"Hawke" wrote in message
...


So we're toying with the idea of selective protectionism; a dangerous
idea
but one that may be the only way to deal with it. A lot would depend on
how
Europe and Japan react to the same pressures. The idea would not be to
keep
our industries in a hothouse but rather to slow down the pace of change
to
something that we could deal with.

You mean something like managing our trade rather than just letting the
chips fall where they may?

Yes, gently, and carefully.

You mean we decide what industries we want to
keep for the good of the country and figure out what we are willing to do
to
keep them healthy?

Absolutely not. If you need a cautionary tale regarding "industrial policy,"
look to Japan's MITI and how they blew up Japan's chip business. And MITI is
one hell of a lot better at it than anything we're likely to paste together.

We might even plan which areas we want to allow free
trade to operate in and which areas that we think that would be a bad idea
for the majority of Americans. In other words a system that is not free
trade.

The idea is to limit the *velocity* of change, not its magnitude. You can
give an industry and the people who work for it some time to adjust, in a
world in which an industry can be devastated in a couple of years, but if
you hothouse that industry, you're soon going to have a useless, bloated,
and noncompetitive clunker of an industry.



To me, that's the key long-term economic issue we face. Most of what's
going
on now in financial markets has little to do with it, and will play
itself
out regardless of it. The question is how much damage we can afford to
sustain for the sake of an economic theory that has never, in reality,
been
tried befo free trade.

Free trade is like the honor system, it's a game where if everyone plays
by
the rules some get ahead but the majority get the shaft. With a game like
that is it any wonder why nobody is playing by free market rules? There
are
just too many losers in real free trade for very many to want to play that
game. The fact is the US was able to win the global economic competition
game for many years, so we loved it. But now others are coming up to
compete
with us and they are actually beating us, say, like the Japanese
automakers
are destroying the American ones. Now if we played by the free trade, free
competition rules we will lose that industry just like we lost consumer
electronics and several others. Do we want to let our automakers be
destroyed in the global market or do we want to fix the game just enough
so
that we can keep playing?

I think what we want is for the Japanese automakers to become more American
than Japanese. And that seems to be what's happening. d8-)

That's what it is all about, staying in the game economically. Those
countries that want to keep industries protect them and the countries that
don't want to keep them don't.

Hmm. When was the last time you saw a French car in the US? Protecting is
usually bad. Giving a temporary shield, a delaying tactic, may sometimes be
good. It's not easy to do to good effect, and it rarely is. But sometimes
it's necessary.

Free trade is simply global competition for
business. If there are no barriers it will be just like free market
capitalism everywhere. There will be a few big winners and a lot of
losers.
That is the outcome of free market capitalism everywhere it's been tried.
Whether it's Standard Oil, Wal-Mart, or the old AT&T, free market
competition winds up with a monopoly, duopoly, or oligopoly and all the
other competitors are put out of business. A great example of this is the
American car market. Eighty years ago there were over 100 car
manufacturers
in the US. Eventually, there were three. That is what happens in a free
market and when you expand that market to include the whole world you will
get the same thing. All the countries know this and that's why they don't
want to play free market capitalism unless they believe they are one of
the
few countries that can come out on top. Most of them know they won't so
they
protect what they want to keep. Except for us. Because of the free market
utopians in charge here we've allowed our markets to become too open to
unfair competition, and now we've got the worst trade deficits in the
world.
When something like free trade isn't working for you it's time to go with
what does. The successful countries all use protectionism in one form or
another. As soon as we start using the same tactics the sooner our trade
deficit will start coming down, and probably the dollar will start going
back up. Free trade has been a bust for us except for a lucky few. It's
time
to go back to what all of our competitors are using; protection for the
industries that are critical for the welfare of our nation. Which is
something we should have done years ago but with republicans in charge
that
wasn't possible. If we can get rid of them maybe we can make the changes
necessary to turn things around. I think we all know where we're going to
be
if we keep doing things like we have during Bush's term in office.

That kind of thinking is what may cause me to vote for McCain. If you're
going to tamper with markets, you'd better be damned sure of what you're
doing. What others are doing is of little help to us in deciding what *we*
should do. We can't be mercantilists like the Chinese or the Asian Tigers.
Europe is not a model we would accept. Japan has run out of gas and they're
no shining example.

We need trade but we need something cautious, backed by a more conservative
monetary policy and a more balanced fiscal policy. Trade will have to be
slowed down for a while. We have to re-invest in infrastructure. That means
a willingness to accept some real pain to get things back on track.

--
Ed Huntress