Monday, May 27, 2013

Reaganomics Revised

Robert Mundell, a Nobel laureate and significant figure in conservative economic policy development, has come to the conclusion that "free trade" isn't exactly free:
 In an interview on the fringes of the Astana Economic Forum in Kazakhstan, Mundell did not pull his punches. One of the chief architects of Reaganomics and a lifelong advocate of trade liberalization, Mundell now raises a large question mark over the continued viability of free trade. “The United States can’t keep a completely open system if the rest of the world is less open,” he said. “The United States may have to take a leaf out of the book of Japan, China, and Germany, and have protectionism inside the system.”
He explained that though he opposes tariffs (because they would send the wrong signal and thus invite retaliation), America may have to resort to less overt protectionist measures. One such tactic would be to adopt Buy American policies in government procurement (such covert protectionism is virtually universal elsewhere among America’s most significant trade partners).
Mundell  believes outsourcing has gone too far and that America’s formerly world-beating industrial corporations are in danger of losing their ability to manufacture. He commented: “It has been a mistake to let U.S. manufacturing run down so low. While other nations have industrial policies to maximize their trade benefits, the United States leaves itself open like a naked woman. A big problem is with nations that may prove to be future enemies.”
In a neomercantilist world, so-called "free trade" policies could simply empower the protectionism of other nations.

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