This is my first time blogging. I plan to have this be an outlet for my thoughts and views on policy and current events.
This morning while reading CNN I came across a piece by John Cafferty, a regular CNN contributor. In today's piece he cited Pat Buchanan's recent article at entitled A Decade of Self Delusion on the website Human Events. The article makes some good points about how over the past decade our economy has gone down the tubes and if we continue on this path then times will get more troublesome.
He states "we sold ourselves a lot of snake oil about the Global Economy, interdependence, free trade." While it would be wrong to say free trade does not have its troubles, by dismissing interdependence and free trade, he misses one of the first lessons that any economics 101 student learns in school. That is that economies should focus on their competitive advantage. It is apparent the US no longer has the advantage in heavy industry that the we enjoyed for most of the 20th century. Rather our competitive advantage has shifted to other areas in science, computers, etc.
The article simply call for protectionism but does not discriminate between two type of protectionism. One types keeps industries that are vital to the national interest alive and other lets entrenched industries hang on by a thread and keep producing inferior products.
In the US we have decided that having a national passenger rail system is in our interest. When was the last time Amtrak even came close to breaking even let alone making a profit? The free market failed to support a national passenger rail system, something we have decided is in the national interest, so we needed the government to step in and provide one. In this case because of the market failure the government has to have some role in providing the service.
The case of car production the US we see the another market failure. We have decided that having the ability to build cars is in our national interest. The car companies straddle the line between vital industries and industries that are just hanging on . What we need to do is force the car companies to retool and regain a competitive advantage. There is nothing stopping us from building a competitive advantage in car building again accept the dinosaurs who don't want to change.
I believe we should continue to promote some level of heavy industry here in the states. It does provide jobs but, it also allows us in times of war it allows us to build our own military hardware. Trying to stay ahead in some areas of heavy industry, particularly those areas that are more technologically intensive, we can rebuild up a competitive advantage.
The most important thing the govenment can do right now is provide incentives for people to invest in areas of science and high technology where we are world leaders. We need a comprehesive strategy just like Japan did after WWII on where we want to go and what we want to become. If the government and industry can work together to chart out a plan then the policies that the government puts in place and will yield the desired outcome.
