violate (World Trade Organization) rules, and will take all necessary actions to protect its legitimate rights.” It is an interesting reversal of the previous positions of the two countries, with China supporting the rules-based language of “free trade” and the United States backing the more parochial language of “protectionism.”
It is also a stark reversal for Biden himself. When former President Donald Trump announced tariffs against China five years ago, Biden called the move “short-sighted.” There were some expectations that the incoming Biden administration would lift those sanctions because they were hurting American........