On X, Jeffrey Tucker makes some interesting comments regarding the fall of manufacturing in America and a free-market response:
For decades, I dismissed, and even defended, the dramatic loss of American manufacturing as nothing but kvetching by economic revanchists and overpaid unionists. I don’t do that any more, namely because the history is deeply complicated by terrible policy mismanagement:
1. Depression then war kicked off the decline in the 20th century, along with fierce wartime rationing that devastated consumer manufacturing, e.g. US piano and clock industry, disrupting supply chains and deleting discretionary spending from the household budgets. That’s not the free market.
2. The end of the gold standard and rise of the petrodollar meant the forever export of American dollars, thus disabling the Hume/Smith/Ricardo settlements mechanisms that come with built-in limits to dramatic industrial disruption. This started the practice that eventually wiped out nearly everything from watches to textiles to steel, that is, forever US debt funded the industrial buildup globally.
3. The price-specie flow mechanism was replaced by a Fed commitment to forever inflation so that domestic prices (wholesale and retail) were never allowed to adjust toward great purchasing power as they would have under a gold standard, thus making the US inherently uncompetitive, despite all its infrastructure, knowledge, history, supply chains, and skills. The Fed just kept the printing going year after year and the debt always had a hungry market abroad.
4. The rise of the hegemonic regulatory state has erecting so many barriers to enterprise in the US that only the largest and most highly capitalized and heavily lawyered companies can thrive. Any industry struggling with thin margins is made incredibly vulnerable. Only those who have tried entrepreneurship can explain this fully. It’s mind boggling.
5. High taxes and high compliance costs move industrial structures toward consolidation, and open up an easy path for any foreign exported to outcompete any enterprise in the US. Every bit of this was preventable and fixable, even under a globalized free market provided the money was sound.
Given all of this, it should not surprise anyone to see the rise of a movement dedicated to industrial policy, higher tariffs, and even autarkic protectionism, none of which will actually fix the problem.
Photo Credit: Jeffrey Tucker by Gage Skidmore