Posted by: JanF | November 12, 2011

American Jobs, Part III – Rebuilding our Industrial Base

China has a plan. India has a plan. South Korea has a plan and shiny new trade agreement. And the American worker gets shafted*. Again.

Thursday, we discussed the decline of manufacturing and that many of the things we buy are NOT made in America. Yesterday we looked at the jobs that are left behind when our factories close and how a lot of the new jobs being added do not provide a living wage. Today we will look at how we can get those factories and jobs back by creating an industrial policy that involves long term planning and a return to some very old American ideals.

China just announced that it is making a $1.5 trillion investment over 5 years in seven strategic industries including alternative energy and biotechnology:

The vast spending programme would be integral to the government’s ambition to turn China into a top maker of high-tech, environmentally friendly products and move it away from its current focus on cheap manufactured goods and energy-intensive, polluting factories. A large-scale investment plan would focus the minds of officials and businesses and ensure that the powerful machinery of the state-owned banking system is geared towards the government’s strategic objectives.

India has a Planning Department whose purpose right now is to encourage and exploit India’s lead in information and communication technologies (ICT) and an industrial policy with these objectives:

1. Maintaining a sustained growth in productivity;
2. Enhancing gainful employment;
3. Achieving optimal utilisation of human resources;
4. Attaining international competitiveness and
5. Transforming the country into a major partner and player in the global arena.

The Chinese and Indian plans are startling in their similarity to what we need to reinvigorate the American economy. The difference is that they are working on a plan with a goal. What we need going forward is a similar industrial strategy with a plan to get our jobs back.

A blast from the past
Thom Hartmann, progressive radio and TV host, wrote a book that includes a plan to rebuild our industrial base. The book is Rebooting the American Dream: 11 Ways to Rebuild Our Country. From the intro:

When Washington became president in 1789, most of America’s personal and industrial products of any significance were manufactured in England or in its colonies. Washington asked his first Treasury secretary, Alexander Hamilton, what could be done about that, and Hamilton came up with an 11-point plan to foster American manufacturing, which he presented to Congress in 1791. By 1793 most of its points had either been made into law by Congress or formulated into policy by either President Washington or the various states, which put the country on a path of developing its industrial base and generating the largest source of federal revenue for more than a hundred years.

Those strategic proposals built the greatest industrial powerhouse the world had ever seen and, after more than 200 successful years, were abandoned only during the administrations of Ronald Reagan, George H. W. Bush, and Bill Clinton (and remain abandoned to this day). Modern-day China, however, implemented most of Hamilton’s plan and has brought about a remarkable transformation of its nation in a single generation.

(Note: Hartmann’s book is available to read online at in serialized form — currently up to Chapter 4 — and for purchase at Amazon.)

Those “American manufactures”
Here is Hamiliton’s 11-point plan for “American manufactures”:

I. Protecting duties—or duties on those foreign articles which are the rivals of the domestic ones intended to be encouraged.
II. Prohibitions of rival articles, or duties equivalent to prohibitions.
III. Prohibitions of the exportation of the materials of manufactures.
IV. Pecuniary bounties.
V. Premiums.
VI. The exemption of the [raw] materials of manufactures from duty.
VII. Drawbacks of the duties which are imposed on the materials of manufactures.…
VIII. The encouragement of new intentions and discoveries, at home, and of the introduction into the United States of such as may have been made in other countries; particularly, those which relate to machinery.
IX. Judicious regulations for the inspection of manufactured commodities.
X. The facilitating of pecuniary remittances from place to place—
XI. The facilitating of the transportation of commodities.

The first word screamed after looking at these is “Protectionism!!”. Well, yes. Protecting American jobs and livelihoods. What is so bad about that? As a commenter pointed out in yesterday’s Morning Feature, that is a concept that Fred, our archetypal median voter, can understand.

Hamilton added this paragraph to his letter to President Washington, anticipating the resistance to his ideas and also perhaps predicting the mind set of current Republican party:

A question has been made concerning the constitutional right of the Government of the United States to apply this species of encouragement; but there is certainty no good foundation for such a question. The National Legislature has express authority “to lay and collect taxes, duties, imposts, and excises, to pay the debts, and provide for the common defense and general welfare,” with no other qualifications than that “all duties, imposts and excises, shall be uniform throughout the United States; and that no capitation or other direct tax shall be laid, unless in proportion to numbers, ascertained by a census or enumeration, taken on the principles prescribed in the constitution,” and that “no tax or duty shall be laid on articles exported from any State.”

