By Hunter Wallace
For those of you who are skeptical of “free trade,” check out Clyde Prestowitz’s The Betrayal of American Prosperity:
“Through the Defense Plant Corporation, the government financed more than 80 percent of the new plant construction and plant conversion by the auto, aircraft, and other companies for wartime production. Washington came to own 90 percent of the country’s synthetic rubber, aircraft, magnesium, and shipbuilding plants and facilities; 70 percent of the aluminium factories; half of the machine tool plants; and 3,800 miles of pipeline. By the end of the war, the RFC spent $37 billion that not only helped win the war but also stabilized the economy.
In 1940, to run the wartime economy, the White House established the Office of Production Management, which morphed into the War Production Board and the Board of Economic Warfare in 1942. The war created 17.5 million jobs in the United States as the board drove war production to reach more than 40 percent of GDP in 1943-44. For example, steel production in 1944 reached 80 million long tons, or more than two-thirds of total world production. The merchant marine expanded from 13 million to 40 million gross tons as 5,545 ships were built in American yards. By 1945, the United States had 60 percent of the world’s merchant tonnage. Having produced less tham 14,000 airplanes total in the twenty years before the war, the United States was turning out 96,000 per year by 1944. On top of this was the incredible R&D effort that led to the atomic bomb, the computer, dramatic advances in aeronautics including the jet airplane, and the development of penicillin and numerous other drugs and biological agents.
By the end of the war in 1945, after a century and a half of “catch-up,” of the American System of industrial policy, infrastructure policy, protectionism, and continuous government intervention in the economy to ecourage industrial development and direct war production, the United States emerged as an unprecedentedly powerful hegemonic colossus. It accounted for about half of global GDP, owned 70 percent of the world’s gold, had a monopoly on nuclear power, was the world’s leader in virtually every technology and every industry, owned the world’s main currency, was the world’s leading creditor to the tune of $3 billion, and had a trade or current account surplus of $5.8 billion. It had more than caught up. It was all alone in a realm no nation had ever before inhabited.
Then it took a new track.”
Libertarians would have us believe that “government” is anathema to economic development. In reality, the first 150 years of American history were more notable for government-business cooperation.
Just read this one chapter on British and American economic history. It covers the role of “government” in everything from the telegraph to the transcontinental railroad to the Erie Canal to the Panama Canal to the Hoover Dam to the steel industry to the merchant marine to the aerospace industry to nuclear power and computers.
Compare the economic trajectory of the United States and Great Britain from the 1840s to the 1940s – a century in which the US developed under the American System as an industrial policy, and Great Britain which practiced unilateral free trade in that time period.