Between a Rock and a Hard Place

The US has painted itself into a corner. We are helpless to protest communist China's pegging of the Yuan to the dollar as we are beholden to them for trillions of dollars of goods each year. We have no ability to force the Japanese to stop manipulating US currency prices to the detriment of our exporters because they are our single largest creditor nation and hold 1/3 of our government debt. We have no ability to enforce human rights standards in China and other parts of Asia. We have no hope of stopping European subsidizing their industrial core. We have no effective method for forcing the oil cartels to increase supply.

We are hamstrung simply because of our reliance on foreigners for capital and credit, for basic goods and services, for employment, and defense supplies. As illustrated above, these trends and the slowing interest in foreign direct investment in the US are heralding the beginning of a major change for the American super power as we have come to recognize it.

From problem to solution, protecting fledgling or recovering industries is clearly not the same as protecting established fully competitive industries. Many examples in our history have shown the merits of using protectionism to allow new or recovering industries the time to build up their technological base and their capital infrastructure to compete with established global industries. US industries such as steel, chemicals, semiconductors, glass, textiles, automobiles, and agriculture were all forged out of opportunities afforded by protectionism. Furthermore, there is little risk that companies formed in this way will run rampant over domestic buyers given the size and competitive nature of the US market and the anti-trust system that is at work domestically.

US citizens are most alarmed at the risk protectionism poses to their own standard of living. This is certainly a valid concern. Given the fact that most of the products we now purchase are either made overseas or composed of components that were imported from abroad, it is probable that under protectionist policies in the short term, the US will experience a net decrease in buying power until domestic industries can take up the demand. The alternative is to allow our position to deteriorate to the degree that the value of the dollar is so deflated that our buying power will have the equivalent effect of tariffs albeit at a pace we cannot control.

We have reached a point where we cannot afford to continue in our current practice. Though we all value the lush consumer markets and freedom of choice we have in this country, these things must come at a price. This price is the mortgaging of our future as we exchange sustainable wealth creating assets for short term luxury and a perishable standard of living. This is not opinion. This is fact. The mortgaging is accruing at an accelerating rate currently at $1.4B per day or $1M per minute.

Other combinations of subsidies, tariffs, quotas, and similar policies will also likely result in discomfort to the US buyer. We are confronted with a bitter pill or a degenerative terminal illness. We can control the industrial recovery in this country or we can allow it to take a natural course. In either scenario, there seems to be no pain-free alternative.

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