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January 20, 2011

When You Close The Factory We Can’t Make A Living

-- by Dave Johnson

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

In a signal of change in elite attitudes, Steven Pearlstein wrote a Washington Post op-ed, Chinese follow same old script (and they get the punch line), describing the cost-to-us of the business-as-usual game we have been playing with China. Pearlstein has seen the light: China has an industrial policy and it is working for them as a nation. We do not. We have a lassez-faire ideology that enables a few at the top of "Multinational Corp." to get really rich moving manufacturing infrastructure to China, leaving the rest of us with no way to make a living. Next week President Obama can announce that he is changing that.

"Enough!"

Pearlstein writes about China’s bullying mercantilism, how it benefits China, the cost to us, and says “Enough!” He makes a startling suggestion to address the problem: do unto them as they are doing unto us. He writes,

“The right response to these challenges would be for the president this week to laud China for the success of its economic policies and announce that the administration will begin forthwith to apply each and every one of them to Chinese exports into the United States. Subsidies and directed credit for local companies, buy-American provisions for government agencies and government contractors, currency manipulation, the rules on "conditional market access" and "indigenous innovation" - surely China could hardly complain if we were to pay them the highest compliment by embracing their economic model.”

Read that paragraph again.

Pearlstein goes on to describe how a national industrial policy brings advantages to China, while our everyone-in-it-for-themselves ideology hampers us,

“…China can strike deals that may provide short-term profits to one company and its shareholders but in the long run undermine the competitiveness of [our] economy. What's good for GE or Honeywell or Rockwell is, in this case, almost certainly not good for America and American workers."

The Establishment

This column is significant because Pearlstein is part of what you might call "the establishment," a DC opinion leader, not part of the labor movement or a social-justice non-profit or, worse yet, an advocate for the unemployed. But here he is joining with us on the “far left” to say that we can't keep going down this road -- that it is time to see ourselves as a country of people who are in this together, with common interests. He actually makes the far-left argument that, “What's good for GE or Honeywell or Rockwell is, in this case, almost certainly not good for America and American workers.”

Will he keep his job? Or will others join him and begin to see that this is all of a piece. Our trade deficit is part and parcel of our budget deficit and our terrible unemployment problem and our bank bailouts and our deteriorating infrastructure and our deregulation and our tax-cuts-for-the-rich and our on-your-own ideology and our corporate-financed elections and our slow economic growth.

Evergreen Solar

To illustrate the difference a national industrial policy makes Pearlstein uses the instructive example of Evergreen Solar, a solar panel manufacturer that made waves this month announcing it is closing down its US manufacturing and moving it to China. Solar panel prices are plunging because of Chinese-subsidized manufacturing, and "Evergreen can still make money in China because of the lower costs and considerable government subsidies offered by the government there." But not here.

The NY Times covered the Evergreen Solar story last week, in Solar Panel Maker Moves Work to China. These snippets tall the story,

... But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.

. . . Chinese manufacturers, Mr. El-Hillow said in the statement, have been able to push prices down sharply because they receive considerable help from the Chinese government and state-owned banks, and because manufacturing costs are generally lower in China.

. . . In addition to solar energy, China just passed the United States as the world’s largest builder and installer of wind turbines.

The article includes a reminder that we are, after all, talking about China,

… Evergreen’s joint-venture factory in Wuhan occupies a long, warehouselike concrete building in an industrial park located in an inauspicious neighborhood. A local employee said the municipal police had used the site for mass executions into the 1980s.

Business As Usual

China cheats. We don't stop them. They manipulate currency. They restrict imports. They subsidize exports. They subsidize companies. They steal intellectual property. They coerce companies to give up proprietary technology. They do what it takes to win key strategic industries, regardless of treaties and laws. And why should they if we won't stand up to this cheating and stop them? They watch out for themselves, and we do not.

Yesterday, describing China's currency manipulation as part of an industrial policy, I wrote that China looks at the overall, longer-term picture, seeing themselves as a country of people with a common interest. We do not. They understand that attracting industries to China is good for China and its people in the long term. We do not.

We follow a corporate/conservative greed-is-good ideology that says that the interests of individual companies and a few wealthy people are the interests of the country-at-large, and if companies can make larger profits in the short term and a few people can get wealthy closing factories and moving them to China that's just fine, even if it means a loss of jobs and of the country's overall ability to make a living in the long term. This just doesn't work for us as a nation. Or, as Pearlstein put it, "What's good for GE or Honeywell or Rockwell is, in this case, almost certainly not good for America and American workers."

Obama's State Of The Union Opportunity

Next week the President delivers his State Of The Union speech. This is an opportunity to announce a new direction. He can lead us in a transition back to a nation that sees itself in this together as a people watching out and taking care of each other. He can reject the conservative vision of each of us on our own, following a greed-is-good ideology that enriches a few but just doesn't work for We, the People. He can announce the formation of a bold national industrial/economic policy where we again lead the world toward greater prosperity. And he can announce that we are going to, as Pearlstein writes, "pay [China] the highest compliment by embracing their economic model" -- meaning do unto China as China is doing unto us. Enough!


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Posted by Dave Johnson at January 20, 2011 8:19 AM


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