Here’s a letter that I sent ten days ago to the New York Times, but which was never published there.
Editor:
Although rightly decrying tariffs, as well as suggesting some worthwhile policy changes, Sam Hammond’s case for industrial policy fails (“Tariffs Won’t Fix Our Trade Imbalance. This Will.” April 18). That case rests on a misunderstanding of economic history and of current economic realities.
It’s untrue, for example, that America’s postwar boom was fostered by government’s wartime industrial subsidies and planning. As the economic historian Alexander Field reports in his 2022 book, The Economic Consequences of U.S. Mobilization for the Second World War, “the economy’s postwar capabilities are almost entirely attributable to conditions already in place in 1941.”*
Mr. Hammond also overstates the problems with the current state of American manufacturing and exports. Standard accounts today have the U.S. as second in the world, behind China, in manufacturing and exporting. But on a per-capita basis, the U.S. manufactures more than twice what China does, and exports more than three times what China exports.
And while the growth both in U.S. manufacturing output and in manufacturing-worker productivity** have stalled since the Great Recession, each of these measures is today multiple times larger than it was in the mid-1970s when the U.S. began running the annual trade deficits that Mr. Hammond, along with Pres. Trump, believe to be a problem that needs to be solved. Given the explosion in the regulatory state under Presidents Obama and Biden, and of protectionism under Presidents Trump and Biden, perhaps the best thing the government can do to ‘revive’ U.S. manufacturing is to leave it alone.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* See page 372.
** Phil Gramm and Donald J. Boudreaux, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism (Lanham, MD: Rowman & Littlefield Publishers, forthcoming May 13, 2025), page 93.
