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

Yes, gently, and carefully.

Okay, I take that as a yes.

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.

Not a yes. But just because someone tried something and screwed it up
doesn't mean they shouldn't have tried. And I'm not so sure we couldn't do
better than the Japanese. Maybe, maybe not. But I think that is the
direction we need to head in. You can be cautious, which is probably a wise
thing to do.


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.

That may be true but sometimes you need to keep an industry for other
reasons. Take steel. Say we are not competitive in the free market sense and
we let the industry go to where it can be done better and cheaper. But now
we have no access to steel, which we may need in a war. How would it be if
we needed steel from China but that is who we go to war with. We'd be
screwed. So there are some industries a country may want to keep even though
they don't do as well as others. Japan shouldn't be growning rice at all but
they are protecting that market so the local farmers can stay in business
even though they can't compete in a global market. Now rice isn't steel but
the point is the same. For whatever reason the country may want to keep an
industry even if it's a bloated, useless, and noncompetitive clunker. We
should be making the choice not leaving it to the "market".




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-)

70% of the cars they sell in the US are made here right now. That means they
are made by Americans, in America, and sold to Americans. Sounds pretty
American like to me. Looks like the only thing that isn't American is the
people running the business, which pretty much shoots to hell the idea that
Americans are the best at running a business.


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.

Since I've never seen a French car that I wanted to buy that's kind of
beside the point. Maybe there aren't any is because we don't want them? I
don't know what the deal is between the US and France regarding autos but I
assume they are protecting their manufacturers and we are retaliating by not
allowing them to be sold here. But if nobody wants them we're not hurting
them much. If I remember Peugeot and Citroen were always garbage. They
probably wouldn't sell anywhere but in France anyway. But we agree sometimes
protection is a good thing. The only question then is when and how much.


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.

I'm pretty sure you'd vote for McCain despite anything I did. Old habits die
hard. If you're a conservative they never do. Unless some change is forced
you will continue to repeat the same pattern. That's unfortunate because
it's so anti intellectual. The idea is that you don't "tamper" with markets.
You protect what you think is in the national interest to keep or to stop
other nations from damaging you. Sure, you can go overboard and mess things
up but this is one area where being conservative is a plus. It's like
grinding. You can always take away but once you grind it off you can't put
it back on. So going slow and cautious is the way to do it.



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.


Pain will be necessary because of the excesses and mistakes already made.
Corrections usually hurt. But we have to get back on track and that means
putting people in charge who don't believe in unfettered free markets. They
are the ones who got us in this mess. Trade needs to be balanced and some
protection will help. We really need a whole new policy in this area and we
have to be honest and not go with the ideologues. We need to examine what
isn't working and change it and we need to see what is working and expand in
those areas. It's really just a matter of replacing incompetent managers
with competent ones. There are some good people out there, they're just not
working for us right now.


Hawke