June 22, 2012

Romney, Jobs And China -- Let's Connect Dots

Will Mitt Romney create jobs and help our economy, or will he just take us back to the Bush-era, send-jobs-to-China destruction that made him rich? With Romney there is no way to connect what he says with what he means or might do. So we are forced to read tea leaves and look for signs. Should be reading Chinese tea leaves?

The Fire Sale Of Our Economy

Mitt Romney made his huge fortune partly by taking over companies, sending the good-paying American jobs to places like China -- or using the threat to do that to force wage and benefit cuts -- and keeping that money for himself and his business partners. A Washington Post story says that Romney's company not only took advantage of this technique, but actually helped pioneer the technique!

While Romney and those like him became enormously wealthy from this since-Reagan fire-sale of American factories, companies, industries and technologies, our economy suffered terribly. Working people's wages stagnated and people turned to credit cards and borrowing on their homes just to get by. Evenually the economy collapsed.

The Romneys and Wall Street 1%er types did very well from this destruction of our economy and our capacity to earn a living, as they have been doing since the collapse. China has also done very well by this. And they are all trying to keep things that way.

Connecting Dots

Dot: Under Bush we lost 50,000+ factories and 1/3 of our manufacturing jobs. Non-manufacturing was also hit hard with outsourcing of jobs to other countries. Companies then used the threat to move other jobs to force wage and benefit cuts here. "If you don't agree to this we'll just move your job, too."

Dot: Since the "recovery" began the richest 1% received 93% of the economic gains. It's all going to the top -- to the Romneys among us.

Dot: Washington Post: Romney’s Bain Capital invested in companies that moved jobs overseas. Note that Romney's company "pioneered" the practice. They didn't just do it, they "pioneered" it,

Mitt Romney’s financial company, Bain Capital, invested in a series of firms that specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India.

During the nearly 15 years that Romney was actively involved in running Bain, a private equity firm that he founded, it owned companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components...

Dot: The Supreme Court's "Citizens United" decision allows unlimited secret money to influence our elections. Secret, as in we don't even know what country the money comes from, never mind what companies or billionaires.

Dot: Huge amounts, from the 1%ers, all coordinated: Romney plans posh weekend donor retreat featuring Rove and VP hopefuls,

The presumptive Republican nominee and his senior advisers and aides are hosting two days of policy sessions and campaign strategy discussions at the Deer Valley resort for more than 100 top fundraisers and their spouses. Those who raised more than $100,000 are expected to attend. ... Rove’s appearance could raise questions because of laws barring any coordination between super PACs and campaigns. ...

Dot: One source (of many) of this flood of money has been disclosed. Casino billionaire Sheldon Adelson, has already given $10 million to Romney's campaign, promises a "limitless" amount -- $100 million or more. (He has $25 billion, largely thanks to China.) There are also allegations of corruption, bribery and violations of US law in the operation of these Chinese-licensed casinos.

Dot: Adelson's exclusive Chinese-granted casino license is worth billions, and he has used his influence with Republicans in Congress to help China. Adelson influenced Republicans to help China get the Beijing Olympics and then received the license to build casinos in Chinese territory. From the New Yorker, The Brass Ring: A multibillionaire’s relentless quest for global influence,

In July, 2001, Adelson met with a Vice-Premier of China, Qian Qichen ... [and] met with the mayor of Beijing, who asked Adelson for help with a matter pending in the U.S. House of Representatives, which he believed was threatening China’s chance to host the Olympics.

Adelson ... immediately made calls on his cell phone to Republican friends in Congress—including Tom DeLay, then the majority whip—who had received generous support from Adelson. DeLay told him that there was indeed a resolution pending ...opposing China’s Olympic bid, saying, “China’s abominable human rights record violates the spirit of the games and should disqualify Beijing from consideration.” ... Three days later, the International Olympics Committee voted in China’s favor. [Adelson received the casino license soon after, in early 2002 - dj]

[...] In May, 2004, the first gamblers entered the Sands Macao. Its construction costs were two hundred and sixty-five million dollars, and Adelson made back his initial investment in a year. In December, 2004, Adelson took Las Vegas Sands public (according to Forbes, he owns sixty-nine per cent of the stock) and became a multibillionaire, overnight.

