Comment by consteval
From what I've seen most economists have extremely short-sighted thinking. Their theories are almost comically naive.
Yes, economically in the short term (< 50 yrs) putting your eggs in your few specialized industries will give you big economic growth. But, in the long term this is economically extremely risky - because you're relying on remaining competitive in those few, high price, more advanced industries. If that happens to change, you're screwed.
And it CAN change due to geopolitical factors (something economists don't understand). A dictatorship of the future can 100% make more efficient supply lines than you. Even somewhere in-between and you can be screwed - just look at the Chinese automobile industry.
For decades, the automobile industry has been the darling child of the US. This has, and will continue, to no longer be the case. The reality is China subsidizing their industry and providing top-down support means they can make better cars cheaper. The only reason this hasn't completely fucked that portion of our economy is because we don't let them in.
We can't keep outsourcing all our manufacturing while we sit on our asses and rely on our darling child industries to grow.
Take a look at what happened during the global communist revolutions. Those communist countries were scary to us because they have the potential to make more shit and make it cheaper. They can out manufacture us.
Luckily we were not completely braindead (and the tech did not exist) to outsource our manufacturing to them. But if we did, it could have been catastrophic for our economy in the long-term.
A few points to consider:
- Electric vehicles are inherently much cheaper and have way fewer moving parts. Just because an entry level internal combustion vehicle costs $25K doesn't mean an EV has to. But with 100% tariffs it can!
- Every day that American workers spend building heavily government subsidized internal combustion powered vehicles is a day we fall farther and farther behind. All those low-end "hoverboards" that everyone bought a few years ago, all the electric scooters. The engineers who design those in China are the ones designing low-cost EVs that utterly out-compete what the US can do. US policy to subsidize mediocrity (Tesla, over-priced, over-hyped, impossible to maintain) HARMS the entire US economy. How many people need to pay an extra $500 to $1000 a month in payments that are effectively a subsidy of outdated tech? Most people with a car payment are doing just that.
Meanwhile we keep getting into wars over petrol which is why we don't keep track of how much we spend on the military because nobody cares, of course it's worth it to keep the oil flowing!
Economics is about information. Price is a function of supply and demand. As much as governments may wish that internal combustion tech was competitive with low-cost EV tech, it's not. As much as everyone wishes healthcare was free, it's not. We have to choose our subsidies wisely. US industrial policy is a disaster and it is fraught with so many misconceptions.
If it's really a national security issue, where is the US stockpile of raw steel, copper, lithium, 555 timers, etc.? Politicians would rather rant and impose tariffs and get photo-ops near coal factories than actually do something simple and strategic that would take away the possibility that a conflict would disrupt crucial supply chain.
Economic specialization is a good thing. Economies are not so simple as importer and exporter. Most companies are both importers and exporters. China's government knows this and adopts sensible policies like subsidizing oceanic shipment of goods so that shipping costs of the $25 electronic device aren't $100. This lets an engineer build and sell something and learn and grow.
China has an economically-aware industrial policy, the US has a backward-looking, short-term, electorally driven one.