How to rebuild manufacturing - Ralph Gomory

Professor Ralph Gomory explains the basic problems with free trade:

  • The trade deficit is permanent under free trade.
  • Hence the US economy cannot recover under free trade.
  • It's a mercantilist world (strategic trade) not a free trade world.
  • Hence the USA should adopt a mercantilist approach and protect key industries by tariffs, or provide tax incentives to stop offshoring, or use import certificates to balance trade.
  • Global corporations are doing okay but not most of America.
  • We must refocus the economy on serving "we the people", not just corporations.

(It's not just incentives/mercantilism that cause offshoring, cheap wages is the biggest factor, but at least Gomory acknowledges the permanent nature of the trade deficit, and the need to think outside of free trade for solutions).

Ralph Gomory, On Manufacturing and Innovation
... many still proclaim that free trade benefits everyone and point as proof to lower prices for the imported Asian products. But lower prices are not low if you lose your job to get them, and the mutual gains predicted by free trade theory do not in fact materialize in a world where the well thought-out subsidies and controls of foreign governments create persistent trade deficits for our country.

We are allowing much of manufacturing, the great innovation engine that turns ideas into reality, to vanish quietly from our shores. Our global corporations may be benefitting from this; most Americans are not.

It is time for the steady wasting away of manufacturing, and the consequences of that wasting away, to become a matter for national debate, and to remain a matter for national debate, until the problem is resolved. Action is needed, and strong actions should be considered with a full understanding of the enormous importance of what is really happening.
Ralph Gomory, Jobs, Trade, and Mercantilism - Part I - Facing Reality
Our nation's continuing massive trade deficits are destroying important sectors of American industry and eliminating desperately needed jobs; yet balancing trade is not even on our government's agenda. This is happening because we are not facing reality, the reality that we are not living in a free trade world but that we are dealing with countries that practice mercantilism.

If we continue to turn a blind eye to this reality, we will become a poor nation.
File under: facing reality.

No comments:

Post a Comment