No Green Economy Without a Serious US Manufacturing Policy

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I just did this interesting interview with media investor Leo Hindery who also chairs the Economic Growth/Smart Globalization Initiative at the New America Foundation.
Hindery spoke yesterday at a forum sponsored by the Center for American Progress and Apollo Alliance titled “”Picking a Winner: How to Make the U.S. a Leader in the Clean Energy Economy”.
I particularly appreciated Hindery’s focus on the need for a much more serious national economic strategy to promote manufacturing jobs as a necessary piece of any real green economy initiative.
— Steve Clemons

Comments

16 comments on “No Green Economy Without a Serious US Manufacturing Policy

  1. JohnH says:

    Drew, don’t be naive. There’s hardly a successful country out there that doesn’t protect domestic industry to some degree. Japan and France come to mind in particular.
    Frankly, it’s just stupid to let the commanding heights of your economy fall into foreign hands.
    Further, most economies never got to be successful without years of sheltering domestic industry from foreign competition. Please name countries that have become successful without significant shelter. Certainly not the US.
    The US foreign trade position is now so dire that it will take years of protection to make it competitive globally once again. Even the US’ vaunted agricultural industry requires massive subsidies and dumping onto foreign markets.
    The question is not protection or no protection. The question is how to target it and how much protection to provide.

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  2. Carroll says:

    Drew….
    You appear, as near I can tell, to be arguing the standard Globalist theory of economics markets.
    Now in our fifth decade of that, I would say the results haven’t been in the US’s favor.
    The globalist goal in free trade is maximizing profit by controlling labor cost and opening new markets.
    They ‘contend’ that this will enable “everyone” to compete and expand their markets and float all boats.
    And one of their favorite arguments is that this is good because it provides products people otherwise couldn’t afford as in your Walmart example….which they “equate” to raising those folks ‘standard of living’.
    Plain and simple, you have to recognize the US’s disadvantage in trade because of non competitiveness due to wage cost differences.
    What this does is indeed make Americans shop Walmart because their real income has declined.
    By removing manufacturing jobs typically higher paying than service jobs the globalist force their own prediction that lower cost imports are good for the country because people can afford them. So now the vast majority of workers no longer have the choice or ability to opt for higher quality or more expensive domestics goods which are anyway more scarce in the retail market then imports.
    Fait accompli!…Circle complete.
    Using Walmart as your example. Walmart is among the top three largest employers in the US. the service sector that manufacturing jobs fled to.
    It is admitted that they do not paying a living wage for a family.
    And as for Unions, they do not represent the majority of the US labor force. And the benefits they secure for those they do represent are usually totally out of bounds with what the majority of workers get.
    To see that you only have to look at the effect of Union demands on GM, Eastern AL back when, that have come home to roost.
    Short and sweet…We are out of balance.
    Our economic base is out of balance.
    Labor and capital are out of balance.
    Goods production to service production is out of balance.
    Even worker to worker wages and benefits are out of balance.
    Yes I believe that nations sometimes have to adopt some protectionism in order to re balance their own economic engines. The long term advantages out weigh the short term disruption and disadvantages.
    And perhaps sometime you should go look up all the trade bills and exemptions that are passed
    by congress most often for no other reason than to benefit a favored multi national political contributor or a country for a quid quo pro that relates to some international agenda other then US trade policies. With absolutely no consideration or concern for how it impacts XYZ company and it’s employees in Any Town USA.
    It would be amusing if not so tragic that the US didn’t even have the manufacturing capacity to product enough bullets for it’s war in Iraq and had to buy them from overseas.

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  3. Robert says:

    http://tinyurl.com/ybkllwj Help me promote the ‘green’ artist job Obama was talking about bringing.

    Reply

  4. drew says:

    JohnH, might you provide a single example of a successful tariff-
    based global economy? Because all I know is that it has wrecked
    every country where it’s been tried, including the US.
    This mercantilist fantasy is straight out of Pat Buchanon’s playbook.
    The 1950’s and American manufacturing hegemony are not coming
    back.

    Reply

  5. JohnH says:

    Yes, Germany exports despite it overvalued currency. But they are the exception. Standard economic theory says that if you’ve exports disappear, you need to devalue your currency, at least until you’ve discovered the proprietary technologies and production secrets that allow you to defy the gravity of an overvalued currency.
    The dollar has to drop and perhaps lose its reserve status, else the American economy will continue to be hollowed out.
    I agree with Carroll. The US also needs to impose tariffs that at least cover foreign producers’ cheating on basic standards–using workers as slaves, sweat shops, trashing the environment, etc. It should be obvious that American workers can’t compete against slaves. And countries that use them should be penalized by having their production taxes.

