Industrial Policy

President Puts American Manufacturing Front And Center In State Of The Union

Dave Johnson — Wed, 25 Jan 2012 14:59:42 -0500

President Obama put American manufacturing literally at the front and center of his State of the Union speech. American manufacturing was at the front of the speech and at the center of a "blueprint" for bringing back jobs and strengthening our economy. By placing manufacturing front and center he has taken this conversation further than any President before him.

There is good reason to cheer, but also good reason to ask for even more. He outlined steps to stop the outsourcing and start the insourcing, but there is not yet a comprehensive, overall government strategy to fix trade and capture the industries of the future.

The Speech

Right up front the President talked about building "an America that attracts a new generation of high-tech manufacturing and high-paying jobs." Then,

"Tonight, I want to speak about how we move forward and lay out a blueprint for an economy that's built to last, an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.

This blueprint begins with American manufacturing."

Bob Borosage, in The Obama State of the Union: A Progressive View,

On the economy, the speech led with more discussion of manufacturing than anyone has heard in years. The president wanted and deserved credit for saving Detroit – a key to his campaign in the Midwest – and wanted to highlight the uptick in manufacturing jobs and “insourcing,” the movement of some jobs back to the US.

Again, his agenda focused on mostly symbolic measures of populist appeal. In addition to the tax on multinationals, he promised a new trade enforcement effort to challenge China and others who trample global trade rules. With Romney promising to cite China for currency violation on day one if elected, the administration seems likely to finally challenge China, at least symbolically.

Steps, But Not An Overall Picture

The President outlined steps to stop the outsourcing and start the insourcing. There are things that the Congress can do right now. These include but are not limited to,

Eliminate existing tax deductions for outsourcing
Big multinational corporations should pay a minimum tax
Use some of the money this brings in to cover the expenses of bringing jobs home
Pass tax cuts for manufacturing here
A trade enforcement unit to look at bringing cases against countries like China that cheat, use piracy, give subsidies
Steps to train skilled workers, with a national commitment to train 2 million with skills that will lead to a job
Do something about the maze of confusing training programs
Turn our unemployment system into a reemployment system
Instead of bashing teachers and laying them off, give schools resources to keep good teachers
Reduce the cost of college. Stop student loan interest rates from doubling in July. Condition federal assistance on lowering tuition.

This "blueprint" has a number of good, solid steps that will help stop the outsourcing and start the insourcing. But it is not a comprehensive national industrial/economic strategy that addresses the overall picture of all of the components of a national manufacturing ecosystem. To begin to address this, the President has established a cabinet-level Office of Manufacturing Policy to coordinate efforts of various government agencies.

Coordinating the efforts of various government agencies to help American exports is important, but this does not address the development of a national plan, like other countries have. We need this, too. A national plan would seek to cover all the elements of a healthy "industrial commons" -- meaning all of the components of a healthy manufacturing ecosystem. These include government efforts to make sure the components are ready, funded and functioning:

The necessary educational components to provide people ready to do all of the jobs an industry requires;
The financing to build factories and obtain inventory;
The modern infrastructure of roads, electrical power, internet, posts and airports, to support the companies;
Trade and tax policies to help these companies locate and export;
R&D facilities and researchers for innovation and design;
Local suppliers to support the companies;
Legal structures and fully-funded and staffed court systems to support the industry;
The entire "chain of experience" located in an area, often around a "cluster" of businesses, required for an industry to develop and thrive.

Countries like China are engaged in national efforts to get all of these components lined up to capture industries like the new green energy revolution that is taking place. China is working to capture solar and wind energy manufacturing. They are working to capture high-speed rail manufacturing. The news about the reasons Apple and other high-tech manufactures have had to locate in China show how hard China has worked to capture that industry -- and not without quite a bit of cheating that we are not stopping.

Our competitors are engaging in national efforts to line up all of these components to capture other new industries as they emerge. We are not.

Ideology Holds Us Back From Competing

This list of components of a national industrial/economic policy describes the kind of national effort that competitors like China are engaged in, and is the reason they are bringing in such a share of new industrial growth. To address this we have to see ourselves as a country, as China does, mutually supporting each other, to be able to embark on an undertaking like this. We have to abandon the "each of us on our own" and selfish, "in it only for ourselves" mentality that has set us apart, preventing national government efforts like other countries engage in.

