How to fix the economy. No, really. I'm serious.

Obama says that we are going to export our way back to economic health. Export what? We don't make anything.

My fear is that talk of an "export economy" is simply a way of justifying free trade policies. And those policies will keep us stuck as an import economy.

Our only real product is now the financial services industry, which creates nothing and sucks the life out of genuine industry:

It’s just one big game of passing the trash to a higher bidder in a fixed game of who can leverage themselves into the highest arbitrage profits by creating false momentum now.

You can also see the 2008 crash and the current return to business-as-usual for extraordinary profits of Financial Institutions vs. the rest of the industries in the U.S. economy. Lenin would love this. It shows a complete siphoning of money from everything else to banks.

What to do?

The best book I've read (okay, heard) recently is Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Korean economist Ha-Joon Chang. This work has not received the attention it deserves because it focuses on the developing world. American readers don't want to hear about third world issues right now, because we have problems of our own.

Yet to a great extent, we have returned to "developing country" status -- and that's why we must heed the lessons of this book. To be specific: We need to return to the policies that once made us great, policies now never discussed, policies which we've erased from the historical record. We need to protect our "infant industries" with tarrifs and large-scale investment.

Using irreverent wit, an engagingly personal style, and a battery of examples, Chang blasts holes in the “World Is Flat” orthodoxy of Thomas Friedman and other liberal economists who argue that only unfettered capitalism and wide-open international trade can lift struggling nations out of poverty. On the contrary, Chang shows, today’s economic superpowers—from the U.S. to Britain to his native Korea—all attained prosperity by shameless protectionism and government intervention in industry. We have conveniently forgotten this fact, telling ourselves a fairy tale about the magic of free trade...

Between 1812 and the Second World War, the United States was the most protectionist country in the world. By contrast, Adam Smith advised America not to use protectionism to develop artificially a manufacturing base. This country would never have prospered if our leaders had followed Smith's advice.

You never see any examples of Lincoln, Hamilton, Jackson or Jefferson quoting Adam Smith with admiration. Ever notice that? Ever wonder why?

(I've read Smith, as most conservatives have not. He seemed to think that America was and would forever remain an agricultural backwater. Well, that's what we're turning into again, thanks to modern-day Smith followers: A nation of farms and banks.)

Neoliberals (i.e., conservatives) often cite Smith without telling you that the Brits achieved dominance by not practicing what Smith preached. Only after they were perched at the top did they insist that others follow a strict neoliberal ideology. In essence, they pulled the ladder up after themselves.

So who pulled the ladder on us? That's the question which every parapolitical thinker ought to be asking.

And while you're chewing on that poser, read this piece by Chang:

Britain and the US may have been the most ardent - and most successful - users of tariffs, but most of today's rich countries deployed tariff protection for extended periods in order to promote their infant industries. Many of them also actively used government subsidies and public enterprises to promote new industries. Japan and many European countries have given numerous subsidies to strategic industries.

As chapter 9 of Chang's book demonstrates -- with much citation of example -- Japanese workers were once stereotyped as lazy, undisciplined and ineducable. (Which is pretty much the same stereotype now applied to Americans.) But the work ethic is not genetic. Our attitude toward work may have something to do with culture, but only to the extent that a culture changes when a nation advances.

The company which perhaps best exemplifies Chang's analysis is Toyota. This summary of Chang could change the way you look at the world:

Toyota has been touted by free traders as a clear example of why free trade works, mostly because of the widely cited example outlined in Thomas Freidman's book The Lexus and the Olive Tree.

But again, at a closer look, the reality is the opposite of what Friedman naively portrays in his book. In fact, Japan subsidized Toyota not only in its development but even after if failed terribly in the American markets in the late 1950's. In addition, early in Toyota's development, Japan kicked out foreign competitors like GM.

Thus, because the Japanese government financed Toyota at a loss (for roughly 20 years), built high tariff and other barriers to competitive imports, and initially subsidized exports, auto manufacturing was able to get a strong foothold and we now think of Japanese exports being synonymous with automobiles.

We have cynically abandoned Detroit. We grumbled that Americans just can't make cars any more. We decided that we would rather sneer and bitch than invest in ourselves. Screw it. Let the other countries take over the car market.

Because we are so quick to take that attitude, other countries are taking over every market.

Is that sort of cynicism actually accomplishing anything? Should America just give up on itself?

If you think otherwise, then the answer is both simple and hard. Simple, because we need merely recapitulate what worked for us before. Hard, because this course of action requires long-term thinking.

Instead of investing in the Wall Street vampires, we need to invest in our industries. We need to do so in the understanding that those investments may not pay off for decades. We may have to weather serious setbacks. (Remember how people used to laugh at Datsuns and Toyotas in the late 1960s?) Capitalism alone won't do the trick; our industries need help from a non-invisible hand. Most of all, we need to return to the non-free trade practices that made this country great.

If Obama cannot take those steps, then his talk of an export-driven recovery is pure hooey.