    Reply

  6. Drew says:

    The charts are St. Louis Fed-based and the links work if you
    remove the line breaks that this blogging software imposes. I
    apologize for the inconvenience. I would just post them here if I
    could. In short, manufacturing output, normalized, has been
    climbing steadily without surcease since 1960; further, there is
    no relationship between manufacturing employment and
    manufacturing imports. Saying otherwise is ideologically fine
    and all, but truly meaningless.
    One should not introduce policy based on sentiment and
    ideology belied by facts.
    If one wishes to assert, as Carroll does, that some sort of Central
    Intelligence Agency of Price Jiggering can manage global trade, I
    would refer you to Belarus, where that model is still in place. A
    couple of nights in Minsk and you’ll be downloading Milton
    Friedman for the ride home.
    1. In regard to our manufacturing export issues disappearing if
    we cheapen the dollar:
    Concerns about the value of the dollar contradict the praise for
    the protectionist, industrial policy-driven export economy of
    Germany. You can’t have it both ways.
    Contemporary Germany and its manufacturing ethos have been
    constructed on a high-value deutschemark/euro model. The
    Germans sell to value, they do not try to game exchange rates;
    they also put factories (cf. BMW, Mercedes) close to their
    customers if they believe that there are structural barriers to
    longterm currency mismatches.
    2. In regard to slapping tariffs on imports:
    Well, let’s just reimpose Smoot-Hawley? It worked great in
    1930, pulling the USA out of an incipient depression, while
    staving off global collapse. Restricting and ‘managing’ free
    trade to reflect the opinions of congressmen(!) has always led to
    greater prosperity.
    There would also be a near-civil insurrection if you forced
    people who live outside Washington-land to pay 2x the going
    rate for their made-in-China Walmart stuff.
    This critique of inexpensive imports always reflects a union bias
    that does not answer the question: what replaces the Walmart
    Effect, once it is removed. (The Walmart effect is the lift in living
    standards afforded people who have access to inexpensive
    manufactured goods.)

    Reply

  7. Carroll says:

    There is something else that needs to be addressed as well as the dollar.
    We need a trade scheme of tariffs that takes into account the lower wage base and average income of labor in countries that produce products we import.
    While it is true the US market provides jobs in poorer countries it hasn’t raised their standard of living to what would be expected and to what is necessary for them to buy US products. Nike paying 1.50 an hour overseas doesn’t allow that worker to buy a US IPod, even one made in Qatar…except for a black market knock off. Although it would be more complex we should have a sliding scale of tariffs imposed on multi nationals, not native companies of the country, importing to the US based on their wage structure. The lower their labor cost the higher the tariff. They would have a choice then of increasing their off shore wages or paying the tariff and it would discourage their wage shopping around the world.
    We don’t have to bring overseas labor to absolute parity with the US but we do have to rise their buying power and also give domestic producers a fighting chance to compete.
    So far all we have done with multi nationals and free trade is provide bare minimum to medium subsistence jobs to most overseas workers and lowered our own.

    Reply

  8. jerseycityjoan says:

    Manufacturing provides the best-paying jobs for the many Americans who didn’t go to college. It’s been killing me to see so many jobs go and so many of our least educated left in the dust.
    But whether we can rebuild manufacturing or not, we can surely help ourselves by not continuing to hand out work visas at the same rate we were before the recession.
    If we don’t have jobs for more than 10% of our workers, why are we continuing to import competitors to the unemployed?
    What has to happen for us to adjust our immigration policies to our economic conditions?

    Reply

  9. Carroll says:

    Posted by drew , Mar 05 2010, 10:38PM – Link
    >>>>>>>>>>>>>>>
    Your links don’t work so I can’t see your charts.
    And honestly it sounds like you’re promoting a “theory”. It doesn’t match information I
    have seen or anything I personally have seen in the manufacturing industry and I have been following the manufacturing sector since the GATT conferences in Geneva in the ’60’s.
    However last time I looked.
    Consumer spending, made up 75% of US GDP.
    The manufacturing sector made up only 20% of GDP.
    This was 2008. I don’t what 2009 was.
    We had a around a $144 billion surplus on trade in services. (mostly financial and IT)
    BUT.. over a 800 billion deficit on trade in goods.
    It is also a fact that we lost 3.2 million – one in six U.S. factory jobs since 2000.
    And it’s a fact, not theory, that for each dollar spent on imports that is not matched by a dollar of exports, shifts workers into activities where productivity is lower, wages are lower,reduces domestic demand and therefore employment…a
    vicious cycle.
    Now follow that bread crumb trail to figure out the ending. Don’t wait till you’re as old as Greenspan to find out all your ‘theories were wrong and end up having to fall on your sword in front of congress.

    Reply

  10. JohnH says:

    If the US is going to increase exports, manufactured or not, it’s going to have to deal with the overvalued dollar.
    American producers are simply uncompetitive at the current level of the dollar. No industrial policy will work unless this is first addressed, perhaps by ending the reserve currency status of the dollar.

