Trump shoots down the ‘Flying Geese’ theory of international trade
Michael Lind, a professor at the University of Texas (Austin), is a proponent of a national industrial policy. In an article appearing in American Compass, he focuses his attention on the flaws of the reigning paradigm for trade used by globalists: the flying geese theory.
Lind described the flying geese theory as such:
The “flying geese theory” of trade was proposed by the Japanese scholar Kaname Akamatsu in the 1960s and was much discussed in the West in the 1980s and 1990s. It is a theory of global economic development, in which a leading nation, Japan or the U.S., is compared to a lead goose followed by a flock of developing nation geese. The geese that trail behind eventually catch up with where the lead goose was, but by that time the lead goose has moved on. So the whole world moves in the same direction of increasing technological and economic development, but the relative positions of nations in the hierarchy remain stable over time.
The way this is supposed to happen in theory is that advanced economies like the U.S. outgrow their “old” industries like, say, textiles and steel and develop new industries or services. The outgrown industries are abandoned and passed down to developing nations. Workers in the advanced nations find employment in the new industries, and those in the developing countries do the work previously done in America twenty-five or fifty years ago, albeit at lower wages.
The flying geese theory is not some arcane academic curiosity. Lind says: “This is the implicit model of the economy that most chin-stroking American policymakers, pundits, economists and corporate executives share as they stroke their chins in policy confabs in Washington, New York, Aspen and Davos. The model is wrong.”
The model was wrong when it was first proposed, and it is especially wrong for today. As Lind points out, America did not “outgrow” its agriculture industry. Instead, the U.S. invested in it and made American farming the wonder of the world. It would have been be insane to abandon agriculture and rely on foreign sources for our food supply so as to focus on new industries like the automobile and electronics. Insane, yes. But it was insane for America — the lead goose — to export much of its manufacturing, including critical pharmaceuticals and health care products, to China, a trailing goose.
Lind rejects the idea that there are any industries that are “old” and should be ceded by the U.S. to foreign countries. As he puts it: “There are no old industries, only industries that have not yet been modernized with new technology.” He is correct. He gives an example:
The history of the U.S. transportation industry provides yet another reason why the flying geese theory is wrong. That reason is cross-hybridization among industries and technologies. In the U.S., both the automobile industry and the airplane industry drew upon the pre-existing bicycle industry which had developed light metal frames, ball bearings and other necessary components. Without the already-existing bicycle industry, the transition in the transportation from horse-drawn carriages to horseless carriages might have taken longer and proven more difficult.
In reality, the flying geese theory is just an excuse used by big multinational companies to move industries out of the U.S. in the quest for low wages, the most easily exploited workers, the lowest environmental regulations, and the fattest foreign government subsidies. This was done in the name of corporate profits but at tremendous cost to the country.
Fortunately, since 2016, the U.S. has had a president who has not only stopped this, but has started to reverse the trend. Skeptics might say they don’t see much evidence of reshoring. That’s because of inertia. Just as it takes time to turn an ocean liner around, so it takes time to re-establish an industrial base. The process is happening, however, and will accelerate significantly in Donald Trump’s second term.
Published at Fri, 30 Oct 2020 05:00:00 +0000