Adelson used his influence with the Republicans in Congress to help China get the Olympics, and then got a casino license worth billions to him. What else has he helped or will he help China get?

Dot: McCain: Adelson funding Romney Super PAC with 'foreign money'.

Senator and Romney presidential campaign surrogate John McCain (R-AZ) said Thursday that casino magnate Sheldon Adelson is indirectly injecting millions of dollars in Chinese "foreign money" into Mitt Romney's presidential election effort.

Owing China

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair.

When China offers you a path to make a huge fortune, you start to have a hard time understanding how this can hurt your own country. As I said last week in Why Can't Apple Make Your IPhone In America?,

China offers our business leaders an amazing deal – a deal that they can’t refuse. The owners and managers of our companies get really, really rich if they play along with China. Nerver mind if the companies go away later, they’re rich.

... In fact, China has essentially recruited our own business leaders to fight against our own government.

Romney's Bain Capital, and so many others, have made fortunes from offshoring our jobs, factories, industries, technologies and our economy. Fortunes. And now they are applying those China-made fortunes to our election process.

How Much Of Romney's Campaign Money Comes From Or Depends On China?

So we know about one source of secret money funding Romney's campaign, and this source is directly obliged to China for much of his multi-billion fortune, and has influenced our government on China's behalf in the past. But we don't know anything about much of the rest of the money that is being spent on the flood of negative ads and other persuasion and election efforts.

How many of Romney's other funding sources are dependent on China for their fortunes, directly or indirectly? And how much will this lead them to have trouble understanding how shipping jobs and factories and industries to China hurts our country?

The question is out there, and really should be answered before the election. How much of Romney's huge, secret, campaign war chest comes directly or indirectly from China? And beyond China, where else is Romney's campaign money coming from?

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

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Posted by Dave Johnson at 1:43 PM | Comments (1) | Link Cosmos

April 24, 2012

1% Vs 99% Battle Comes To GE Detroit Shareholder Meeting Tomorrow

I'm in Michigan to cover the GE shareholder meeting tomorrow. I grew up in Michigan and have to say that Mitt Romney was exactly right that the trees here really are the right size. The look of the houses, the layout of the roads, the birds, everything feels right. Of course, my wife grew up in England, and she says that the trees in England are the right size. (She also says the beer there is better -- and she's right.)

I grew up in Michigan. My family was in Michigan because my grandfather worked in what is now called "Carriage Town" in Flint in the days of Dort and Durant and Nash and the rest of the early auto company industrialists. (No he didn't get stock.) He fought in the first world war, and considered himself an American. Later he was an executive at different companies, living outside of Detroit. In WWII he and a number of other auto company executives went to work in Washington for $1 a year, because they felt it was their patriotic duty. Later, when Eisenhower was President he went to work in the government, and considered it public service.

My grandfather was a proud Republican, and even spoke at Rotary Club events. He worked under and was a friend of Mitt's dad George, another auto executive. I found a speech online where he said he felt that big corporations should be taxed more to incentivize formation and competition of smaller, innovative companies and said they they create more jobs. I know he agreed that we need a high top tax rate (it was over 90% when he was in the Eisenhower administration), that the revenue should be used to invest in infrastructure because it is the soil in which businesses grow and prosper. He believed in his country and in investing in this country and in the importance of making things in America.

"Bean-Counters" Take Over, Sacrifice Long-Term

Later on the auto companies went in a different direction. Bob Lutz, former vice-Chair of GM is a "car guy" and a conservative. In his recent book Car Guys vs. Bean Counters: The Battle for the Soul of American Business Lutz wrote about how the MBA and finance types took over management from the "gar guys" and didn't care about design, product quality, customer satisfaction -- only about money, and really only short-term money even if it meant sacrificing the company in the long term.

