Ain't pandering, manufacturing jobs _must_ come back
by fairleft, Fri May 30, 2008 at 12:22:18 PM EDT
U.S. manufacturing jobs must come back (pp. 20-21 of the link):
Manufacturing is key to long-run prosperity because it is a major center of productivity growth and innovation. When U.S. manufacturing moves offshore, associated R&D can move too, thereby further diminishing future innovations at home. Another problem is that international trade remains concentrated in goods. This means that, over the long haul, countries need to be able to produce and sell manufactured goods in order to finance imports. The erosion of U.S. manufacturing capacity undermines this ability, potentially risking a future decline in U.S. living standards . . .
And we know basically what has been happening for a helluva long time: other countries have been helping their manufacturing industries, manipulating their exchange rates, and/or under-paying their workers, while the U.S. has been sucking money out of domestic industry and putting it into financial speculation and overseas investment. These (obviously) have made our manufacturing industries uncompetitive:
U.S. consumers buy imports rather than American-made goods because imports are cheaper. This price advantage is often due to under-valued exchange rates in places like China and Japan, which often swamps U.S. manufacturing efficiency advantages.
Under-valued exchange rates are only one of the policies countries use to boost exports and restrain imports, so that they run trade surpluses while their trading partners (including the U.S.) run deficits. Other policies for export-led growth include export subsidies and barriers to imports.
In the modern era of globalization export-led growth is supplemented by policies to attract foreign direct investment (FDI), a pairing that has been particularly successful in China. Such FDI policies include investment subsidies, tax abatements, and exemptions from domestic regulation and laws.
These policies encourage corporations to shift production to developing countries, which gain modern production capacity. This increases developing country exports and reduces their import demand. Meanwhile, corporations reduce home country manufacturing capacity and investment, which reduces home country exports while increasing imports.
Mainstream economists have approved of the above, believing 'cheaper stuff at Walmart' compensates for the deep decline in good-paying jobs. But that hasn't happened, but that never bothers the true believers. And the above also is found more profitable, in the short-term, by our big corporations and banks and the Presidential candidates they contribute to, so even in the Democratic Party primaries we hear good-sounding rhetoric paired with 'secret' reassurances to big campaign contributors.
Nonetheless, the following division in thinking about our economy's problems nevertheless exists, it is just that the second position below for many years (decades?) hasn't had a place in the Democratic Party policy inner circle.
Over the last 30 years the American economy has exhibited a systematic disconnection between wages and productivity growth. This disconnection means that ordinary Americans are not properly sharing in the economy's growth, thus contributing to rising income inequality.
Rising inequality and the failure of wages to rise with productivity has triggered a fundamental debate among Democrats. One position argues that the underlying structure of the economy is sound, but workers must be offered a "helping hand" in the form of enlightened social policy, in the form of income supports, tax credits, educational assistance, and wage insurance. Policy would thereby ameliorate the effects of the disconnection between wages and productivity growth.
A second position is that the underlying structure of the economy is flawed, and policy needs to address the flaws. From this perspective, it is not enough to address "symptoms:" policy must address underlying "causes." Enlightened social policy is always welcome, but it is not adequate to the scale of the problem and therefore cannot produce the desired outcome--an economy in which productive work is appropriately rewarded and provides the means for participating in the American dream.
The second position's take is that reviving domestic manufacturing and at the same time domestic demand (by empowering labor to claim a greater share in the wealth it creates) are musts. Thomas Palley sums the matter up (on p. 9 of the pdf file):
The contradictions inherent in global export-led growth regime compels a need to shift the stance of development toward a path of domestic demand-led growth. This requires rising wages to support domestic consumption. However, it is exactly this outcome that is blocked by the existing pattern of globalization. Microeconomic leakiness, macroeconomic leakiness [Palley explains these relatively easy to understand terms earlier in the paper] and export-led growth combine to increase wage competition between developed and developing countries, and they tilt the economic playing field in favor of business at the expense of workers. A leveling of the economic playing field between business and labor is needed for, in the absence of such a leveling, labor will be unable to win the wages necessary to support domestic demand-led growth.
Or perhaps you'd rather go along with head-in-the-sand David Brooks:
Brooks suggests there "is little evidence that trade has been a major cause of job loss or even wage stagnation" and instead touts "technological change" as the driver of "anxiety" for America's "struggling working class."
In truth, foreign producers have access to the same advanced technology as U.S. producers. As such, their only competitive advantage is to utilize predatory trade practices in order to produce more cheaply. What Senators Obama and Clinton discussed at AAM's forum is that China is violating the rules of world trade when it artificially manipulates its currency to gain a price advantage. When U.S. workers fret about foreign cheating that robs them of good paying jobs, they're right to be concerned. For Mr. Brooks to suggest otherwise is patronizing, elitist, and simply ignorant.