Thursday, July 15, 2010

He's right and he's right? They can't both be right!

Ryan Avent, perhaps prodded by
my comment-thread heckling ( my dreams!), has started making a lot more sense in his arguments against the industrial-policy-ists:
And over the long-term, the needs in America are the same as they have been for decades. The country has been underinvesting in the basics, and the effects have become ever clearer. Its infrastructure—from transportation to water and power to broadband—is wholly inadequate. Educational attainment is plateauing and may begin to decline. Its labour market policies aren't up to handling sectoral shifts or millions of people in long-term unemployment. Its research funding is ample for any project with a potential military application and meagre for everything else. The weaknesses are clear.
This is absolutely right. The collapse of America's pubic-good provision is the single biggest problem with our economy. Trade issues, and industrial policy, are secondary to our crumbling infrastructure and dysfunctional education system.

And yet, when Tim Duy says things like this, it's hard to ignore the sneaking suspicion that maybe trade-imbalance and industrial-policy issues are a bigger part of the picture than we realize:
[I]n aggregate real wages and nonfarm payrolls have been stagnant for a decade. Where are these high wage paying jobs? Or even median wage paying jobs at this point? Silly me, I actually believe the unapologetic and unquestioning supporters of free trade need to answer this question. We are millions of jobs below trend, and we have lost millions of jobs in manufacturing - the manufacturing of goods that we still consume, no less. Moreover, these two trends occurred in the same decade, in concert with a third trend - the sharp rise in foreign official reserve accumulation. How can you not be even allowed to suggest that there just might be a connection?
The problem I see with Avent and his fellow-travelers (Yglesias) is not that they are wrong about the structural problems facing our economy - the lack of investment in public goods, the Republican commitment to ever-expanding deficits - but that they are so dogged in their belief that these are the only problems we face. Perhaps they are afraid that they'll labeled as economic know-nothings if they question the free-trade orthodoxy (a legitimate fear, given that most of the Grand Old Men of the economics professions are still ideological conservatives). Or perhaps a trade war with China is what they fear most.

But either way, if Tim Duy's question turns out to have an answer we don't want to hear - an answer that implies that a strong-dollar policy and a finance-favoring industrial policy have hurt our economy - then writers like Avent and Yglesias are preventing liberals from coming up with a workable answer to America's economic woes. Which, in the long run, is bad news for the liberal movement.

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