The "bean counters" took over more than just the car companies, they took over company after company, industry after industry. And they sacrificed more than just their companies to short-term profits. When they closed factories, as documented in Michael Moore's Roger & Me, the community of Flint, Michigan was devastated when GM closed car factories there. This was back 1989 and presaged the tsunami that was coming. As I wrote about in 2010, the movement of more and more manufacturing out of the country wiped out the midwest and other regions, and the resulting loss of jobs and wages combined with the huge trade deficit helped lead to the financial crisis and current "jobless recovery."

On My Way To Detroit

I stayed in Flint last night and am writing this from a coffee ship in downtown Pontiac on the way to Detroit. I mentioned "carriage town" in Flint - the little area which incubated much of our automotive industry and with it the Midwest's manufacturing prosperity. Today the area is neglected. The original buildings at least have historical markers, but the area is relatively deserted, several houses in the area are boarded up, with vacant lots where the city has cleared derelicts. The roads are not in good shape, there are many empty storefronts, roadside businesses, offices and manufacturing facilities. The city has lost and is losing population, and has been taken over by Michigan's anti-democracy "emergency manager" law. ("If you people won't sell off your assets to private interests, cut public employee pay and pensions, cut back on the things democracy does for citizens, etc., and other "reforms" that enrich the 1%, then we'll just take over and make it happen and you don't get a say.)

Downtown Pontiac is one more of so many examples of the devastation of our country's communities by the short-term-profit, long-term-collapse mentality of America's ruling elites. We drove by closed factories, boarded-up stores and houses, and sit in a little coffee shop - one of the few remaining businesses in the "downtown."

GE Shareholder Meeting Tomorrow -- 1% vs 99%

The 1% vs 99% clash comes to Detroit tomorrow. The GE shareholder meeting takes place in that city tomorrow, and while it is going on inside, outside people will be making their voices heard with nonviolent protests. GE brings to light the the battle between short-term-gain-for-a-few vs long-term health of the communities and economy of the rest of us.

GE has made billions in profits, but paid zero federal income taxes from 2008 to 2010. Over the last ten years, GE’s effective tax rate has been 2.3%. In 2010 alone, the top five GE executives received $75.9 million. Just five people. Over the last three years, GE's executives collected $234 million.

Since 2008, GE has spent more on DC lobbyists than it paid in taxes. GE spent $84.35 million on lobbyists from 2008-2010.

The cause of our terrible economic inequality is clear: the 1% have too much power, and use that power to enrich themselves at the expense of the rest of us -- the 99%. Since 2008, at least thirty big American corporations reported big profits and paid their CEOs excessively while laying off workers and spending more on Washington lobbyists than they paid in taxes. In fact, 100 of the Fortune 500’s most profitable companies received average tax refunds of 2%.

Tomorrow in Detroit, people are taking it straight to the top of GE.

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

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February 15, 2012

China Is Very "Business-Friendly"

China is very, very "business-friendly." Corporate conservatives lecture us that we should be more "business-friendly," in order to "compete" with China. They say we need to cut wages and benefits, work longer hours, get rid of overtime and sick pay -- even lunch breaks. They say we should shed unions, get rid of environmental and safety regulations, gut government services, and especially, especially, especially we should cut taxes. But America can never be "business-friendly" enough to compete with China, and here is why.

Workers In Dormatories, 12 To A Room, Rousted At Midnight

China is very, very "business friendly." Recent stories about Apple's manufacturing contractors have started to reveal just how "business-friendly" China is. Recently the NY Times' Charles Duhigg and Keith Bradsher exposed the conditions of workers at Apple's Chinese suppliers, in How the U.S. Lost Out on iPhone Work. They describe how China's massive government subsidies and exploitation of workers mean, as Steve Jobs told President Obama, “Those jobs aren’t coming back.”

