Edward Luttwak
For decades, the United States provided a market that was unlimited for most exporters, enabling countries large and small to transfer their populations from marginally productive farms in overcrowded villages to low-tech industries producing garments, footwear, simple hand-tools and such like. In that first stage of one-sided market opening, poor people worldwide became less poor, while working-class Americans started to lose their jobs — and the American ruling elite in both parties remained uncritically devoted to free trade.
How did the US pay for that first tidal wave of cheap low-tech imports? Partly with earnings from American agricultural exports, as well as some irresistible consumer products such as Coca Cola and cigarettes. Increasingly, though, America paid for these products by selling Treasury bonds, eagerly bought up by exporting countries. That, in turn, drove up the dollar, and made foreign wares even more competitive.
But this model came with a downside. In the US, producers of low-tech and craft products started going out of business, even as the newly unemployed were encouraged to abandon hard industrial jobs for splendid new positions in the services sector. Go into marketing analysis foreign-exchange trading, they were told, whose winnings could earn you more money in a day than a lifetime spent turning out garden tools — which now anyway arrived more cheaply from overseas.
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