In one of the most uninformed -- and counter-productive -- op-eds we've read in the last five years, President Barack Obama's first chairwoman of the Council of Economic Advisors, Christina D. Romer, just spent 1,200 words arguing that we should do nothing about the crisis in American manufacturing. She meticulously constructed three straw men -- market failures, jobs and income distribution -- and then proceeded to knock the stuffing out of each of them.
It was a heroic, if not faintly humorous, performance given Ms. Romer's recent position in the administration and the fact that few others in the country misread more the depth and the duration of the still largely ongoing Great Recession of 2007. She was an architect of the administration's stimulus package, its auto bailout, and its policies that led to the "green shoots" and "recovery summer" fiascos. But none of that stopped her from eviscerating arguments meant to do something about the crisis in manufacturing.
Ms. Romer concluded her op-ed by admitting that manufacturing was "the engine of growth that allowed us to win two world wars and provide millions of families with a ticket to the middle class." And yet she felt that public policy regarding manufacturing should be "based on hard evidence of market failures, and reliable data on the proposals' impact on jobs and income inequality", for which, in her opinion, "a persuasive case for a manufacturing policy remains to be made."
President Harry Truman, in a moment of sheer frustration, demanded a one-armed economist. He had grown tired of dismal scientists telling him "on the one hand, we should do this. On the other hand, we should do that." He had a point.
Now the consensus among too many economists also seems to be that we should let cycles cycle and the economy naturally evolve -- and structural collapse be damned. They spin so many theories, twist so many numbers, and advance so many specious arguments that the cumulative result is nothing gets done.
We've seen the hard evidence in the eyes of the real unemployed and underemployed. We have reliable data on how many factories have closed and how many manufacturing jobs have been lost overseas. What we, as a nation, lack is the foresight, drive and intensity to re-spark our true engines of growth.
But those sparks will not come from the dismal scientists that Harry Truman dealt with and Barack Obama seems content to deal with. They will only come from those who actually want to do something, who take pride in making things in America, and who are willing to look to concrete solutions rather than academic sophistry to drag us out of this jobless recovery.
Borrowing liberally from the writings and speeches of Senators Sherrod Brown (D-OH), Debbie Stabenow (D-MI) and Sheldon Whitehouse (D-RI), and from our colleagues at the New America Foundation, we first have to admit that manufacturing is, as they say, 'critical to the American economy'.
It's past time to admit that the Great Recession of 2007 has only exacerbated the adverse trends in manufacturing that actually first reared their heads as far back as 1980, with the "Reagan Revolution". And for those thirty years the manufacturing sector has shed jobs faster than many other sectors of the economy.
While there are many reasons for the decline in manufacturing over this period -- including productivity growth -- and for the closely related economic downturns, productivity growth in truth is actually much less than some economists -- Ms. Romer among them -- would have us believe. The now decades long decline in manufacturing is mostly because while other countries have a policy of maintaining capacity and employment, the U.S. does not have a national manufacturing strategy and has not established a framework for creating one.
U.S. government policies across the board -- taxes, trade, investments, R&D, exports, infrastructure and procurement -- are not integrated into a strategy to restore and grow the U.S. manufacturing sector. And until they are and America has its own manufacturing policy to rival those of our trade competitors, U.S. manufacturing employment will continue to decline, as will manufacturing output as a percentage of GDP, and the U.S trade deficit will remain crushingly high.
In the sweeping onrush of the Recession, America's industrial base is undergoing its most radical restructuring in decades as manufacturers dramatically rethink their businesses, with far too little support from Congress and the administration.
These moves are accelerating the U.S. manufacturing economy's longer-term shrinkage, as well as exacerbating its shift away from heavy sectors. In some cases, companies are investing in smaller, more-efficient facilities that rely heavily on goods manufactured overseas. In other cases, such as with General Electric's avionics business, they are continuing to relocate labor-intensive operations to countries where wages are cheaper and subsidies, often illegal, are available.
As a result, right-headed economists expect unemployment to remain high for many years as millions of American workers in the hardest-hit sectors struggle to find new jobs. And while some economists see this restructuring as inevitable, those right-headed ones worry that the sheer scope of the cutbacks could doom companies that ought to survive and further weaken an already depleted manufacturing sector.
The erosion of our manufacturing base -- our skilled workforces and our plants, production processes and supply chains -- continues even as economists like Ms. Romer urge us to do nothing. But doing nothing is not an option now. With nearly a fifth of our workforce idled in real terms and with competitor nations buying our under-utilized machines, now is the time to do what we've always done: roll up our sleeves and make the best of a bad situation.