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. ... New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Right. No American plant can roust workers out of nearby dorms at midnight to force them onto a 12-hour shift. And the corporate conservatives criticize America for this, not China, saying we are not "business-friendly" enough to compete. This is because we are a place where We, the People still have at least some say in how things are done. (Don't we?) Later in the story,

The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones.

“Business-friendly” = living 12 to a room in dorms, rousted out of bed at midnight for 12-hour shifts, working in a plant paid for by the government, using a neurotoxin cleaner that harms people but enables more production for companies like Apple.

Forced Labor Is The Real "Business-Friendly"

Arun Gupta at AlterNet, in iEmpire: Apple's Sordid Business Practices Are Even Worse Than You Think, writes,

Researchers with the Hong Kong-based Students and Scholars Against Corporate Misbehavior (SACOM) say that legions of vocational and university students, some as young as 16, are forced to take months'-long “internships” in Foxconn’s mainland China factories assembling Apple products. The details of the internship program paint a far more disturbing picture than the Times does of how Foxconn, “the Chinese hell factory,” treats its workers, relying on public humiliation, military discipline, forced labor and physical abuse as management tools to hold down costs and extract maximum profits for Apple.

... Foxconn and Apple depend on tax breaks, repression of labor, subsidies and Chinese government aid, including housing, infrastructure, transportation and recruitment, to fatten their corporate treasuries. As the students function as seasonal employees to meet increased demand for new product rollouts, Apple is directly dependent on forced labor.

... The use of hundreds of thousands of students is one way in which China’s state regulates labor in the interests of Foxconn and Apple. Other measures include banning independent unions and enforcing a household registration system that denies migrants social services and many political rights once they leave their home region, ensuring they can be easily exploited. In Shenzhen about 85 percent of the 14 million residents are migrants. Migrants work on average 286 hours a month and earn less than 60 percent of what urban workers make. Half of migrants are owed back wages and only one in 10 has health insurance. They are socially marginalized, live in extremely crowded and unsanitary conditions, perform the most dangerous and deadly jobs, and are more vulnerable to crime.

Please read the entire AlterNet piece, iEmpire: Apple's Sordid Business Practices Are Even Worse Than You Think. These things are not “costs” that we can compete with by lowering our wages, these things are something else.

Not JUST Low Taxes -- Massive Government Subsidies

These stories also describe how the Chinese government massively subsidizes these operations, assists their low-wage labor-recruitment schemes, and looks the other way at violations of labor and trade policies. The Chinese government is very "business-friendly." They hand money to businesses so they are much more able to "compete." They are so friendly to business that they even own many businesses.

Trade Secret Theft

Another area where China has very "business-friendly" policies is when their own businesses steal from non-Chinese businesses. This NY Times story, U.S. to Share Cautionary Tale of Trade Secret Theft With Chinese Official details just one case of the "unbelievably endemic" problem of Chinese theft of "intellectual property" -- the trade secrets that keep businesses competitive. In this case China's Sinovel sole the software that ran an American company's products, and immediately cancelled their orders for those products because they could now make them in China:

Last March, China’s Sinovel, the world’s second largest wind turbine manufacturer, abruptly refused shipments of American Superconductor’s wind turbine electrical systems and control software. The blow was devastating; Sinovel provided more than 70 percent of the firm’s revenues.

... Last summer, evidence emerged that Sinovel had promised $1.5 million to Dejan Karabasevic, a Serbian employee of American Superconductor in Austria.

If you steal the ideas, processes, techniques, expertise, plans, designs, software and the other things that give companies a competitive edge, then you don't have to pay them and you can just make the things yourself. When you get in bed with a very "business-friendly" country, you might find that they are more friendly to their own businesses. Because they consider themselves to be a country with a national strategy, not a self-balancing, self-regulating "market."