    Reply

  11. drew says:

    Carroll,
    U.S. manufacturing output increased steadily over the past 30
    years, and shows no correlation whatsoever with increases in
    imports or the “outsourcing” you ascribe to Bush and Clinton.
    Employment has declined because some industries died a
    natural death, while others chose to compete through incessant
    productivity improvement.
    The most objectionable aspect of Choate’s thinking is his
    peddling of the labor theory of value: i.e., the idea that the
    degree to which manual labor contributes to a marginal cost of
    production determines the value of that object. This is straight
    19th century Marx, and irrelevant (because it is intellectually
    bankrupt) to any analysis of manufacturing health. When this
    trope leads him to say that manufacturing output increased only
    because of our increased general population, you have to laugh.
    Manufacturing employment has declined significantly over the
    past 15 years; productivity has gone up as a result; one can
    hardly argue against employment cuts in manufacturing and at
    the same time claim a rising population tide floated the
    manufacturers’ boats. If that is what he really says and believes,
    he’s incoherent.
    Germany is an extraordinary, export-driven manufacturing
    culture. It’s also a zero-growth to low-growth society with a
    declining and aging population.

    Reply

  12. Drew says:

    It’s a fetching story, if a familiar one, but suffers two problems:
    a. it’s not true that American manufacturing output is in secular
    or near-term decline; this is shown here:
    http://4.bp.blogspot.com/_4jIlyJ10uJU/S4PWmrc4o-
    I/AAAAAAAAGGg/A0CB7xzYApw/s1600-
    h/Industrial+Production.JPG
    b. it’s not true that there is a correlation between imports and
    manufacturing jobs; this is shown here:
    http://s152.photobucket.com/albums/s163/gradek/?
    action=view&current=goodsvimports.png
    (Both charts drawn with Federal Reserve research.)
    There is simply no factual basis for asserting either of the above.
    It is true that manufacturing productivity increases have resulted
    in the elimination of jobs; manufacturing employment has
    declined significantly.
    Anyway, if someone is going to make a case for a national green
    manufacturing policy, that’s fine, I guess, but one should not try
    to sell it by propounding myths of American manufacturing
    collapse.
    Industrial policy and its absence was all the rage in the mid-
    1980s, as many Americans were convinced that Japan economic
    hegemony threatened our independence. Happily, we didn’t
    jump off that cliff, and the 1990’s were the most prosperous and
    creative decade of the century — precisely because we didn’t try
    to hire bureaucrats to determine industrial winners and losers.

    Reply

  13. samuelburke says:

    Thanks for bringing us Leo Hindery once again Steve.

    Reply

  14. Jackie says:

    Steve,
    I heard you on “All Things Considered” earlier this afternoon. I have to agree with you.

    Reply

  15. John Waring says:

    Thank you, Carroll. Well said.

    Reply

  16. Carroll says:

    Instead of ranting as I usually do about the landscape of my state being littered with shut down manufacturing plants that moved jobs overseas.
    I’ll just use Germany as a example of why we need to bring back our manufacturing industry, green or not.
    Pat Choate, a Washington-based author and longtime advocate of a strong American manufacturing base:
    Points out that manufacturing can be — and often is — both far more capital intensive and far more know-how intensive than the advanced services such as software and financial engineering on which the United States has staked its future. “The Germans, like the Japanese, have a structural advantage,” Choate says. “They have concerned themselves with the structure of their economy, while we have been indifferent.
    ” It would be unthinkable for the German government to facilitate the outsourcing of industry as the Clinton and Bush administrations did.”
    Between 1998 and 2008, it grew in real terms by an average of just 1.5 percent a year. By comparison, the United States grew by fully 2.6 percent.
    BUT…. these numbers are not meaningful without considerable adjustment. GDP growth is a function not only of rising output per capita but of population growth.
    * Much of America’s growth between 1998 and 2008 came from a cumulative population increase of 13 percent.
    * By contrast, Germany’s population rose by less than 0.3 percent. (Though American conservatives like to lambaste Germany for its super-low population growth, many Germans take the view that, in a world of scarce resources, slow population growth is less a curse than a blessing.)
    In 2008, for instance, German exports reached fully $1.49 trillion, which comfortably topped America’s $1.27 trillion. Put another way, on a per-capita basis Germany out-exported the United States by more than 4 to 1 ($18,200 per capita versus $4,160).
    As of 2010 the Germans are evidently more efficient than ever. David Marsh, a London-based consultant and author of The Bundesbank: The Bank That Rules Europe, sums up the story: “After the reforms of the last decade — but also after the setbacks of the credit crisis and ensuing recession — the German model has emerged in better shape than before, to face the exigencies of global competition. About 90 percent of the German model — crucially, the web of understandings between different sections of business, employees and government — has survived intact.
    Wake up Washington….it’s industry that powers a nation and provides stability…not a consumer society and WS casino.

    Reply

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