Thursday, August 4, 2011

Are service economies inherently fragile?*Critique of Free Trade*?

The U.S and most of the developed world have essentially become 'service oriented economies' with emancipated manufacturing sectors. Undoubtedly, this economic transition is all a result of free trade and globalization, because manufacturing is cheaper in the third world. I know that according to the law of comparitive advantage it is a good thing for nations to specialize in the products and services that they are more efficient in, but this seems to put America in a weak position. What if Asia decides they don't want to make trinkets for us anymore? What if there was another world war? A lot of 'what ifs' perhaps but the point is valid. I generally consider myself a freetrade advocate but pure free trade doesn't seem to take into account nationalist agenda (ie currency fixing, subsidies, tariffs,etc..). What say you?

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