Trade Deficit Drains Our Economy

As a result of our ideological blindness, refusing to understand China's game, we have a massive trade deficit with them. This means hundreds of billions of dollars are drained from our economy, year after year. And to make up for this we borrow from them in order to keep buying from them. But this does not cause their currency to strengthen in the "markets" because China loves this game the way it is going, and intervenes against the markets to keep their currency low. And so it continues, year after year. We believe in "markets" they believe in rigging markets so they come out ahead...

Markets Can't "Compete" With This

Corporate conservatives tell us we need to be more "business-friendly" to "compete" with China. But at the same time Steve Jobs was being a realist when he said "the jobs are never coming back" because he understood that the current political climate, controlled by a wealthy few who benefit from China's "business-friendly" policies will not let us fight this. Why should these companies bring jobs back here, when over there they can roust thousands from dorms at midnight and make them use toxic chemicals for 12 hours a day for very low pay to make iPhone screens that he can sell at fantastically high prices? Why should they, unless We, the People tell them they can't do that to people, and that we won't let them profit from it?

As long as we continue to think that this is about "markets" competing, we will lose. China sees itself as a nation, and they have a national strategy to continue to be so "business-friendly" that our businesses can't compete. Our leaders and corporations may have "moved on" past this quaint nation thing but China has not.

We, The People Need To Act To Fix This

As long as we continue to send our companies out there alone against national economic strategies that engage entire national systems utilizing the resources of nations, our companies will lose. But the executives at those companies are currently getting very rich now from these schemes, so what happens in the future is not their problem. Maybe the companies they manage won't be around later, but that is not their problem. Others are concerned, but are forced to play the game because no one can compete with national systems like China's.

When everyone is in a position where something isn't their problem, or where they can't do anything about it on their own, it means this is a larger problem, and this is where government -- We, the People -- needs to get involved. It is our problem but we have been convinced that we -- government -- shouldn't interfere, or "protect" our industries, because "the markets" don't like "government" -- We, the People -- butting in. This is a very convenient viewpoint for few who are geting very, very wealthy at the expense of the rest of us.

We Need A Plan

In U.S. must end China's rulers' free pass at Politico, AAM's Scott Paul writes, Read it, read it, read it!)

We shouldn’t fear China’s citizens. But we should be worried about the actions of its authoritarian — and, yes, still communist — regime that tightly controls the People’s Republic. And we should be downright terrified by some of our own leaders’ attitudes toward China.

... China is not merely the key U.S. supplier of cheap toys, clothing and electronics: Its government is also one of our foreign financiers. China achieved this status by defying the free market and its international obligations toward more open trade and investment.

[. . .] History didn’t do in the Soviet Union. A sustained and aggressive strategy did. China engaged our business and political elites — and seduced them into believing these policies were no longer necessary.

... There has been no strategy, no effort to prevail economically.

... No one is suggesting that China is an enemy and we should just update our Cold War strategies. No one can accurately define what China’s intentions are in terms of foreign policy or defense. But on the economic front, the lessons of the past are instructive: We need a plan.

We need a plan. We need to understand that China is not competing with us in "markets' they are competing with us as a nation. We need a national economic/industrial strategy that understands the urgent need to fight as a country to win the industries of the future.

It’s not just price, it is things a democracy cannot allow. We can’t ever be “business-friendly” ENOUGH. We have to do something else. We have to understand that We, the People -- the 99% -- are in a real fight here to keep our democracy, or we will lose what is left of it.

Democracy Is The Best Economics

When people have a say they demand good wages, benefits, reasonable working conditions, a clean environment, workplace safety and dignity on the job. We need more of that, not less of that. We must demand that goods made in places where people who do not have a say do not have a competitive advantage over goods made in places where people do have a say. And we must demand that those places give their people a say.

As long as we let democracy be a competitive disadvantage, We, the People will lose.