Thom Hartmann’s reboot
Thom Hartmann’s plan is listed in the form of chapters from his book:

Chapter 1, “Bring My Job Home!” covers how economies work and why we need to heed Alexander Hamilton’s advice. It points out that simply moving money around or creating a service economy (“Do you want fries with that?”) doesn’t produce long-lasting wealth in a country; only manufacturing does.
Chapter 2, “Roll Back the Reagan Tax Cuts,” points out how when top income-tax rates on millionaires and billionaires are above 50 percent, not only does the gap between the very rich and the working poor shrink but the nation’s economy stabilizes and grows.
Chapter 3, “Stop Them from Eating My Town,” covers the ground of monopoly- and crony-capitalism, an economic system born and bred when Reagan stopped enforcing the Sherman Antitrust Act of 1890.
Chapter 4, “An Informed and Educated Electorate,” begins by showing how badly our news media has deteriorated, how it only caters to what people want and not to what they need, and how important it is that we take our media back from the profit-hungry corporations that have abandoned the public-service mission of media.
Chapter 5, “Medicare ‘Part E’—for Everybody,” points out how a nation that liberates its citizens from worrying about getting proper medical care is a nation of entrepreneurs, innovators, and stress-free families. It’s also a nation that can successfully compete internationally for manufacturing work, when companies are free of health insurance burdens.
Chapter 6, “Make Members of Congress Wear NASCAR Patches,” tackles the problem of our private money–fueled electoral system and all the havoc it has wreaked.
Chapter 7, “Cool Our Fever,” shows the incredible problems that arise from our own addiction to oil, especially in transportation.
Chapter 8, “They Will Steal It!” is about how we cannot force other countries through military might to adopt our values of democracy and an open society—and how they will “steal” our ideas and our values if we engage them constructively so they can see how they can benefit from those ideals.
Chapter 9, “Put Lou Dobbs out to Pasture,” addresses the problem of what’s popularly referred to as “illegal/ immigration,” when, in reality, it is a problem of economics and illegal hiring by American companies.
Chapter 10, “Wal-Mart Is Not a Person,” tells the story of how back in the 1880s corporations—then the railroad corporations, the giants of the Robber Baron Era—turned to the U.S. Supreme Court to give them human rights under the Constitution.
Chapter 11, “In the Shadow of the Dragon,” tells the story of a visit to the Mondragon Corporation headquarters in the town of the same name in the Basque region of Spain in late 2009. We saw one of the world’s largest worker-owned businesses, with more than 90,000 employees turning over more than $14 billion a year worldwide.
The conclusion, “Tag, You’re It!” is about tried-and-true methods—most that we’ve used before in this country and all that we’ve at least flirted with—that can bring back a strong middle class and restore America to stability and prosperity without endangering future generations. It’s straightforward, easily understood, and the only obstacle to implementing virtually every chapter’s suggestion is the power of vast wealth (usually corporate wealth).

It’s not a secret that we have a problem
Others are also keenly aware of the problem and have some ideas. For example, Andy Grove, former CEO of Intel :

“Startups are a wonderful thing, but they cannot by themselves increase tech employment. […] Scaling used to work well in Silicon Valley. Entrepreneurs came up with an invention. Investors gave them money to build their business. If the founders and their investors were lucky, the company grew and had an initial public offering, which brought in money that financed further growth. […] The scaling process is no longer happening in the U.S. And as long as that’s the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.”

His conclusion is not much different than Thom Hartmann’s:

The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.

I fled Hungary as a young man in 1956 to come to the U.S. Growing up in the Soviet bloc, I witnessed first-hand the perils of both government overreach and a stratified population. Most Americans probably aren’t aware that there was a time in this country when tanks and cavalry were massed on Pennsylvania Avenue to chase away the unemployed. It was 1932; thousands of jobless veterans were demonstrating outside the White House. Soldiers with fixed bayonets and live ammunition moved in on them, and herded them away from the White House. In America! Unemployment is corrosive. If what I’m suggesting sounds protectionist, so be it.

Some things are being done. From The Prospect article on The Plight of American Manufacturing that I linked to yesterday:

There are nascent signs that the administration is awaking to the need for new economic policies aimed at private-sector industrial investment and the creation of good jobs. President Barack Obama has appointed Ron Bloom, a financial whiz, to be his “senior counselor for manufacturing policy.” Bloom, a graduate of Harvard Business School, worked for years in the investment-banking industry before taking a job with the United Steelworkers, using his experience to help restructure companies to assure their survival and their ability to employ American workers.

Our challenge is to first wake people up to the dangers of having no plan other than to “go shopping more”. Then to energize the next generation of American workers to become full partners in a push to demand an industrial policy and to force our government to create the structure and provide the money for achieving those goals.

Because make no mistake about it. This impetus to rebuild our industrial base will not come from the captains of industry. Most are perfectly happy with the status quo. It will have to come from governmental action and from a dedicated effort to fix the problem.

Thom Hartmann’s concluding chapter title “Tag, You’re It!” is the not so subtle reminder that change comes from the bottom up and that we need to press our politicians to do the things that will make the American dream less of a nightmare.

(A version of this was originally posted on 12/09/2010 at BPI Campus)