03/18/2010 05:12 am ET | Updated May 25, 2011

Why Our Jobs Crisis From Hell Could Last Decades

"Now main streets whitewashed windows and vacant stores

Seems like there ain't nobody wants to come down here no more
They're closing down the textile mill across the railroad tracks
Foreman says these jobs are going boys and they ain't coming back to
Your hometown, your hometown, your hometown, your hometown,"

Bruce Springsteen, "My Hometown"

I am at the small port of Olympia, Washington with a dear friend who recently retired from state government. "That about says it all," he says pointing to the cargo on the docks.

We see only two items: raw logs by the thousands, and stacks of giant wind turbine blades. The logs are on their way to Japan for milling and the seventy foot-long turbine blades have arrived from Brazil for assembly on our wind farms. Remarkably, the America of 2010 is exporting raw materials and importing high tech renewable energy products. And this is happening less than 100 miles from Redmond, the home of Microsoft.

Is this pattern just a fluke? Surely we have not yet become a third world nation that must survive by exporting its raw materials in exchange for finished goods. Then again, the most recent unemployment statistics suggest we are in serious trouble.

While the rest of the world competes to develop and, yes, to protect its manufacturing base, we let ours go. Instead, we bet the entire economy on fantasy finance -- on a financial sector that was to become the great profit and job creator of the future. We were told we could build a prosperous society by moving money around instead of making things and providing tangible services. We were scammed.

Instead of an economy that worked for all of us, we ended up with a very prosperous society for the very, very few at the top. We lead the world in billionaires. We lead the world by having the largest gap between CEO and average worker pay. We lead all developed nations by having the most extreme distribution of income and wealth. And we lead the world in having created the worst financial crisis since the Great Depression.

We also lead the world in bailouts: We have dumped more that $14 trillion of taxpayer support into Wall Street to prop up the failing financial sector. And now we are on our way to leading the developed world in unemployment: There are more than 29 million of us who are unemployed or underemployed. The BLS U6 jobless rate for September hit 17 percent.

If we're going to import items like wind turbines rather than to build them here, it's highly unlikely that our tepid recovery is going to create anything close to full employment. That's because our policies are still geared to the grand laissez faire experiment that sunk our ship. That failed folly had three parts: 1. Deregulating finance to promote "financial innovation"; 2. tax relief for the wealthy to promote "entrepreneurial activity/investment" and 3; unfettered free trade to boost profits by moving production to where labor is cheap and environmental regulations lax. .

This witches brew has turned into the wildest casino ever as excess capital sought the higher returns provided by innovative (toxic) securities that secured bogus AAA ratings.

Meanwhile, the biggest export nations -- Germany, Japan and China are doing all they can to protect their key industries in a variety of subtle and not so subtle ways (currency manipulation, direct subsidies, dumping, rigged bids, targeted R&D investments, etc.) They are not about to give away key manufacturing jobs. That's because there is an intimate connection between manufacturing and the higher tech jobs that always grow around it. That's a major engine of middle-class job growth and we let ours rust out a long time ago.

It's time for our policy makers to wake-up to the real world rather that the flat one imagined by cheerleaders like Thomas Friedman. In the real world, you have to find ways to protect the new industries needed to produce jobs for your people. In the real world you build renewable energy technologies by investing large sums of public money in it, and by making sure that its core products are produced on your soil.

If other countries like Brazil want to send its wind turbine blades halfway around the world to Puget Sound, then we need to be sure their production and shipping leaves as small a carbon footprint as would be the case if those steel blades were produced here. A protective border adjustment tax based on carbon content would be in order. It might even courage other nations to produce the blades here, using our steel and our unemployed. Your not a Neanderthal to suggest that taxpayer stimulus money go to purchase goods made at home.

Without a national industrial plan to build a new green economy and to promote long-term industrial employment, short term tax subsidies to create jobs won't work for long. Even Robert Reich's call for a robust WPA will be insufficient in the long run. He assumes that once the economy is on its feet again we won't need a continued WPA because the private sector will provide enough jobs. I don't share his optimism. It's not clear why most of those private sector jobs will be within our borders unless we insist on it. (For an excellent account of how carefully designed protectionist policies can increase employment in all nations see Paul Davidson's The Keynes Solution.)

It won't be easy to undo the disastrous neo-liberal free-for-all that got us here. Not only will it require some degree of protectionism, but also we'll have to dramatically curtail our wealthy elites who funded the casino. We will need to return to Eisenhower progressive taxes (91 percent on income over $3 million in 2009 dollars) or something near them to reduce our obscene income and wealth gaps. And we will need to return to Teddy Roosevelt's trust-busting to break apart financial firms so they no longer are too big too fail, or big enough to domineer over our elected officials.

It's a very tall order, especially since we seem much more timid than the New Deal/Greatest Generation. God forbid we should bust up Goldman Sach, JP Morgan, CitiGroup or Bank of America. But we may soon find our way there as we discover that nothing else works. Either that or we'll face decades of bailouts and unemployment as the logs leave and the windmills arrive.

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.