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

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Posted by Dave Johnson at 12:49 PM | Comments (0) | Link Cosmos

February 8, 2012

Manufacturing On Planet Economus

Economist Christina Romer had an op-ed in the NY Times this weekend, Do Manufacturers Need Special Treatment? The question that keep coming back to me is why did she feel the need to write an op-ed to diss manufacturing? Is it just an economist thing? Or is she, like so many economists, from another planet?

In her op-ed Romer claims those of us who argue for a national manufacturing policy do so out of “the feeling that it’s better to produce “real things” than services.” But, she says,

American consumers value health care and haircuts as much as washing machines and hair dryers. And our earnings from exporting architectural plans for a building in Shanghai are as real as those from exporting cars to Canada.

Here is the difference: We can't just keep servicing each other. This "service economy" thing hasn't worked out so well here on Earth, and now we have a huge trade deficit. It is "better to produce real things" because that is what you sell to others to get the money to pay each other for haircuts (and scissors).

Once You've Got It It's Hard To Lose It, Once You Lose It It's Hard To Get It Back

Manufacturing brings so much along with it that entire economies have been, are and will be supported. China isn't making its living by cutting each others' hair. Neither is Germany, or other countries that have realized the importance of manufacturing and manufacturing policy to an economy.

Manufacturing brings with it all the businesses in a supply chain, it brings the research and innovation that manufacturing requires, and it brings a lasting real infrastructure that requires enormous investment to duplicate elsewhere before competition is enabled. Today we have a tremendous current account imbalance that resulted from the terrible trade deficits suffered since we were invaded by this crowd from planet Economus, who told us we don't need manufacturing - that we should transform ourselves into a "service economy." And it will require enormous investment to restore the ecosystem that we allowed to escape to other countries in that period.

Once you've got it, it's hard to lose it, and once you lose it, it's hard to get it back. Not so much with services.

Romer's Three Straw Arguments

Romer sets up three arguments made of straw for helping manufacturing, only to knock them down:

One: Market Failure. Romer says "government intervention" is only justified when you can demonstrate "market failure." In essence she says markets must make our decisions, not We, the People. “For example, when competition in a market is limited, antitrust laws that prevent monopoly can be helpful.”

Romer writes that another “market failure” comes when it can be shown that there is a benefit to having clusters of businesses. When benefits leak beyond where a company is putting their money then tax breaks and other government help may be due.

Romer knocks down this justification for government “intervention” with two arguments. She says, “large clustering effects have been hard to find.”

Perhaps cluster effects don’t have benefits on planet Economus, where Romer apparently resides, but on earth all you have to do is look from the development of the auto industry in Detroit to the development of the semiconductor industry in Silicon Valley to understand that yes, clustering effects matter.

Romer also says if clustering does brings benefits why single out manufacturing for government benefits when other sectors also benefit from clustering? Well, of course we shouldn't just help our manufacturing if it can be shown that government involvement boosts the businesses of We, the People in other sectors.

Romer also says there is market failure if a learning period means that future companies benefit form work done by early companies. Romer says, “ a study of the semiconductor industry found that although learning by doing was substantial, most of the rewards went to companies doing the early investing.”

The Silicon Valley Romer talks about is located on that planet Economus. The Terran Silicon Valley I live in has seen many, many startups fail, only to see later companies take up their ideas and succeed.

Romer concedes that we might need manufacturing to make things with which to defend the country, justifying government intervention in markets. The argument that we need a strong manufacturing base here in case of war must be taken seriously. But she says it still doesn’t follow that all manufacturing deserves special treatment. Which industries are truly essential in a war effort, she asks? I guess she asks this is because on planet Economus service industries are essential to a war effort. On Economus you apparently win wars by cutting each others’ hair.

Two: Romer’s second case-of-straw for “government intervention” is to create jobs and reduce unemployment. Romer says, “Unfortunately, those effects are probably small.”

In the 2000-2009 "service economy" decade we lost 5 million manufacturing jobs, more than 50,000 factories, and the hope to capture several industries of the future. Those are not small effects. And the effects on the surrounding communities are severe.