Some of us hold on to an ideological fantasy that government is only in the way, but other countries do not. So the result is that we keep sending our companies out on their own against national systems. Even our largest companies cannot compete on their own against countries with national efforts to put all of these components in place. It takes a unified government effort.

We have to move to a "we are in this together" understanding of ourselves and our country if we want to bring back the shared prosperity we used to have, and can have again.

Update - White House fact sheet: FACT SHEET: President Obama’s Blueprint to Support U.S. Manufacturing Jobs, Discourage Outsourcing, and Encourage Insourcing

Obama Appoints Two For Cabinet-Level Manufacturing Policy

Dave Johnson — Tue, 13 Dec 2011 15:04:08 -0500

President Obama has appointed Commerce Secretary John Bryson and National Economic Council Director Gene Sperling to co-chair a new White House Office of Manufacturing Policy. The new Office of Manufacturing Policy will have cabinet-level status, reflecting the importance of the manufacturing sector to our economy. It will coordinate the efforts of different government agencies, such as the Small Business Administration, the Department of Commerce and the Transportation Department.

The idea of a coordinated government manufacturing/industrial/economic policy has been in disfavor for some time, with conservatives deriding the concept as "picking winners and losers." The right-wing blog RedState, for example, calls this new effort "central planning" and calls the new appointees "czars." Other countries, however, do have coordinated industrial policies. So the result of our own abandonment of government coordination while countries like China and Germany charge ahead has been that we send our companies out on their own to compete against national systems. Even our largest companies have a very hard time up against this kind of supercharged opposition. We lost as many as 50,000 factories and millions of manufacturing jobs during the conservative-dominated Bush years, and have carried a massive trade deficit since Reagan's presidency.

The White House issed a press release, President Obama Names Commerce Secretary John Bryson, NEC Chair Gene Sperling as Co-Chairs of White House Office of Manufacturing Policy. From the release,

President Obama today announced that Secretary John Bryson would join National Economic Council Director Gene Sperling as co-chair of the White House Office of Manufacturing Policy. The Office of Manufacturing Policy is part of the National Economic Council in the White House and works across federal government agencies to coordinate the execution of manufacturing programs and the development of manufacturing policy.

“At this make or break time for the middle class and our economy, we need a strong manufacturing sector that will put Americans back to work making products stamped with three proud words: Made in America,” said President Obama. “I am grateful that Secretary Bryson and Gene Sperling will head up this office to continue our efforts to revitalize this great American industry and fight for American workers and jobs.”

... The President has also called on Congress to help revitalize American manufacturing, including continuing to push for an expanded, simplified, and permanent research and development tax credit which would provide the certainty and predictability manufacturers need to invest in innovation. In addition, the President’s American Jobs Act would extend the 100 percent capital purchase expensing provision signed into law in December 2010 and make an immediate $50 billion investment for highway, highway safety, transit, passenger rail, and aviation activities.

Since the bottom of the recession in 2009, manufacturing production has grown 14 percent while real goods exports have grown 29 percent. Over this same period, U.S. manufacturing has added over 300,000 jobs, the first time the sector has experienced sustained job growth in over a decade, but more must be done to revitalize American manufacturing.

Manufacturing Policy Hearing: Republicans, Corps Say Taxes, Regulations, Government, Democracy Bad

Dave Johnson — Thu, 23 Jun 2011 13:15:51 -0400

I watched a Congressional hearing yesterday (webcast), examining why we need a national industrial strategy. There were a few pro-manufacturing voices. But in a surprise move, Republicans and representatives of Wall Street & giant multinationals opposed such a policy and repeatedly called for more tax cuts for the rich and corporations, more "free" trade agreements, getting rid of regulations and stopping government from holding corporations accountable to our laws. And at the end of the hearing the top committee Republican said we should not blame China's trade-cheating for our trade deficits, we should instead blame our "home-grown" regulations, citizen access to courts, taxes, good wages, benefits, worker-safety protections, environmental protections, etc. [aka democracy] that China lacks.

Yesterday's hearing was before the Joint Economic Committee, which is a committee of members of the House and Senate, created by Congress to review economic conditions and to analyze the effectiveness of economic policy. The hearing was named: Manufacturing in the USA: Why We Need a National Manufacturing Strategy? Click through for details and an archived video of the hearing.

The format was remarks by the committee heads, brief remarks from a panel of two members of Congress and a panel of four "experts" in the subject, followed by a question/answer session.

