Classical economic theory had once dominated the academia for decades after World War II; many economists are convinced that the classical theory is sufficient to explain everything that happens in the real world. Yet, what is happening in the real world seems to have begun to shake this kind of blind confidence. The wave of protectionism has swept the world and disrupted the international trade norm; even WTO and other organizations once recognized and accepted by most countries are now in dire situation. Most of the world's leading economists now appear to avoid getting involved, and many maintain a suspicious silence. Even if an economist stands up to express his or her objections, the voice would be powerless, without any echo in the real world.
This is a phenomenon that has never happened before in history, but it is not the first time that the industrialism transfer is being condemned and trampled under the wave of protectionism.
In the 19th century, the British manufacturing industry, like its counterparts in China and India today, was also a processing-oriented manufacturing industry. The Great Britain shipped various production resources such as rubber from the colonies around the world and then produced various commodities and sold them to the world market. The manufacturing model of the world today was therefore a British invention. The problem is that things have been reversed today; countries like China and India have replaced the United Kingdom as the global processing and manufacturing centers, while the United Kingdom has halted its manufacturing industry and turned to financial capital services.
Therefore, the British Royal Enfield's "bullet" motorcycles appear in India, and developed a unique motorcycle culture, just like the American Harley-Davidson, but now the bullet motorbikes are entirely made up of India. The liquidity of financial capital is much stronger than that of the manufacturing industry, with relatively smaller risk and faster return; the free market economy is completely dominated by businessmen, and naturally they would not care about the process of industrial transfer so long as they can earn money, and this has formed a "fatal vacuum". This "fatal vacuum" is formed because industrial transfer is not a continuous benign process, but merely a transfer of technology, equipment and production. It is difficult for production workers to transfer and adapt to new jobs, thus leaving behind dreadful industrial vacuum that has become a fertile ground for the development of the world's protectionism.
How should such a problem be solved? The classic economics focusing on efficiency does not give a clear answer. More often, classical economics even consider this a sociological problem. In fact, there are two ways to solve the results of industrial transfer. The first method is to raise the level of social welfare supply to help people in the vacuum zone to live with welfare so that society can adapt to the tide of this industrial transfer. There are examples of success stories with this method, such as certain countries in Europe. The other method is that since this is a problem caused by the industry, industry should be brought back. Trump administration basically adopts such method, denying the Obama administration's tendency to move toward a welfare society.
It would be a mistake to think that only totalitarian governments can influence the development direction of the industry; democratic societies that are supposed to uphold free market can achieve this as well. The powerful and detailed legal system, plus the law enforcement system and the fiscal temptation policy, as well as the lurking strong interest rate policy, coupled with public opinion and the strong voice of the government, would be enough to cause panic in enterprises and they would be forced to reconsider and adjust industrial transfer policies. Hence, preventing the occurrence of industrial transfer is not directly correlated with the nature of the political power and ideology, and the perfect the social environment of the democratic mechanism, the greater the counter-transfer political power would be, and power could well use democracy to counter globalization.
Subversive results have emerged, an unprecedented real world has surprised the classical economists – a free market that is not actually free. Is it just a market failure? The market is still the market, but the societies and the governments have jointly created a wall, an unprecedented border, blocking the enterprises to have their own way and preventing the advancement of industrial transfer. This would turn the complete free market into a "limited free market". Paul Samuelson sees market failure as an exception to the general rule of efficient markets. This is actually not an "accident", but a classic theoretical flaw driven by human nature; it is an inevitable outcome because the limited free market is entirely possible to emerge in a cyclical way.
It is worth noting that the emergence of "limited free market" is always closely related to a strong government or political power. When the level of welfare supply is insufficient or difficult to cover fully, a strong government is always required to balance the relationship between corporate profit maximization and social stability. In the book Urbanization by Chen Gong, it has been forecasted that the future world needs a strong government to play a more active role as a welfare provider, and the emergence of a limited free market shows that this could be accurate, but the government can take two distinct approaches, namely increasing welfare supply and preventing industrial shifts to realize it.
Final Analysis Conclusion:
The world is made up of people. It is the people who decide the enterprises and the industry, and determine the industrial transfer. A theory that ignores of human and human nature is not a true classic; human nature will become the core of post-classical theory.
