I haven’t read the paper but my first reaction to the news that Paul Samuelson is “coming out with an article in the Journal of Economic Perspectives on outsourcing that contradicts the mainstream economic take” is that this is horse sh*t, even if it is straight from the horse’s mouth. In particular I can’t see how outsourcing differs fundamentally from any other form of trade and this is (one of the lines expounded at some length in Bhagwati’ response ‘The Muddles over Outsourcing”.
Arnold Kling summarizes the argument as follows:-
“The authors point out that some of the concern is not about trade per se but about the accumulation of capital and know-how in China and India. They suggest that this could harm the U.S. if it reduces trade by eliminating the division of labor. That is, suppose that the U.S. stays stagnant, but China and India learn how to do everything that we know how to do. Then they will no longer export cheap goods to us, and we will lose. This, they claim, is what Samuelson's theoretical paper describes”
The argument seems to be to bear some resemblance to China’s turn to isolationism in the 15th century.
Here’s the description from Loise Levanthes ‘s “When China Ruled the Seas”
“During the brief period from 1405 to 1433, seven epic expeditions brought China's "treasure ships" across the China Seas and the Indian Ocean, from Taiwan to the spice islands of Indonesia and the Malabar coast of India, on to the rich ports of the Persian Gulf and down the African coast, China's "El Dorado," and perhaps even to Australia, three hundred years before Captain Cook was credited with its discovery. With over 300 ships--some measuring as much as 400 feet long and 160 feet wide, with upwards of nine masts and twelve sails, and combined crews sometimes numbering over 28,000 men--the emperor Zhu Di's fantastic fleet was a virtual floating city, a naval expression of his Forbidden City in Beijing. The largest wooden boats ever built, these extraordinary ships were the most technically superior vessels in the world with innovations such as balanced rudders and bulwarked compartments that predated European ships by centuries. For thirty years foreign goods, medicines, geographic knowledge, and cultural insights flowed into China at an extraordinary rate, and China extended its sphere of political power and influence throughout the Indian Ocean. Half the world was in China's grasp, and the rest could easily have been, had the emperor so wished. But instead, China turned inward, as succeeding emperors forbade overseas travel and stopped all building and repair of oceangoing junks. Disobedient merchants and seamen were killed, and within a hundred years the greatest navy the world had ever known willed itself into extinction. The period of China's greatest outward expansion was followed by the period of its greatest isolation.”
One of the arguments made to successive emperors seems to have been that since, at the time China was the most technologically advanced country in the world, there were no “new” products that it could gain from trade. Further, in addition to the expenses of building and maintaining a sea going fleet, trade could only erode China’s absolute advantage by exporting this technological know how abroad thereby weakening its terms of trade - and security.
So China isolated its self and the rest is history – or more particularly, from that moment on, the Ming dynasty was history.
Posted by wardx107 at September 11, 2004 05:50 PM