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Take the case of Harley-Davidson. My father protected this American manufacturer of motorcycles against lower-priced Japanese imports. When he acted in behalf of an American company, Kawasaki and Honda reacted by moving their plants to the U.S. and created American jobs for American workers.

His policy was so successful that although he gave five years of protective tariffs to Harley-Davison, they didn’t even need that long a time before they could turn their company around. Given a level playing field they proved their superiority as an American manufacturer.

Ronald Reagan did the same thing with semiconductors, and the auto and steel industries. He also forced the Japanese and others to open up their markets to American products so that trade would be fair. When that didn’t happen he would impose tariffs on those products coming into the U.S., thus protecting American manufacturers.

Sure, he was a free trader who wanted too open up trade, but he always sought first to protect the sovereignty of the United States and its manufacturing base. He did not confuse free trade with giving the store away.

The effects of our current trade policies and the horrendous trade deficit they have produced are a gun pointed at the heart of our economy, and the Republican who can stand up and tell the truth about this problem and its solutions will be the one who emerges from the pack.

Michael Reagan on Ronald Reagan, free trade,

This quote from Michael Reagan really shows how stupid he, and others that believe this quote, are. This is not what happened in the motorcycle industry.

The Japanese motorcycles could not compete against American motorcycles at first. It is because Japanese motorcycles were originally designed for the lower speed, lower distance use in Japan. Taking those motorcycles onto American highways resulted in them always being broken down.

One Japanese executive would let off steam, due to the company’s constant failures to break into the American motorcycle market, by riding his little Japanese motorcycle offroad into the hills around LA. Other japanese executives joined him. Onlookers began asking where they could buy those cute little Japanese motorcycles so they, too, could ride off road. The execs mail ordered them to those people but as more and more people asked, a lightbulb went off in their head. Instead of trying to take on American motorcycles head on, could there be a new market here for offroad smaller motorcycles?

After much persuasion, eventually the Japanese companies sold their small motorcycles for offroad purposes. The smaller size and breaking down constantly were not seen as a problem to Americans since these motorcycles were used offroad.

Harley Davidson and the other big motorcycle companies ignored these new Japanese offroad motorcycles. After all, they were small, were offroad. Why should they be worried? Well, the japanese motorcycle did not stay small or remain offroad. Over time, it got better. They got faster. They eventually got to the point where they were competing head on with American motorcycles.

Harley Davidson and the other American motorcycles did the natural response: flight. They ceded the simpler and lower cost motorcycles to the Japanese and focused on the bigger motorcycles where all the money and prestige were. But the Japanese kept following. If it were not for the unique counter culture brand of the ‘harley’ and all, the American motorcycles would have been completely wiped out.

This process I just described is called ‘disruption’ which has been outlined by a Harvard business school professor, Clayton Christenson, who noticed this pattern when studying computer disk companies. We see this pattern occur in the computer industry so much because it is so fast changing. However, disruption is why the railroads died to automobiles and airplanes, why the telephone killed the telegram, and why so many Japanese companies rode the wave of computer technology to great success (Sony being a huge example). But they’ve lost focus so many of those same Japanese companies are in decline (like Sony).

We no longer live in the Industrial Age. In the Industrial Age, people did not need to know how to create a financial system for themselves since they were working for someone else. In the Agricultural Age, it was far different. Even the farmer ran his own place with business like precision.

The vast changes occurring in civilization now, due to computers and such, are demanding that you create your own financial system. The Industrial Age is over. You cannot simply ‘work hard’ and expect results.

Just as farmers were out of place in an Industrial Era since they couldn’t read (and became bitter Democrats), the workers of today are just as out of place in the Silicon Era because they do not know how to read finances (so I expect them to become bitter Democrats).

All the political rhetoric you hear everywhere is just that, rhetoric. A farmer spewing talking points of either side never helped him. The farmer thinking some politician helped him with a tariff never actually helped him. What did help the farmer was when he learned to read so he could get an Industrial Era job.

The only thing that stands between us and financial doom is our own financial education... all the stuff that public schools and colleges do not teach. People can either choose to learn the financial stuff or become bitter and expect politicians to save them.

It’s your choice.