The P-word that everyone's doing

Interesting article by Clyde Prestowitz over at Foreign Policy continuing with the "economics of defence" and the rise of China theme by drawing attention to a little-noticed strategy that came out at about the same time as the defence guidance.

The commerce department's report on US competiveness, says Prestowitz, misses significant hindarances to US trade with emerging countries:

"At the moment, four great incentives are continuing to pull the production and provision of tradable goods and services out of the United States. These are foreign currency manipulation that overvalues the dollar, subsidization by many foreign governments of the offshoring of U.S. production capacity, the "buy national" policies and attitudes of many governments that force U.S. companies (and the corporations of other countries) to produce in a particular country if they want to sell there, and the subsidization of and risk reduction for capital investment by state-owned or indigenous private companies in designated "strategic" or "pillar" industries by a number of foreign governments. As long as the report doesn't even mention these elements, let alone address them, there is no hope for a shift in the downward arching American economic, industrial, and technological trajectory."

For the UK, trading with the rest of the world is even more important to the country's well being (the UK doesn't have the US's huge internal market). MP Kwasi Kwarteng, who has a Cambridge doctorate in economic history, offered this take a while ago on government's role in promoting manufacturing and trade. Acknowledging that it's a little surprising to hear a Conservative MP take positively about government support for the private sector, Kwarteng ends with this.

"Of course, we can’t mention the P-word, Protection, in polite company, but everyone is doing it. They always have. Once we recognise this, we realise that it makes sense to harness our excellent universities and scientists and our manufacturing traditions to preserve and grow our industrial base. Nothing could be more conservative than that." - Flashman would be proud!

As ever, Londonstani finds it difficult to resist a little econ geekery