A great nation like ours requires time and space to change directions. As with a supertanker, there is misdirection to slow and shed before a new course can be set. And there are always obstacles -- naysayers, overseas competitors and the inherent inertia of a very large economy -- to overcome before resuming flank speed.
We haven't a moment to lose.
Leo Hindery, Jr. is Chair of the US Economy/Smart Globalization Initiative at the New America Foundation, Co-Chair (with USW President Leo Gerard) of The Task Force on Jobs Creation, founder of Jobs First 2012, and a member of the Council on Foreign Relations. Rick Sloan is the Communications Director of the International Association of Machinists and Aerospace Workers and Executive Director of its Union of Unemployed.
Follow Leo Hindery, Jr. on Twitter: www.twitter.com/leohindery
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- First, manufacturing does not need "special" treatment. As a sector it needs respectful treatment. Not the disdain commonly heaped upon it.
- Second, the US has the most polarized regulatory process in the world. rapidly changing regulations are costly for any business. Manufacturing businesses happen to be impacted by an inordinately high percentage of new regulations.
- Third, the American consumer is much less discriminatory about quality that their European and Asian counterparts. A manufacturer of quality products will find a difficult road in the US. The American market is all about price.
- Fourth, the American public wants the benefits of local manufacturing without the burdens. For instance, transportation of goods is continually burdened with additional costly restrictions because Americans want the roads to be safer. This is commendable. But it adds costs that the public does not wish to pay for. manufacturers have a very high sensitivity to transportation costs because of the flow of materials both into and out of their plants.
In summary, I don't believe special treatment is required to support manufacturing. What is needed is an education of the public as to what it takes to attract and retain manufacturing and what that means to the individual.
The US International Trade Deficit must be corrected by any means possible in order to generate more NATIONAL WEALTH in the USA instead of continuing the flow of title to US located assets (privately owned businesses, factories, casinos, hotels, farms, land, ports, refineries, forests, ports, breweries, distilleries, and other NATIONAL WEALTH) leaving the USA to pay for the things that we import from foreign manufacturers, and also to pay for increasing government expenses, such as stimulus for infrastructure expenses that destroys a nation's NATIONAL WEALTH and does not increase or create any new NATIONAL WEALTH.
Do you think that maybe the foreign product manufacturers that export consumer products to the USA might have paid professional US lobbyists to spend hundreds of thousands of US dollars on wine, food, women, song, vacations, cash, sexual services, corporate jobs for the (unemployable) children/wives/girlfriends on enough of the US senators and US congressmen (and their congressional aids who actually control the members of congress) plus campaign contributions to entice (bribe) enough of our Republican and Democratic US Presidents, Congressmen and Senators for the past 20 years to create all of that "FREE TRADE LEGISLATION" to ratify various FREE TRADE AGREEMENTS that allowed, caused, and ECONOMICALLY REQUIRED our businesses to take advantage of the lower labor costs, lower electrical energy costs, lower business taxes, lower payroll taxes to pay for health care costs, lower unemployment insurance costs, lower environmental manufacturing costs and other anti-business costs that are not required in various foreign countries with fewer anti-business laws that are/were applicable to businesses in the USA?
Were our elected congressmen ignorant, stupid, dishonest, or some combination of these factors?
How do you think that US Government environmental damage liability limits, pharmaceutical liability limits, product liability limits, tax exemption loopholes, agricultural subsidies, and/or any other laws benefiting only a few people were created by our elected US congress and US senate, and then enforced by our elected presidents and their bureaucratic administrators?
The USA has the very best government that money can buy!
Maybe the US Congress needs to propose legislation to repeal President Clinton's NAFTA, GATT, WTO, MFN trade with China, Financial Services Modernization Act of 1999, H-1b visas, etc.
Maybe the US Congress needs to propose legislation to repeal George W. Bush’s 14 additional FREE TRADE AGREEMENTS (with Jordan, Morocco, and other young democracies of Central America).
Maybe the US Congress needs to propose legislation to repeal President Obama’s multiple new FREE TRADE AGREEMENTS with Vietnam, Brunei, Singapore, Malaysia, New Zealand, Australia, Chile and Peru and several other Asian and South American nations.
THEY START OFF pooh-poohing an Op-ed by Ms. Romer without providing a link to it, so that the reader can easily compare these authors' claims against the Op-Ed.
