But this isn't a dichotomy, isn't it? The USA is big, we could have had Silicon Valley and Detroit at the same time.
> The result is expensive and subpar products that become locally mocked & detested
But we're still designing better products, we're just building them in China and in the process giving away a cut that used to go to American workers. I don't think this analogy fits.
While that may be true, something that's often overlooked is that US-based manufacturing can be cost-neutral within the domestic US market (prices rise, but wages rise enough to cover the former) but not globally (other countries have lower purchasing power, so if prices of American-designed product rise, non-US markets shrink)
That is exactly what comparative advantage implies. The US cannot be great at Silicon Valley and Detroit (well, the manufacturing bits) at once.
> But we're still designing better products, we're just building them in China and in the process giving away a cut that used to go to American workers. I don't think this analogy fits.
We are designing better products because of globalism. If we cut off free trade with the rest of the world (protectionism), either our designs or our manufacturing quality would stagnate compared to the rest of the world.
Why not? On another continent, Silicon Valley and Detroit would be in entirely different countries.
Labor arbitrage doesn't reflect a real comparative advantage.
The history of using tariffs (taxes) to protect local industries is bad, but it would take decades of protectionist policies to make us realize exactly how badly we'd fucked up, and by then it would be far too late. The classic example here are soviet or developing nations using tariffs or import restrictions to protect local industries, often automobiles. The result is expensive and subpar products that become locally mocked & detested. Eventually the need for open trade will become too much, politically and economically, and when that happens the free market typically destroys the inferior local products.
Of course, none of this ever comes to a head if you decide that you will never trade with another country. Which ... good luck with that.