Rep. Kevin Brady's introductory remarks set the stage for the coordinated Republican/Wall Street/multi-national corporate position. Opposing the idea of a national industrial policy, Brady summed up the reasoning:

The concern is that policy can "morph" into "central planning" that interferes with "the invisible hand." He said industrial strategies have failed everywhere. [note- of course they haven't, just look at China, Germany, Brazil, India...] It comes at the expense of the consumer and leads to protectionism. Instead we should adopt “pro-growth” economic policies: (see if you can guess what is in the following list)

Reduce government spending, reform entitlements, cut taxes, give more tax breaks to big companies, give a tax "holiday" to repatriate "stranded" American profits, do even more trade agreements, repeal regulations and health care, enact tort reform.

Panelists

Alex Brill of the American Enterprise Institute testified that we should "rely on market forces," and government should make no specific policies. We should not expect an increase in employment in manufacturing because of productivity growth, which increases our standard of living.

The downward employment trend prompts some to conclude need government assistance, but that can harm "other sectors," with resources misallocated. Manufacturing is only one sector of economy. Rely on market forces, government should stay out of it. [Note - by "other sectors" see if you can guess which "other sectors" he means. Hint: the answer is Wall Street.]

Instead we should should Improve US business environment as a whole. Encouraging growth across the economy [i.e. Wall Street].

Having government involved in manufacturing policy is an oxymoron in a free market economy [i.e. Wall Street].

To reduce the harmful distortions: (get ready, here it comes)

Reduce the corporate tax rate. We need a significant reduction, to level the playing field, improve general competitiveness. This is one step toward "neutral" fiscal policy.

Jay Timmons of the National Association of Manufacturers offered a contrasting opinion, saying that we need tax cuts, deregulation, etc.

We must have policies to compete successfully in international marketplace. Pro-growth policies: (get ready, here it comes)

Reduce the corporate tax rate. Reduce the regulatory burden, and "onerous" regulations that put the weight on "job creators." [Note - see: Actually, "The Rich" Don't "Create Jobs," We Do.]

Get rid of barriers to trade and growth. We need more trade agreements. We are ceding market share to competitors. Our policies are turning clock back. There are excessive new regulations, like ozone standards. They "hamstring" the economy and "job-creators."

A Different Perspective

Scott Paul from the Alliance for American Manufacturing offered a pro-manufacturing perspective.

Robust strategy has been at the core of American policy from the country's beginnings. Today’s dearth of policy is the exception, not the rule. Hamilton’s manufacturing policy was in place until WWII.

Having a manufacturing strategy is not partisan, Reagan had one, the Plaza Accord. His administration made key investments, including semiconductors, and had "Buy America" requirements.

We saved the auto industry, which stabilized part of the support structure for domestic manufacturing.

There are many problems that can’t be solved on their own by companies, like R&D investment.

No single firm can coordinate national projects. We need a robust manufacturing strategy because fate of this sector is too important. The decline of manufacturing is not inevitable or desirable.

Paul's solutions
1) Address Chinese currency manipulation
2) Counter China’s other cheating – when we act and enforce we get results.
3) Retool our export initiative to focus on zero trade deficit.
4) Tax changes – but don’t offset corporate tax reduction with reductions in manufacturing – this is just a windfall for Wall Street
5) Winning a race to the bottom -- don’t engage in this.
6) Infrastructure bank
7) Skills and training infrastructure

The Q&A

Currency manipulation.

Chairman Casey asked Scott Paul about Chinese currency manipulation.

Chairman Casey and Mr. Scott Paul on International Currency Manipulation:

Paul: We need legislation to allow workers and firms relief from currency manipulation. Currency manipulation is one of most harmful policies out there, contributes to global imbalances, viscious cycle, hard to get out of. A year ago China took off the "peg," and the currency appreciated but arguably not enough, still grossly undervalued between 30-40%.

Rep. Brady Brady: "If we blame china we will be sorely mistaken." Our challenges are home-grown. Fiscal stimulus is one cause of our problems, we have fewer workers because of it, unemployment higher, etc.

A Unified, Coordinated Front: Government, Taxes, Regulation, Democracy -- All Bad

Question – to Timmons (NAM), don’t your manufacturing members want tax cuts instead of jobs programs?
Timmons – Enact legislation that reduces costs and barriers. 18% higher cost here because of taxes, tort, regulatory and energy costs. We can reduce those costs, not blame other countries.

