The Betrayal Of American Prosperity by Clyde Prestowitz

Author:Clyde Prestowitz
Language: eng
Format: epub
Publisher: Free Press
Published: 2010-07-15T00:00:00+00:00

Krugman and his colleagues also pointed out that, contrary to the theory, government intervention in trade might, under some circumstances, be in the national interest after all. For instance, subsidizing and/or protecting an industry to enable it to achieve unchallengeable economies of scale in key areas might be sensible (remember Alexander Hamilton?). Think of computing, aerospace, and the production of solar panels. Or consider the case of U.S.-based Boeing versus European Airbus. Europe has substantially subsidized Airbus in its attempt to overtake Boeing, and most analysts agree that this subsidization has benefited not only the European aerospace industry, but also the European economies as a whole.

In view of all this, Krugman concluded that while “free trade is not passé, it is an idea that has irretrievably lost its innocence. There is still a case for free trade as a good policy . but it can never again be asserted as the policy that economic theory tells us is always right.”

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