The American economy has gone away. It is not coming back until free trade myths are buried 6 feet under.
America's 20th century economic success was based on two things. Free trade was not one of them. America's economic success was based on protectionism, which was ensured by the union victory in the Civil War, and on British indebtedness, which destroyed the British pound as world reserve currency. Following World War II, the U.S. dollar took the role as reserve currency, a privilege that allows the United States to pay its international bills in its own currency.
World War II and socialism together ensured that the U.S. economy dominated the world at the mid-20th century. The economies of the rest of the world had been destroyed by war or were stifled by socialism.
The ascendant position of the U.S. economy caused the U.S. government to be relaxed about giving away American industries, such as textiles, as bribes to other countries for cooperating with America's Cold War and foreign policies. For example, Turkey's U.S. textile quotas were increased in exchange for over-flight rights in the Gulf War, making lost U.S. textile jobs an off-budget war expense.
In contrast, countries such as Japan and Germany used industrial policy to plot their comebacks. By the late 1970s, Japanese automakers had the once dominant American auto industry on the ropes. The first economic act of the "free market" Reagan administration in 1981 was to put quotas on the import of Japanese cars in order to protect Detroit and the United Auto Workers.
Eamonn Fingleton, Pat Choate, and others have described how negligence in Washington DC aided and abetted the erosion of America's economic position. What we didn't give away, we let be taken from us while preaching a "free trade" doctrine at which the rest of the world scoffed. Read more...