Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Obama's Failing Industrial Policy
In October, U.S. manufacturing employment declined for the third straight month while overall unemployment remained unchanged at 9.6%. The graph below shows the number of workers employed in U.S. manufacturing since January 2008:
President Obama has pinned his hopes for a manufacturing revival upon industrial policy, the idea that government bureaucrats should pick the companies of the future and subsidize them. His Export Promotion Cabinet is supposed to manage this policy. But the latest anecdotal report, from the Oakland Tribune, explains why it is not working:
There is an alternative that would actually revive American manufacturing, the scaled tariff. Instead of relying upon bureaucrats, it relies upon the marketplace to choose winners and losers. It's rate goes up when our trade deficit with a country goes up, down then our trade goes down, and goes to zero when trade approaches balance. Such a tariff would increase American exports to the trade-manipulating countries, reduce American imports, and revive American manufacturing investment.
Journal of Economic Literature:
Atlantic Economic Journal: