Local opinion: The arc of history
There is much policy, effort and funding being expended to "reshore" manufacturing to the U.S. Even if successful, manufacturing will still only represent a small activity in the overall economy vastly eclipsed by services. The preferred method of the incoming Administration in Washington is to apply tariffs to products entering the U.S. This certainly will raise prices to consumers and businesses. It may spur some "reshoring" to avoid tariffs, but compared to China the U.S. is now a high-cost manufacturing pygmy. As well, countermeasures by foreign exporters could have a negative effect on U.S. industry in all sectors, not just manufacturing.
It seems the world is heading into a nationalist era, where the idea of comparative advantage that Adam Smith explained no longer counts for much. Growing up in Canada before the Auto Pact, North American Free Trade Pact, and U.S. Mexico Canada Agreement reduced tariffs and trade friction, I recall the high prices for made-in-Canada goods of inferior quality and selection. Of course, Smith operated in the eighteenth Century and today's international trade flows would have astounded him. Moreover he had no concept of the way in which one nation, China, would distort its domestic economy in order to flood the world with its manufactures, creating job losses and social upheaval in its trading partners such as the U.S. so that those made jobless, poorly educated and skilled, became the core voters of the Trump revolution.
Was Smith wrong? In my view those who adopted the laissez-faire economic model with an "invisible hand" balancing competing interests are the culprits. Their ideological adoption of the "invisible hand" and its fellow-travelers "tax cuts" and deregulation fostered a cult unwilling or unable to understand the social disruptions, much less to do anything constructive about them. So the social problems grew until it became possible for a demagogue, promising to fix things, was propelled into power. We and the world are in for some turbulent times.
Adam Smith was a Scottish cleric and philosopher and before his "Wealth of Nations" he wrote "The Theory of Moral Sentiments". So far as Smith was concerned, trade between men requires of both parties that there be trust and honest dealing. The reason the Jews who trade diamonds on 48th St. in Manhattan can do so on a handshake is that they are all members of a small group, all known to each other. Failure to honor the terms agreed on by handshake would lead to ejection from the group.
Today's multinational trade attempts to replace these handshakes with rules and laws. But enforcement is weak and rulebreakers often go unpunished. Trust is replaced by legal documents where the party of the first part covenants, promises, signifies, commits and ... well, you get the idea: words, not trust. The party with the smartest lawyer, the deepest pockets, the most experience gaming the system, for example by judge-shopping, prevails. Welcome, our new administration. Rather than the "golden rule" of "do unto others as you would have them do unto you" we now have a win/lose world where it's "do unto others whatever I want".
Where does this lead to? Certainly not to lower consumer prices and well-paid jobs for all Americans. More likely to friction and double-dealing on a gigantic scale, probably leading to wars or, if "peace" is imposed, to the recruitment of frustrated multitudes into "terrorist" movements. America can pretend they don't exist, but the events of 9/11 illustrate what happens when a small number of fanatical terrorists organize themselves against even the largest countries. Do we want another 9/11? Seems like it.
Martin Luther King spoke of an "arc of history" that he saw bending toward freedom and equality. But the arc of history bends the other way too, toward dystopia, repression, genocide, violence. We may now be witnesses to that.
David Loynd is an entrepreneur and value creator.
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