Buy American?

Here I am again recalling the Great Depression of the 30ies. Living long means you are repeatedly called on to tell “how was it back there when the stock-market dove and a third of the workforce was unemployed?” Clearly it wasn’t good, but as a kid you have a different perspective. My family never had a lot so we didn’t have much to lose. Yes, our diet changed. We ate lots more animal organs and drank powdered milk and listened to FDR’s “Fireside Chats” on the radio. I do remember him pleading with us to “BUY AMERICAN.” This was part of a campaign to get the unemployment rate down. I have been puzzling about how this might apply to our present unemployment problem. This is what I have come up with.

Traditional manufacturing has been disappearing from the US since the advent of globalization. We stopped making almost all the stuff that we traditionally bought, including clothing, shoes, appliances, furniture, cars, electronics, toys and food. Too many economists have long argued that we no longer need our manufacturing base. I remember when Kenneth Galbraith argued that all we needed was people to do our laundry and we would sell our knowledge and service industries to the rest of the world. At the time it struck me as pretty idiotic. Since I was closely associated with Unions, I was told that I simply did not understand the emerging paradigm. I admit that was intimidating.

Now it is 30-40 years later and where are we? We are told that the economy is dependent on the consumer. If the consumer stops buying, the whole economy goes bust. What I can’t get through my thick head is what good is consumer spending if the major beneficiaries will be China, Malaysia, Honduras, Viet Nam, and lets not forget oil and the Middle East. Our new bunch of economists seem to forget what their forerunners told us.

We are only now beginning to reap the consequences of giving up our industrial manufacturing base. It was through those good, unionized jobs in steel, auto, chemicals, appliances, and machine tools that generations of Americans were able to make it into what became known as the middle class. The machine tool industry that used to dominate the economies of Connecticut, Massachusetts, and Vermont are all gone. They were the essential essential tools necessary for making machines that made all the manufactured goods. Without them we will end up making nothing. Doesn’t anybody understand the threat this is to our military? (Imagine me having to ask this question?)

Oh how I remember members of the Machinists Union saying, “I work in this dump to make sure my kids can go to college and never have to enter a factory door.” For many of those Machinists that turned out to be true. But for many of their children the factory was still their best opportunity for a decent job with solid benefits. Most of that was wiped out in the Globalization euphoria. I am sure there are many turning points, but for me it was when China was welcomed into the WTO in 2001. Since then we have shut 42,000 factories. We have lost about 17 million manufacturing jobs; the same number of jobs that presently represent the millions of unemployed. (I include those out of work people who have given up looking as well as those in part-time work.) By the way, on a percentage basis this is not far off from the 1930ies figure.

People like NY Times Columnist Thomas Friedman seem unable to quit writing about the wonders of Globalization and what it has done for the people in Third World Countries. That is in serious question. If one starts with a zero income and foraging for food in the garbage dumps, and than lands a job making sneakers for Nike at the wondrous salary of $2.50 a week, yes you can call that progress. For Friedman that is a dramatic improvement. For the people who have lost their jobs and for the US economy, that’s a tragedy. It does not solve the problem of the third world country as Nike will pack up and move to another third world place where they can get the same work for $1.50 a week. In the meantime the whole structure of our economy here at home has been busted; resulting in our highest unemployment since the great depression while Nike makes record profits from its overseas operations.

The argument that our industries were inefficient and outmoded is sheer humbug. It took a US Steel plant two man-hours to make a ton of steel. In China it takes 12 man-hours to make the same ton and three times the amount of carbon emissions. So who’s more efficient? We were of course. So why can’t we compete? China keeps its currency artificially cheap. Its companies pay zero, zilch, nothing, for health care and housing, and pay poverty wages. Should we want to compete with that? I think not, unless we want to take us back to the living standards of the 19th century.

So what will consumer spending do for us now? It will increase the trade deficit, since we are buying more from overseas than what we sell. The US trade deficit will not decline unless we can re-establish a manufacturing base. We simply cannot keeping buying stuff from China with nothing to sell them. In 2008 our world wide import was $2.5 trillion. In the same year we exported $1.2 trillion, or a deficit of $800 billion. In 2008 1.2 billion cell phones were sold worldwide, not a one made in the US. Our major export to China now is our waste paper. Maybe that’s what they sell back to us in the stink smelling Dry Wall?

All of this is to say we need a policy that will bring back our manufacturing base or we are doomed as a major player in the world economy. Have you read all those predictions about China becoming the worlds dominant economic powerhouse?. It was our manufacturing ability that made the US the number one player in the world’s economic competition. Without it we are doomed to be a second rate country completely dependent on others to keep supplying us with our basic needs, as well as buying our debt in hope that someday we may find a way to pay them back. How to bring back manufacturing? Maybe start with Buy American as a wake up call?

Thanks Kate N.H.W.Y.