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September 8, 2009

Who Else is Against American Manufacturing?

-- by Dave Johnson

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

"A country’s economic power comes from manufacturing. But while other countries have industrial policies, America has a de-inustrialization policy. We have handed our country’s manufacturing capacity over to other countries, and as a result we have to borrow more and more to be able to buy the things that we used to make. How did this come to be? Who would be against American manufacturing?"

In Who Would Be Against American Manufacturing? I wrote about,

“representatives of foreign interests lobbying in the US for trade policies that benefit companies in other countries at the expense of America’s factories, workers, companies, communities and economic power. It is to be expected that a country will work to increase manufacturing within its borders – even if we don’t – and these firms helping the efforts of other countries are required to register with the Department of Justice as “foreign agents.” I traced an anonymous comment left at my own blog back to one of these ...”

Of course other countries have an interest in taking the business away from us to have for themselves.

In Part II, Who Opposes American Manufacturing? II I wrote about Cato Institute, a conservative “ideological” think tank that opposes manufacturing in America. But they receive funding from interests outside of America – the very interests who do the very kind of fighting for trade policies that the Cato Institute opposes for us.

"WHY would Cato Institute advocate this? Is it just weird libertarian cult ideology? Perhaps a look at who is paying for this advocacy will provide a clue. While mostly funded by individuals, Cato’s funders include many of the usual right-wing funding suspects: Koch, Scaife, tobacco companies, Exxon and other oil companies, Wall Street… But one sponsor jumped out at me: the Korea International Trade Association. (Honda, Mazda, Mitsubishi, Toyota and Volkswagon are sponsors as well.) Dots connected: Cato is receiving funding from the Korea International Trade Association, and then turning around and advocating that American hand over its manufacturing capacity to other countries!

So I checked, and did not find that Cato Institute registered as a “Registered Foreign Agent.” Why not?"

Beyond explicitly foreign interests and possible foreign-interest-funded lobbying, are there other reasons that Americans would advocate that we just hand over our manufacturing capacity and instead just borrow to get by? There are domestic interests that benefit from America giving up our manufacturing capacity because there are domestic interests that benefit when the rest of us borrow.

Part III – Americans Opposing American Manufacturing

Our beloved-and-bailed-out financial sector has done very well for itself in the decades since we embarked on the great “free market” and “free trade” experiment. Wall Street has greatly increased its share of our economy. While finance expanded the manufacturing sector shrank until just before the crash the financial sector had risen to 40% of all corporate profits.

Kevin Philips wrote in 2008’s post, The Destructive Rise of Big Finance,

Over the last five years, financial services has reached a swollen 20-21% of U.S. GDP -- the largest sector of the private economy.

Manufacturing led financial services by 2:1 back in the 1970s, but by 2006 beaten goods production had shrunk to just 12% of GDP.

As Wall Street doubled, manufacturing declined.

Profits incentivize corporate behavior and these giant Wall Street corporations profit from our ever-increasing levels of debt. They profit from the transactions that occur when companies move their operations out of the United States. They profit from convincing communities to privatize infrastructure. They profits when companies externalize costs onto the larger community. They profit from the transaction involved when the country borrows to fund our government and trade deficits.

Wall Street profits from debt. So they have an incentive to encourage debt. Who do you think it was that convinced Americans it is normal and even preferable to carry debt and to use credit cards? Marketing works, and the following is based on marketing we have all been exposed to:

    Making minimum payments on credit card debt? $250 a month.
    Making car payments for five or six years? $400 a month.
    Being in debt for the rest of your life, forever making interest payments and being forced to work at corporate jobs? Priceless!

Phillips again,

During Greenspan's 1987-2005 tenure, the sum of public and private debt in the United States quadrupled from just over $10 trillion to $43 trillion. Finance became the industry that was not allowed to fail but was permitted to enlarge and metastasize its behavior almost at will.

In the movie Wall Street, based on actual events and people in the news at the time, the greedy corporate raider Gordon Gecko buys companies, chops them up, steals the workers’ pensions, destroys people’s lives and their communities, etc. and pockets the profits. Gecko claims that because he can profit from doing these things, “the market” wants it done, demands it in fact, and therefore he plays an important economic role of making things more “efficient.”

To Gordon Gecko and market fundamentalists the fact that they can profit from something is proof that it should be done. “The Market” is for them a God that takes responsibility and ethics and morality and humanity out of their hands. “The Market - God - says it must be this way and who are you to question?” (Convenient for them.)

Of course, a large part of why Gordon Gecko could pocket such a profit so fast was because un President Reagan the country had just changed the tax laws. Before Reagan there was a very high top tax rate that prevented people from amassing a vast fortune in a short time (usually at the expense of the rest of us). This tax policy encouraged long-term thinking and planning instead of short-term greed, and encouraged business to maintain interdependency with the larger community and its interests. If it takes ten or twenty years to amass a huge fortune you and your business rely on other businesses and on the community’s infrastructure to be maintained and modernized so it will support your business activities. And you want a thriving, educated community surrounding you

But in a quick-buck scenario you are incentivized to feed off of rather than rely on the greater community. If you can defer infrastructure maintenance and pocket the savings then that is what you will demand. If you can chop up the supply chain and pock the proceeds that is what you will demand. If you can profit from exploiting and abusing skilled workers who would otherwise be needed in coming years, that is what you will demand. and if the community around you deteriorates it doesn't matter because you'll be cashing in big soon, and flying away in your private jet to your tax-haven privatized island. It is no coincidence that pensions started being stolen, companies started outsourcing, communities started privatizing, etc. right after top tax rates and regulations were cut.

Wall Street has an interest in helping dismantle manufacturing in America. (pun intended)

Posted by Dave Johnson at September 8, 2009 7:32 AM


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