A U.S. Manufacturing Strategy, Part 1
There has been an interesting ongoing blogosphere dialogue on the role of manufacturing in creating high-wage jobs in America, involving Paul Krugman, Reihan Salam, David Leonhardt, Karl Smith and Michael Mandel, among others.
This topic has been a fixation of mine for a very long time. Here is how I opened an article a couple of years ago in National Review:
I still remember the first time I walked into a working factory. In the foreground, innumerable machines whirred and clacked away in precise, interlocking dances. A massive vat shaped like a 50-foot-tall Campbell’s soup can loomed in the background. It was encased in a protective sheath of refractory bricks that glowed dusky pink with trapped heat. A crane arm dumped heavy sand continuously into the top at (literally) industrial volumes. Steaming, liquid glass gushed out of the business end at the bottom in a matching stream. I couldn’t see the heating element, but it was in there somewhere, and it was working. …
I was looking at concretized human ingenuity. In the auto industry, “car guy” is a slang term for an executive who doesn’t just view the business of a car company as making money, but loves the cars themselves. I’m a factory guy.
I spent the first few years of my career in the 1980s as one small part of a self-conscious movement to rescue American manufacturing from its projected obsolescence. I’ve worked in glass plants, assembly plants, oil refineries, and textile plants from Florida to Canada, and many points in between. I’ve carried a union card and walked a picket line.
I’ll put forward several propositions as being as being relevant to this discussion. (This would be a very long blog post, so I’ll break them up into several posts.)
Proposition 1: Competitiveness is productivity
Professional economists often pooh-pooh the importance of national competitiveness. To quote Krugman:
The growing obsession in most advanced nations with international competitiveness should be seen, not as a well-founded concern, but as a view held in the face of overwhelming contrary evidence.
They will point out that we all gain from trade, and as people in other places get richer, so can we. Countries, they say, are not like corporations.
Maybe so, but it’s still the case that some societies are populated by lots of people with high wage jobs, nice houses and good schools, and other societies are populated by lots of people hustling for tips from vacationers from the first kind of society. Over time, people who spend their working hours generating goods or services that they can sell for a big margin versus the costs of the required inputs will tend to live in the first kind of society. Nothing is forever in this world, but I want America to remain in that camp for a very long time.
This doesn’t occur by immiserating other societies – international economic competition is not zero-sum in that sense. But there are many paths open to us for how we react to the rise of non-Western economies, some of which lead to us being much better off than others, both in an absolute sense, and also in a relative sense.
Relative productivity is likely to matter a lot, because it will materially influence future absolute wealth by affecting the flow of global technology and innovation. But relative productivity and wealth also matter in and of themselves. First, they will impact the global prestige and success of the Western idea of the open society which we value independently of its economic benefits. Second, maintenance of a very large GDP per capita gap between the West and the rest of the world will be essential to maintaining relative Western aggregate GDP, and therefore, long-run military power.
In sum, we want the rest of the world to get richer, but we want to stay much richer than they get.
This demands that we sustain rapid productivity growth over many decades. Unfortunately for us, this is much harder to do for an advanced economy than for those in catch-up mode, and is likely to continue to create very tough social strains in America. Perhaps we’re just not up to it. This, and not some lets-all-succeed-equally-together happy talk, is the real meaning of globalization for America in 2011.
(Cross-posted to The Corner)
Jim,
This is an exciting and fascinating topic — I fell in love with factories myself after meeting with a lot of manufacturing businesses here in Chicago during the 90s when we were doing O.K. w/r/t manufacturing (now we are doing worse, although we still have a decent base that seems like it will never go away).
Anyway, what I really want to do is get your thoughts on free trade. I know that globalization/trade and manufacturing success and necessarily linked, but I’ve been reading a lot on the topic lately, especially the libertarian writer Vox Day, who has actually come out against free trade. I don’t agree with everything he has to say on the subject, but he has a formidable intellect and makes a strong case that the assumptions that most free-traders use in their models break down once you look at the real world (especially once you look at the ability of individuals to adapt quickly to the changes that free trade bring to a national economy). Anyway, I’d love for you to take a look at some of his posts and come back to the Corner and offer your readers some thoughts on his take:
http://voxday.blogspot.com/2011/06/mailvox-free-trader-defends-hazlitt.html
— Fake Herzog · Jun 23, 07:34 PM · #
Jim:
1. Don’t you think that Krugman and his ilk believe that our success leads to immiseration of other societies?
2. As to you being a factory guy: Does that mean you love factories? Did you love working in them? Did you love having some union muck coming by and telling you to stop doing someone else’s job? Did you love standing in the picket line pretending you were ready to kick some ass if someone crossed your picket? Yeah, I’ve been there, too.
I’m just trying to get the parallel between the car guy and the factory guy. I can understand people loving factories and the marvelous things that they are. But how is the guy who loves a factory in any way like the guy who loves cars—and then does everything in his power to build the best one he can?
— jd · Jun 24, 01:32 AM · #
If there was unrestricted movement of labor then free trade would benefit everyone. Governments would have to revolve policies around social well being of people and businesses, rather then just business.
America loses a lot by not using it’s current prestige to coopt as much of the world as possible. And funnily enough, we think we’re doing the exact opposite by restricting immigration.
— Console · Jun 24, 06:30 AM · #
Fake Herzog:
Thanks. I clicked through the link, and was obviously coming into the middle of a conversation. I’ll try to work my way through it.
jd
I wouldn’t claim to speak for them. I suspect Krugman has written on that exact question, but I don’t know it.
Yes
Yes, but I had generally interesting jobs in them; as you know, a lot of the jobs are incredibly monotonous.
No. This rarely happened to me, though, I assume mostly because all of these work rules were already internalized into the management processes.
I only had to walk the line twice, IIRC, as the strike only lasted something like 10 days. At that level, it was actually kind of interesting to me. It was not a strike that seemed to be on the verge of violence.
I loved the ingenuity of them, and the idea that they produce something tangible that you can touch, rather than ultimately words spoken in a conference room. I loved that things worked or did not work, and you couldn’t talk your way out of it. I loved that the application of skill and effort made the whole pie of the economy bigger, rather than just redistributed it form one person to another.
console,
I’ve written somewhat about this: http://www.nationalaffairs.com/publications/detail/keeping-americas-edge
— Jim Manzi · Jun 24, 10:30 AM · #
Jim,
Thanks for taking a look. I probably should have sent you the correct sequence of links to help you out:
1) here Vox decides to attack Hazlitt’s argument for free trade in Hazlitt’s book_Economics in One Easy Lesson_which are outlined in Chapter 11:
http://voxday.blogspot.com/2011/06/mailvox-hazlitt-international-trade.html
2) This is the second part of Vox’s critique:
http://voxday.blogspot.com/2011/06/mailvox-hazlitt-international-trade_18.html
3) And then he wrote the piece I originally linked to, giving his detailed response to a reader who wrote in to defend Hazlitt.
Again, I know the story of globalization and free trade is not exactly the story of what’s happening to manufacturing in the U.S., but I would think it has played a role in ‘hollowing out’ our low-wage manufacturing base and given Vox’s arguments, I wonder how you think about this issue.
I should note I was a free-trader/globalization fan until I started taking some of Sailer’s ideas seriously and wondered just what society will do with the left side of the bell curve w/r/t stable employment that can support a family?
— Fake Herzog · Jun 27, 08:28 PM · #
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