Last week Barack Obama announced the appointment of 18 leaders to a new Council on Exports as part of his ambitious scheme to double America’s exports over the next five years.
This push to increase exports dovetails with a related agenda to energize the US manufacturing base.
Of course, whenever you start talking about boosting manufacturing in America, you’re going to encounter sneering guffaws from folks who insist that if only you knew a little bit about comparative advantage, you’d realise how foolish it is to try to rebuild America as a manufacturing dynamo.
And granted, there is a fair amount to sneer at. The 18 corporate titans on Obama’s council — leaders of companies like Ford, Verizon, and Boeing — just screams out as a maintenance of the corporatist status quo. We don’t need more of the same: leaders of big companies giving self-serving recommendations to the White House about what constitutes good economic policy.
But stripping that away, pushing manufacturing in America is a smart idea for a simple, though generally unspoken reason.
In a country with 300 million people, with the staggering diversity that we have, we’re ALWAYS going to have people who are ill-equipped for “service” or “knowledge” labour, which was supposed to replace the manufacturing that went overseas.
There’s always going to be a sizeable chunk of the population that lack either the intelligence or just the temperament to do something that isn’t physical or manual.
During the uber-optimistic 90s, the idea was that we’d build stuff overseas, and do the thinking here, collecting the fat premiums that come from creative labour. And that has happened!
As Andy Grove recently wrote in a widely-discussed BusinessWeek piece, FoxConn has 10x as many employees building Apple products in China as Apple has in the US.
But Apple is the huge moneymaker, that sports a market cap of nearly a quarter-of-a-trillion dollars. The logic behind globalization and comparative advantage does actually work in our favour — in that instance.
It’s also plainly ludicrous to think that in a country like ours, everyone would be equipped to migrate towards the high-end of the “value chain.” We could have the best education system in the world, and it just wouldn’t happen. It won’t happen in a 50 or 100 years, either.
We actually had a big, booming manufacturing industry up until recently, soaking up and putting to good use those who were mainly equipped for physical labour. Unfortunately what they were manufacturing was housing, at a Fordian scale (had we actually had more of a real manufacturing ase, it’s perhaps possible that the abundant cheap labour available to build homes might have not been there, naturally choking things off before they got out of hand, but that’s beyond pointless speculation).
If we’re going to reduce unemployment back to anything approaching historical “healthy” levels, the answer isn’t to make our economy more “dynamic.” It’s already incredibly dynamic. What we need are industries that are suitable for the chunk of the population that used to hammer together homes, and other related activities of a similar skillset.
What’s annoying here is that to argue this, people presume you’re talking about protectionism or subsidies, or some such policies. But you could easily start just by looking at the various things that hinder manufacturing (healthcare, labour regulations, environmental regulations, minimum wage laws, tax policies, etc.), to see what can be gotten rid of.
Following that, we can go from there, but the bottom line, which nobody really states, is this: unless we have industries that require people with lack of mental/office/service skills, we’re always going to have huge unemployment.
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