John Hofmeister, former president of US operations for Shell Oil, is granted space for an op-ed in Monday’s Wall Street Journal. In his commentary, Hofmeister espouses a view that will not necessarily make the paper’s editorial board happy: “The U. S. Needs an Industrial Policy.”
Hofmeister: “The next decade could see negative growth thanks to our foolhardy fondness for “free market” philosophies that tell us it’s OK to export all our jobs. The U.S. is down to four world leading industries: entertainment, out of Los Angeles (heavily indebted to Democrats); information technology, out of the Bay Area (likewise); energy, out of Houston (heavily indebted to Republicans); and financial services, out of New York (indebted to both parties). That’s it, folks. We’re otherwise second- or third-rung suppliers across the range of manufactured products—except for biotech, a small industry—and we can still (mostly) feed ourselves. Even aerospace has suffered.”
A handful of readers were moved to comment, and they were not especially happy. Said one: “One man’s ‘industrial policy’ is another man’s Stalinist command economy.” Said another: “Just think… with an industrial policy in place, our economy would look like Japan’s: moribund.”
Well, yes — Japan has gone through a “lost decade” — but did its economy never achieve anything? Just asking….
Germany’s Der Spiegel reports on political tensions between the United States and China, including Chinese resistance to American demands for currency “rebalancing.”
“The ‘American elite’ has ‘no idea’ what fatal consequences a revaluation of the yuan could have, says political commentator Liang Jing, adding that it would lead to a collapse in Chinese exports and ’cause a worsening in domestic income distribution.’
“What that means in plain language is that Chinese factories would need to lay off many workers and the divide between rich and poor would quickly grow wider — potentially plunging the country into social unrest.
“And if the Chinese government were to start allowing money to flow freely across its borders, something Washington is also pushing for, it would mean an ‘unprecedented exodus’ of capital from the country, the commentator says.”
Germany’s Der Spiegel reports on political tensions between the United States and China, including China’s reasons for resistance to U. S. pressure for currency “rebalancing.”
“The ‘American elite’ has ‘no idea’ what fatal consequences a revaluation of the yuan could have, says political commentator Liang Jing, adding that it would lead to a collapse in Chinese exports and ’cause a worsening in domestic income distribution.’
“What that means in plain language is that Chinese factories would need to lay off many workers and the divide between rich and poor would quickly grow wider — potentially plunging the country into social unrest.
“And if the Chinese government were to start allowing money to flow freely across its borders, something Washington is also pushing for, it would mean an ‘unprecedented exodus’ of capital from the country, the commentator says.”
The UK does not observe Thanksgiving, and so the London Economist arrives in the inboxes of its electronic subscribers as it does every Thursday. A reader takes the weekly to task in an online comments section, in response to a leading article on American foreign policy.
“An example of foreign policy cleverness missed by the Economist had to do with tire tariffs against China, which the Economist (stupidly) dedicated a front cover article to, predicting that the U.S. had just ignited a trade war. As we now know (it was actually obvious in retrospect) the U.S. had actually cleverly outmaneuvered China, which could not afford to retaliate. As China exports so much more to the U.S. than vice-versa, any retaliation would harm China more than Americans, so out of wisdom China had to puff out its chest, complain, and then quietly retreat….”
“If you go on track record, the Economist has an embarrassing habit of underestimating Obama….”
Harold Meyerson in the Washington Post: “The China that has emerged since trade relations were normalized has become not just an economic giant but the planet’s leading protectionist power. By artificially depressing its currency and making its exports cheaper, China is compelling other nations to erect trade barriers. In essence, as economist Michael Pettis has observed, China’s currency policy is this depression’s equivalent of the Smoot-Hawley tariff.”
Peter Whoriskey of the Washington Post visits Hickory, North Carolina, where unemployment has hit 15% due to the effect of foreign competition on the textile, furniture, and fiber-optic industries. The manager of a state unemployment office observes: “The people in the think tanks keep saying we are going to become — what’s the term? — an ‘information and services’ economy…. That doesn’t seem to be working out too good.”
Yes, indeed — we simply must knuckle under to “the people in the think tanks.” Regarding free trade, I once asked a professor of economics — whose thinking was representative of that found in the “think tanks” — what if everybody became an itinerant? I wasn’t especially impressed by the answer — “Aw, it’d never get that bad….”
Maybe it never would get that bad — but the question was intended as a sort of thought experiment. If the result of the workings of the free marketplace was that it did get that bad — well, then, according to free-market theory, that result must be the best of all possible worlds. It may indeed bring wonderful benefits to “the consumer” — but “the consumer” is an abstraction, since most every consumer also has to work for a living, and if the economic centrifuge does not follow up your job today, just wait until tomorrow or next week….
We do indeed garner considerable benefits from international trade — up to a point. The trouble with the “think tank” people is that they leave out the “up to a point” — because they’re ideologues. A proportionate policy would balance the benefits of trade against the deleterious effects of the economic centrifuge….
When President Obama slapped a tariff on Chinese tires some weeks ago, the cry went up from the usual suspects: “Trade war!”
Alas, the Wall Street Journal reports Friday from Hangzhou, China: “The U.S. and China agreed to relax restrictions on agriculture, technology, travel and other trade restrictions ahead of President Barack Obama’s first visit to Beijing next month….”
I blogged on the following remark from a public debate in New York City, in the wake of the tire tariff announcement: “Is China not pushing its tires here? Of course they are. Let’s stop isolating this economic theory from the real world. Don’t think [the other] side is fighting an uphill battle. They won. They’ve won for decades….”
The decline in the value of the U. S. dollar is benefiting the domestic economy as it recovers, but politically it pits China and the U. S. against Europe and Japan, which see the decline as tantamount to protectionism. Anthony Faiola reports from London for the Washington Post.
In one of the overnight press reviews I linked to Holman Jenkins’ Wall Street Journal column on the closing of NUMMI, the Toyota-GM joint venture. “However sad for workers, the company’s decision is a brave one, and a rare one.”
I suppose it’s a huge concession for him even to mention that this is “sad for workers.” Fundamentally, he’s a market-ideologue who views every departure from market-ideology as a scam. It’s true that there is overcapacity in global automobile manufacturing, so from a strictly economic perspective it would make the most sense to have all automobiles manufactured in the Japan-Korea-China region and simply shut down the entire industry in North America. I guess that’s what Jenkins wants, along with the repeal of the Wagner Act and the busting of the UAW.
You can’t get a hearing for the notion that a prosperous blue-collar workforce would be a good thing; it’s all their fault for having priced themselves out of the world market. Supposedly they should’ve taken the news that their “market value” had been cut in half, overnight as they were, with impunity.
Here’s what Robert Samuelson had to say about it just under a year ago, with a General Motors bankruptcy looming: “No one knows what further havoc a GM bankruptcy might inflict…. Why run these risks when the 6.5 percent unemployment rate seems headed toward 8 percent and almost a quarter of the 10 million jobless have been out of work for six months or longer? Just to satisfy a purist ‘free market’ ideal? It doesn’t make sense….”
You won’t get anything else but elaboration of the “purist ‘free market’ ideal” from Jenkins and his editorial page, of course. “We speak for free markets and free people … against confiscatory taxation and the ukases of kings and other collectivists.” Congratulations, unemployed NUMMI line workers; you’ve been lumped in with “kings and other collectivists.”…
From Peter Whoriskey in the Washington Post — a profile of Leo Gerard, head of the steelworkers’ union, which instigated the action that led to tariffs on Chinese tires.