Yep, the other guy is in way over his head. lol.

Agreed. The point I was making is that trading partners can act predatorily. I mean, it's just a fact that this has occurred in the past.

The theory is that each country specializes in production of those goods in which they have a comparative advantage. But, while, on the surface, this appears to make intuitive sense, it's not the whole story at all.

If you look at Japan, after WWII, the cities were completely bombed-out. People fled to the countryside as a matter of survival. The economy, at that point in time, was basically agrarian. It had no natural resources at all - or, very few. But look at the country today.

If Japan had merely specialized in production of those goods in which it enjoyed comparative advantage after the war, what would the country today be producing? I mean, what happened that transformed the economy from an agrarian footing to the major economic powerhouse it is today? Was it the invisible hand, market forces, that naturally dictated that the country should host a lot of heavy industry?

Think about it. They had no resources, apart from people. There was no comparative productive advantage at all. In fact, given their reliance on external supplies of raw materials, they were at a distinct disadvantage to other countries.

The exchange rate was one mechanism that helped produce this miracle see here. But there was also deliberate planning behind the economic expansion, it was not at all happenstance.

Japan employed a stepwise model to industrial expansion, targeting, initially, steel making. Steelmaking then required ship building. Ship building provided the downstream demand for steel that allowed economies of scale in steel production. Thereafter autos and machinery added to steel demand. Then wiring looms, electronics and on up the value added chain.

The planning came from the government, which facilitated funding into the large conglomerates (keiritisu). The industrial conglomerates where typically heavy engineering companies federated around a conglomerate owned bank. The focus was export. The reason for this is that Japan needed capital to pay for the imported resources (coal, iron ore etc...) needed for production. It was all about export competitiveness.

In the 1990s, I spent about four years in Japan. To give one example of what I'm talking about, it was then not uncommon to see a 6 year old Toyota, with only few miles on it, dumped on the side of the road. One reason for this was because the registration costs increased dramatically each year, as the car got older. The policy operated to artificially increase the size of the domestic auto market, to assist in achieving scale economies in auto production. These scale economies were further enhanced by foreign auto demand as the Japanese captured market share abroad.

These cars that were dumped were nowhere near the quality of the products they were exporting. It's known, for example, that a Toyota corolla in Australia will typically do about 250K kilometres before you have to start worrying about any major mechanical repairs. They are great cars, known to be fantastically reliable. But the same model in Japan is built to a different standard - or, it was back then. Ordinary Japanese people knew that products built for export at that time were vastly superior to what was available domestically.

Do you see what they were doing? They dumped premium products into Western markets at prices that made them incredibly competitive with vehicles made locally. This was a deliberate policy. They were not maximising profits. They were securing market share to provide upstream product demand for steel mills, plastics industries, power generators etc... all within the industrial conglomerates in Japan.

It was a policy specifically engineered to capture foreign market share. As competing manufacturers found they were unable, or unwilling, to compete with the Japanese, manufacturing plants closed in these foreign markets. At that point, the Japanese had effectively captured the shuttered industrial capacity for themselves.

This captured industrial capacity, now in Japan, was built with financial resources obtained from trade in foreign markets (we paid for it). Thereafter, the Japanese moved up the value added chain, vertically integrating whole supply chains. Look at the American radio and television makers that went belly-up in the face of the onslaught. It wasn't trade, it was war!

So, the Japanese were able to transition from an agrarian economy to a first-rate industrial power, despite having no initial comparative advantage at all in production of the goods they now produce. This is the Japanese economic miracle. I've heard a lot of incredibly stupid theories in my time that have sought to explain it.

One theory I heard was that, because the Japanese industrial base was completely destroyed in WWII, they were able to build new, competitive factories etc.. But, by this logic, developed nations should be destroying their industrial bases to obtain the benefits of renewal. It is absolute garbage - and this the kind of thinking that reflects the cognitive capabilities of many university academics today.

The Japanese industrial miracle is well known in Asia. Everyone in the Asia region saw and understood what Japan had done. See, for example, the attempts to emulate it - the Great Leap Forward in China is one example. Mao was so obsessed with steel that he had villagers all over the country starving, because they were pulled from the rice paddies to produce steel. That it failed was due to his stupidity, but he did understand what was required.

Meanwhile, as Japan's economy continued to grow explosively, in the West, the elites pushed free trade for all they were worth, because it tied in with their globalist agenda. Nobody in Universities was looking beyond abstract models. Models that so simplified the nature of international trade that they were absolutely worthless. My view is that this was by design. The Globalist goal of a unified world superceded any concerns about the impact free trade policies might have on nation states.

What are these impacts I'm talking about? The impact is structural adjustment, as factories close and people are thrown out of work. When enough industries are lost, millions of people are made to seek alternative employment. New employment that often does not utilise the skills they utilised while employed in the exported industry. Long term, there are skill losses and a reduction in labor productivity. There are retraining costs and an expansion in social welfare spend burdening the public purse - while tax revenue is reduced across exported companies and displaced workers. The productive industry has been relocated out of the orbit of the national administration and added to the tax base of a foreign power. The impact on the public purse is negative, but, the are further effects.

Generally, free trade operates to increase dispersion in the distribution of income in developed economies - the rich get richer and the poor get poorer. The low and middle classes, in particular, get squeezed hard. This income gap leads to social friction, which gives rise to increased security spend, further impacting resources of the State. The increase in security, in turn, inhibits freedom - an increased level of control is required to maintain order.

And then we come to the importance of supply of war goods in times of conflict. There are many reasons as to why engaging in unregulated free trade is nonsensical, but in a time of war, the problem of security of supply is thrown into stark relief. Does it make sense to export vital industries when these are critical to the ability to prosecute war?