So, we’re in a slow, slogging, uneven recovery, but there are signs things are getting better, not for everyone, not uniformly across the nation, but signs nonetheless. So what to do now? I’ve heard concerns that, as things improve, there may be less of a sense of urgency to actually work on transforming the economy, and people will settle for sliding back into what was familiar. That, I and others believe, would be a very bad idea; because the economy of the late 1990s and the first decade of this century focused on piling up debt to fuel a consumer spending spree, rather than production. We were told we were entering a New Economy, one where muscle work would be shipped out to other nations (it was, eroding our traditional manufacturing base), and “knowledge workers” would be the order of the day.
Didn’t quite pan out as they told us it would, though.
There’s push now to re-focus on manufacturing, which had so much to do with America’s post-WW II boom. But other countries caught up – think Volkswagens, Sony, and Toyota, for starters. We didn’t make investments, and we didn’t modernize. Detroit, for example, paid dearly for essentially converting to a truck-making industry by pushing SUVs out the door, rather than efficient, reliable passenger cars. And a lot of what we invented ended up being made and marketed overseas – think VCRs, for starters. Then there’s the impact of predator capitalists like, well, you know, who swooped in and carved companies up before swooping back out with a large bag of swag on their backs, but that’s another story, eh?
Nowadays, we don’t want to go back to the smokestack economy, but we can still make things people here and abroad will buy.
There’s a pretty lively debate going on right now about whether we should again emphasize manufacturing. Obama showcased it in his SOTU, to the surprise of many. The corporate tax cut he announced today is aimed at supporting the manufacturing sector.
The debate really got going in public with former Obama economic advisor Christina Romer's (she chaired the Council of Economic Advisors) commentary, in the NY Times earlier this month. That was met with a quick response from scholars at the Brookings Institution, Howard Wial and Jonathan Rothwell, first, on in-house blog, UpFront, then in the Atlantic.
A few days later, Laura D'Andrea Tyson, Romer’s predecessor at the Council, joined the fray on the side of production, and argued for the corporate tax cut Obama’s pushing now.
Economist Jared Bernstein had a Solomonic post on his blog, and another Brookings scholar, Michael Klein, wrote that we shouldn’t get to optimistic about the prospects for manufacturing recovering a large chunk of the millions of jobs it has lost since 1980.
NYT writer Annie Lowery has this on the Economix blog, a very nice summary of the arguments, and a similarly good summary of the new policy paper from the Brookings Institution’s Metropolitan Policy Program.
As I’ve noted before, my first job was in manufacturing, pounding out ploughshares (really) and similar agricultural implements on the night shift. Despite my desire never to work under those conditions again, I’m still a fan of making things. This is the sector where innovation happens most often, where wages tend to be higher (although the advantage has shrunk as companies realize they can push unions to accept wage concessions), and where we get the bulk of our exports.
I don’t know, of course, how this will all play out, but I’m betting a lot of people will get behind the idea that Made in the USA made for a stronger economy.