http://www.nytimes.com/2012/02/05/business/do-manufacturers-need-special-treatment-economic-view.html
This
article discusses government intervention not just as it relates to
market failures, but also as it is used to give help to manufacturing
companies. In class we talked about government intervention when a
market fails due to imperfect competition, an incomplete market or a
market lacking complete information, however this government
intervention is tax cuts for manufacturers rather than a legitimate
reason for the government to intervene. The author argues that while
there may be some positive effects from this policy, overall the gains
will be small. The advantages that have been true in the past such as
better income distribution for lower skill workers with positions in
manufacturing is less true today and the need to raise demand doesn't
need to occur at the manufacturing level, but at the household level.
The author believes that while government intervention is definitely
necessary in certain cases and in certain problems we face today,
manufacturing is not an area that requires it.
6 comments:
I'm inclined to agree with Romer and conclude that manufacturing does not require special governmental interference. She does bring up two points that I don't usually hear in this argument. First, she notes how manufacturing jobs, while paying a fair salary, require such a substantial amount of education that it is no longer the past high-paying job for unskilled workers. To really accomplish their income distribution goals, proponents would have to find a way to skew the tax cuts towards factories requiring mostly unskilled workers. Second, she notes the positives of having a broad manufacturing base, especially during times of war.
I think this is a public failure where government intervention serves in favor of a small interest group. Through lobbying from manufacturing companies and potential pork barreling from regulators from manufacturing states, these companies receive special tax cuts.
It does not bother me to see tax cuts for manufactures because I still want to be able to buy products that are made in America. I was be for a tariff or taxes on companies that out source all their labor. The highest percentage of America's population that are unemployed are those who do manual labor, so bring jobs back to America and let the people work. Though the products may be more expensive for being made here, I'd be willing to spend more for American made products.
As for the issue whether the government should intervene the manufacturers, I think tax cuts is beneficial to both the producers and consumers. However, whether it is an efficient policy to enhance the production and profitability of the manufacture field is important. In other words, whether the government intervention will make a contribution to the market is based on how efficient the intervention is. At this point, if the author has covered the entire market situation, it is true that government should probably stop its intervention/tax cuts in the manufacturing sector and make use of the tax revenue in other sectors. Nevertheless, whether the tax cut is efficient in the manufacturing sector or not, in my opinion, needs further discussion
The most important thing brought up was the realization that manufacturing jobs today are not the same as they were back in the 60s. The amount of skill needed to manufacture has increased significantly. Professor Walker has told stories of manufacturing plants in South Carolina that needed to import workers from other countries because they couldn't find the people in South Carolina with the skills to work.
With that in mind, it seems the government can do much more than tax incentives to increase manufacturing within the United States.
Also, aren't free trade agreements a large factor in why manufacturing left in the first place? How is that supposed to help grow our economy President Obama?
Manufacturing today does not provide the economic opportunities it once did for the United States and I agree with the author that there is not a market failure in manufacturing that our capital markets can fund the businesses that build in the United States. The government needs to allow investors seek out the highest return on capital in investments in manufacturing to insure that capital stays in the United States to build the next generation of factories.
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