Romer rightly says that the current problem with the economy is lack of demand. She prescribes tax cuts for households, help for state and local governments and investment in infrastructure. (The old "taxes take money out of the economy" argument?)

But then she says that a tax break to encourage insourcing of jobs in manufacturing won’t create demand so we shouldn't do it. It might make our goods cheaper to export, but challenging China’s currency manipulation would do more, so we shouldn’t do this. This is the old "don't do anything if it doesn't fix everything." We need to do all of these things, and more.

Three: Romer’s third straw argument is income redistribution. Because manufacturing jobs “are seen as” better-paying “for less educated workers” then manufacturing is a way to distribute more income to people with less education. But no, she says, “Increased international competition has forced American manufacturers to reduce costs. As a result, the pay premium for low-skilled workers in manufacturing is smaller than it once was.”

Romer says government should help people get a better education instead of helping create jobs for people who do not go to college. Perhaps on planet Economus all the IQs are above average, but on Earth the average IQ is 100, and not everyone can or should get a college degree. If we send more people to college without bringing back manufacturing, we'll just have more unemployed people with college degrees than we do now.

Romer also says, "If increasing income equality is the goal, it might be wiser to put money into infrastructure than to subsidize manufacturing. Construction also pays good wages, but with lower educational requirements. And America’s infrastructure needs are enormous." Well, yes. But again this is the old "don't do anything if it doesn't fix everything." Do those things. And revive American manufacturing.

Why is "the pay premium for low-skilled workers in manufacturing ... smaller than it once was"? Here is why: Before we became a plutocracy we were a democracy. When We, the People had a say we demanded good wages, benefits, good working conditions, a clean environment and dignity on the job. But workers in China have no say. They are stuffed 6 to a room in dormitories, rousted in the middle of the night to work extra shifts …

"Free trade" agreements made democracy a competitive disadvantage. To people from planet Economus, these conditions in places like China are just “lower costs” that the rest of us need to learn to compete with.

Are All The Other Countries Wrong?

The countries that are successful in today's economy have national industrial/economic policies. We do not. They work to capture parts or all of key strategic industries, and line up the infrastructure, finance, education, supply chains, power grid, tax policies and everything else needed to compete in the world economy. We do not.

We send our companies out against these national systems, and even our largest companies cannot compete with national systems. So we lose.

Are China, Germany and so many other countries just wrong, putting so much into these efforts to capture parts or all of strategic industries? Or are they being smart? Look at who has a trade surplus and who has a trade deficit, and see if you can guess the answer.

The Fix

1) Romer says we should not have special treatment to help manufacturing. Well, let’s start by removing the special treatments that are hurting manufacturing. After that we can begin to talk about "special treatment" to help manufacturing. Out tax policies encourage outsourcing and make it economically beneficial to close a factory rather than maintain it.

2) Countries like China offer subsidies to strategic companies and industries. They manipulate their currency to keep their prices lower in world markets. Let’s enforce trade rules against that, and if we can’t then let’s get out of these "free trade" agreements that are killing us and put tariffs on their goods so they are not unfairly competing with goods made here. And start matching subsidies on exports so they compete in world markets.

3) Other countries have national industrial policies, lining up everything needed to capture part of all of strategic industries. We don't so we send our companies out alone against countries. We have to change this, or ultimately our companies have to lose.

4) Planet Economus is a place far from Earth. On planet Economus they apparently have free markets, and free trade. But on Earth free markets and free trade never existed anywhere at any time, and never worked when they were tried. So on Earth we have to have policies that reflect what happens on Earth, not on planet Economus.

This Time Isn't Different

Romer concludes,

AS an economic historian, I appreciate what manufacturing has contributed to the United States. It was the engine of growth that allowed us to win two world wars and provided millions of families with a ticket to the middle class.

Right, and it still is. This time it isn't different.


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

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Posted by Dave Johnson at 12:20 PM | Comments (1) | Link Cosmos