Must We Become Japanese?

Will revisionist historians someday reclassify the American defeat in Vietnam as a strategic victory for trade policy? If the U.S. had vanquished the Communist insurgency twenty years ago, South Vietnam probably would have joined the ranks of Asia’s newly industrializing countries during the 1980s. Assuming its bilateral per-capita trade surplus with the U.S. was mid-way between Taiwan’s $650 and South Korea’s $250, Vietnam’s 35 million people would now be adding $10 to $15 billion per annum to America’s trade deficit. Because of its trade surplus, Saigon would now be under constant pressure from the U.S. Treasury to revalue its exchange rate. As the exchange rate appreciated, Vietnamese insurance companies would inevitably have started gobbling up chunks of downtown Los Angeles and Seattle. The Harvard Business Review would now be publishing articles about how Vietnam had prospered by developing a unique export-oriented industrial policy blending elements of Confucianism with a dirigiste style of economic management inherited from the French.

It is doubtful that such a radically revisionist view of America’s experience in Indochina will become popular until the Iowa Democratic caucuses of the early twenty-first century. But Japan’s emergence as a major industrial power and the rise of other Asian nations as trade competitors have set in motion a revolution in the way Americans think about free trade, industrial policy, and the economic role of government.

DH

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David D. Hale

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Will revisionist historians someday reclassify the American defeat in Vietnam as a strategic victory for trade policy? If the U.S. had vanquished the Communist insurgency twenty years ago, South Vietnam probably would have joined the ranks of Asia’s newly industrializing countries during the 1980s. Assuming its bilateral per-capita trade surplus with the U.S. was mid-way between Taiwan’s $650 and South Korea’s $250, Vietnam’s 35 million people would now be adding $10 to $15 billion per annum to America’s trade deficit. Because of its trade surplus, Saigon would now be under constant pressure from the U.S. Treasury to revalue its exchange rate. As the exchange rate appreciated, Vietnamese insurance companies would inevitably have started gobbling up chunks of downtown Los Angeles and Seattle. The Harvard Business Review would now be publishing articles about how Vietnam had prospered by developing a unique export-oriented industrial policy blending elements of Confucianism with a dirigiste style of economic management inherited from the French.

It is doubtful that such a radically revisionist view of America’s experience in Indochina will become popular until the Iowa Democratic caucuses of the early twenty-first century. But Japan’s emergence as a major industrial power and the rise of other Asian nations as trade competitors have set in motion a revolution in the way Americans think about free trade, industrial policy, and the economic role of government.