For about 200 years, we understood this in the United States. Had the fathers of the United States like Lincoln, Washington, Jackson or Grant applied for IMF loans, they would have been denied: All of them believed in high tariffs and a heavy control of foreign investment, and considered “free trade” to be absurd.
In 1791, Treasury Secretary Alexander Hamilton submitted his Report on the Subject of Manufactures to the US Congress. In it he outlined the need for our government to subsidize new industries and subsequently protect them from the international markets until they become globally competitive.
Additionally, he proposed a roadmap for American industrial development. These steps included protective tariffs on imports, import bans, subsides, export bans on selected materials, and the development of product standards.
It was this policy, followed largely for most of the history of our country with average tariffs through most of the 19th and 20th centuries of around 40 percent, which built our American industry. All three times we radically dropped tariffs – for 3 years in 1857, for nine years in 1913 (just down to 25%), and in 1987 – what followed were economic disasters, particularly for small American manufacturers.Since Reagan blew out our tariffs in the 1980s (and Clinton kicked the door totally open with GATT, NAFTA, and the WTO), our average tariffs are now around 2-4 percent. And the predictable result has been the hemorrhaging of American manufacturing capacity to those countries that do protect their industries through high import tariffs but allow exports on the cheap – particularly China and South Korea.
If President Obama and our Congress don’t soon learn the lessons Alexander Hamilton taught us in 1791, which he learned from Henry VII and were borrowed by Japan, South Korea, and China, we’ll continue to see American industry slowly die. And with it will go the American middle class.
Tuesday 14 July 2009
Obama Drinks Friedman’s Kool-Aid ☀
A GNT creation ©2007–2011
