"Hawke" wrote in message
...
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.

Industrial policies and industrial planning are one area where neoliberal
economics is right, based on experience. Central planning can never keep up
with markets and always leads to big market distortions and big
inefficiences as a result. I was a big advocate of planning and industrial
policies for years, but I eventually got it pounded out of me by researching
and reporting on world manufacturing and trade. It's not good, Hawke.



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.

We damned near did hothouse steel in the '70s. That's when reporting on the
steel industry was my #1 job. I was all for it.

Fortunately, we didn't do it. If we had, Nucor would have been stillborn.
Now we produce about 100 m tons of steel and consume 123 m tons. That's not
bad. And most of that steel is from mini-mills, ala Nucor. What they did is
to make the basic steel industry almost obsolete, but it wouldn't have
happened if their parent company wasn't under pressure to find a cheaper way
to produce steel.

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".

Whatever we do to control trade, or to slow down change, I hope it's nothing
like what the Japanese have done with rice. The reason they protect rice is
because of political pressure from rice growers, who are enormously strong
in Japanese politics. It's like our corn subsidies, only worse.

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.

As I think you pointed out, the US car business became an oligopoly, and
bred all of the troubles that oligopies typically breed. I'm doubtful that
it can be fixed. But the Japanese and some other builders who are operating
in the US are starting with a relatively clean slate. That gives them a huge
advantage. I'm hoping they'll all move here, permanently.



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?

Peugeot and Renault were doing pretty well when we had the invasion of
European cars in the late '50s until the late '60s. But both companies
suffered from a lack of market savvy in the US, due largely, say most
observers, to the fact that they were only good at operating in the hothouse
of protectionism that was France. They built cars that weren't suited for
the US market. Now they make much better cars, but the price of entry, and
the fierceness of competition, has kept them out of the US.

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.

Nope. They can sell anything they want. They don't want to try. The Italians
did the same thing. (Which cost me a bundle, because Alfa Romeo was my
advertising client at the time they moved out.)

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.

I'm on the fence and I'm waiting to see how the real campaign goes. I voted
once for a Republican president in the last 40 years.

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.

Definitely. Markets are like high-horsepower engines. They need a throttle
or they blow up. But you don't want to try to control the valves and the
fuel flow while you're driving. (I could extend this metaphor into complete
idiocy with no trouble, but I'll stop here. d8-))


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.

Just so we don't foul the spark plugs and kill the engine. (hee-hee! It's
endless...)

--
Ed Huntress