FOR AN EXCELLENT REPORT ON THE STATE OF MANUFACTURING IN AMERICA TODAY
See the following LONG, article from "The Atlantic" MAKING IT IN AMERICA
http://www.theatlantic.com/magazine/archive/2012/01/making-it-in-america/8844/
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Anyone dreaming of a return to the Manufacturing WorkingEnvironment of America in the 50s & 60s;
. . CAN STOP DREAMING, those days will NEVER come back
MOSTLY BECAUSE the World of the 50s & 60s is never coming back,
. . where WE were THE single world Superpower, Europe & Japan was still recovering from WWII; and the 3rd world was more like a fourth, or fifth world.
TO SEE WHAT COULD BE POSSIBLE,
watch one of the documentaries on the ManufacturingIndustry in Germany.
GOOD PAYING JOBS FOR PEOPLE WITH NO SPECIAL SKILLS WILL CONTINUE TO RIGHTLY BECOME SCARCER, and SCARCER.
We need to leave the WTO and implement sensible Tariffs such that we stop running most of our ForeignTrade Deficits. China charges our exports 25%, and we charge theirs 2%.
Collect Multinationals Overseas taxes EVERY YEAR, and modify the tax code so that it becomes more expensive to operate from LowWage/LowTax locations than it is to operate here in the US
We also know how much output our manufacturing sector creates. And it has continued to increase (except for temporary declines during recessions).
billions of real (2005) dollars
1990 - 919.2
1991 - 905.1
1992 - 935.3
1993 - 972.8
1994 - 1037.0
1995 - 1079.7
1996 - 1114.2
1997 - 1181.1
1998 - 1240.1
1999 - 1306.7
2000 - 1390.2
2001 - 1326.1
2002 - 1359.1
2003 - 1402.1
2004 - 1516.9
2005 - 1569.3
2006 - 1634.6
2007 - 1692.5
2008 - 1593.6
2009 - 1443.8
2010 - 1605.9
http://www.youtube.com/watch?v=Rkgx1C_S6ls
Manufacturing IS important. The Germans, Chinese, Japanese and South Koreans all know it. Unfortunately, President Obama has been given bad advice by economists obsessed by the free market ( which has never existed but only in an economist's wet dream) rather than manipulating same to America's advantage. Here are two articles,the second from even an economist ( heresy !!!) refuting Romer's comments: http://www.brookings.edu/opinions/2012/0206_manufacturing_wial_rothwell.aspx and
http://finance.yahoo.com/news/why-manufacturing-still-matters-125202883.html
The USA must create our own new NATIONAL WEALTH so that some if it can be CONFISCATED as taxes to pay for all of our own US government expenses without borrowing additional money from foreign individuals in wealth creating industrialized nations.
In Germany the public and private sectors, unions and business associations, regional and federal governments get together and PLAN for the next 20 or 30 years into the future. The results are plain to see.
Manufacturing (or not) coincides with the point of view that you hold about the meaning of human life on Earth:
- If you think that a person is a consumer and a taxpayer, a disposable pawn, a statistic on a piece of paper, then it makes sense to have an economy of made in China and financial speculation.
- If you the contrary you consider a person as a human being and a citizen, then you will build an economy with a lot of manufacturing, because human beings come to this world with a wide variety of skills, and manufacturing can accomodate everyone, each at their level of skills.
There is no substitute for industrial policy, under the spirit of brotherhood and love for our fellow citizens.
So, there is another side to the story!
This includes fair trade. Someone like Buddy Roemer (R) is a proponent of this. Obama pays lip servive to manufacturing but his team includes all the hard core of deregulators and stooges of the financial speculation cartels that have hollowed out the manufacturing base.
It is a pity that Buddy Roemer or Bernie Sanders are so rare.
Strong manufacturing : a strong country like Germany
No manufacturing : Banana Republic of speculation and middlemen.
The politicians react by saying that we need more manufacturing. But a new engineering graduate, if lucky enough to find a job, will be making less than 16 cents for every dollar made by an average new Wall Street trader.The system is setup strongly against the desired goal.
There is plenty of money to create jobs, Some activities (such as for fixing the infrastructure) cannot be outsourced. So where is that money? The banksters stole it.
The issue of the day is the wealth inequality. It should be solved by a new tax code, lower taxes for those that contributes to society (such as manufacturing activity), and much higher taxes for those that try to game the system (such as Wall Street).
We need:
1.Fair tax code.
2. REAL Investigation and prosecution of financial crimes (not phony tiny settlements) with real claw back.
If that were done, we would have a couple of trillions to help us climb out of the slump.