Losing to China Where It Matters

Somewhat buried in the news this week was a forecast by Global Insight [1], a U.S. consulting firm, that China would overtake the United States as the leading global manufacturer in 2009. That forecast deserves more attention, because American workers want and need real answers from the next president on the policies they will espouse that will produce real jobs and boost our economy.

Perhaps one reason the Global Insight forecast hasn't gotten more attention is that most U.S. residents in a Global Insight/Financial Times poll [2] thought that China had overtaken the United States in manufacturing long ago. And no wonder: Since January 2001, when President Bush took office, the United States has lost more than 3.5 million manufacturing jobs, and has seen a net loss of more than 3.2 million jobs in the goods-producing sector overall.

That helps explain why, in the past seven-and-a-half years of the conservative economic policies championed by President Bush and the Republicans, the number of unemployed people in the country has jumped more than 36 percent, from 6 million to 8.2 million. Meanwhile, our trade deficit with China rose from $83 billion to more than $250 billion at the end of 2007.

This week, Sen. John McCain addressed workers in York, Pa., [3] and seemed to suggest, once again, that the core of the problem was that workers need more education and businesses need lower taxes. The tax argument has already been exposed as disingenuous, [4] and is made even more threadbare by the tax loopholes big corporations exploit [5] to evade any taxation at all. While it is true that our education system needs vast improvement to both equitably prepare our youth for the 21st-century world and to retrain workers in a changing economy, conservative leaders do not support significant investment in our public education system.

What conservatives won't point out, but progressives must, is, as Charles McMillion noted in his post on China [6] this week, is that while China's political leadership has had an industrial policy that it has methodically executed, the United States has not—or at least nothing that goes much beyond the "greed is good" credo embraced by many economic conservatives.

China also has a public infrastructure investment policy that the United States lacks. While our federal and state governments find themselves unable to finance significant improvements in transportation and is doing virtually nothing in areas such as high-speed broadband, China is spending about 12 percent of its gross domestic product on infrastructure. That compares with the U.S. commitment of about 2.5 percent of its gross domestic product.

There are a number of factors involved in the slippage the United States and its workers are experiencing in the global economy, and the remedy has to be correspondingly bold and sweeping. One set of prescriptions was unveiled this week by the Economic Policy Institute [7], which is calling for a comprehensive set of competitiveness policies that include an Apollo-style alternative energy program; incentives for research and development that leads to new domestic industries and jobs and eliminating tax rules that encourage overseas investment; open new global trade talks with a goal of ensuring that workers in the U.S. and workers overseas get their share of job opportunities, fair wages and decent working conditions; and investments in both our physical infrastructure and our educational system.

The new EPI report touches on the kinds of issues that ought to be front and center of the economic debate in the coming weeks.