Don?t Coddle Factory Owners

If the United States were a pre-industrial economy, manufacturing subsidies would make sense. Consider a country like India or China with a vast population of poor farmers. In an established agricultural society, the marginal agricultural laborer is normally working on a very small or simply undesirable patch of land. If you shift a worker out of farming and into factory work, not only do his wages rise, so do those of the farmers left behind?more and better land is now available for them to work. This is why the Black Death raised living standards for the survivors. Under the circumstances, taxing farmers to subsidize manufacturing?as the United States did with its protective tariffs in the 19^th century and as China does today with its currency manipulation?can make sense. As long as you can get the industrial share of the workforce growing faster than the rural population, this is a potentially win-win dynamic. But an economy like ours cannot take advantage of that. Taxing the service sector to subsidize manufacturing is just a straight transfer?and a poorly targeted one at that. For better or for worse, all advanced countries?even mighty Germany?employ the majority of their workers in the service sector.

Source: http://feeds.slate.com/click.phdo?i=49d420f4704828e3b1dc1b002d6821b4

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