Then most of the Republicans and panelists got going about why government and taxes and regulations are bad. They were a unified, coordinated front, dismissing any consideration of government involvement...

Someone talked about uncertainty which is caused by government. This is why businesses are slow to hire. Businesses don't know what We, the People might demand next.

Mark Zandi of Moody’s Analytics argues that government itself creates uncertainty because it has the power to tax and regulate. This makes companies question whether to do business in the US. Need to provide certainty and stability [like China?]

Someone said, “Pull back and eliminate as much as we can.”

Finally someone said we need to get rid of the National Labor Relations Board "to lower labor costs.

Sobotka

As always, Frank Sobotka explains what's wrong:

America Needs An Industrial Policy

Dave Johnson — Mon, 03 Jan 2011 10:24:50 -0500

Over the weekend Daily Kos ran a front-page story, America needs an industrial policy, making the point that Germany is doing well because their government understands that a national policy of promoting manufacturing drives the economy and jobs.

There is a simple reason why Germany manufactures so many high-end goods, from the best watches to the finest grand pianos, all the way up to Porsches and highly complicated precision instruments: it is the policy of the German government.

Well, it isn't exactly a policy. It is more of a framework. Germany's method of creating wealth is straightforward: 1. Produce a highly educated workforce. 2. Have that workforce create and make advanced, precision things for high wages. 3. Export the things at a high price and then re-invest that money back into item 1. This is why Germany is the Number 2 exporter in the world despite having only 27 percent of America's population and only 6 percent of Number 1 exporter China. The Germans realize they cannot beat either China or India based on cost. Advanced nations can't compete on cost. America could bust all the unions, get rid of the minimum wage, eliminate all social benefits and taxation and we would still lose jobs to low-wage nations. Germany decided to avoid going down the same path of downward spiral among its middle class that we are in. Instead, they invest in their people and in research.

Investing In People And Research Pays Off

As the Daily Kos story points out, Germany invests in their people and research. "America could bust all the unions, get rid of the minimum wage, eliminate all social benefits and taxation and we would still lose jobs to low-wage nations." And the results are there for all to see. Germany is recovering faster from the economic downturn with jobs returning. Manufacturing and exports lead the way.

Over the last 30 years, and the last 10 years in particular, America has conducted an experiment in letting "the markets" decide. Markets are a one-dollar-one-vote system, and of course those with the most dollars to begin with ended up deciding that they should be the primary beneficiaries from this experiment. Namely, them. Wall Street's share of profits jumped from around 16% to around 40% of all profits in the economy.

The "markets" experiment has failed for the rest of us. It is time for We, the People to realize that our government is us, and we need it to make decisions for us. Markets mean one-dollar-one-vote. When dollars decide those with the most dollars will decide to do things that benefit them. Democracy means one-person-one-vote, and that means making decisions that benefit We, the People. Our government - We, the People - must start deciding things that work for We, the People and not those who already have the most of everything. That means developing an industrial policy that invests in We, the People to pull us out of the mess that one-dollar-one-vote has put us in.

Germany's Economy Shows Government "Interference" Works

Dave Johnson — Wed, 15 Dec 2010 15:40:28 -0500

Can we compete with China's wages? Does government interference and regulation hold us back? Are our unions keeping us from being competitive? Do we need to lower our standard of living in a race to the bottom? You might be surprised to learn that Germany pays higher wages, has strong unions, has much more government involvement and is doing better as a result. Conclusion: our wages, unions and government are not the problem, they are the solution.

In July I wrote about something Harold Meyerson wrote about Germany and China and manufacturing and recession.

Germany is NOT a low-wage country. But they weathered the recession. They value manufacturing and have national policies to bolster their manufacturers.

Today I want to write about something Harold Meyerson wrote about Germany and manufacturing and the recession. In Save the economy by keeping jobs at home, Meyerson writes,

Hourly manufacturing compensation (wages plus benefits) was $48 in Germany in 2008 - the most recent year surveyed by the Bureau of Labor Statistics - while it was $32 in the United States. Yet Germany is an export giant, while we are the colossus of imports.

Please go read Meyerson's entire piece.

In Germany, workers also get six weeks vacation - by law, federally mandated, a right. They get health care, university, child care and pensions and as a result they have higher productivity. In Germany, the government requires worker representatives to hold seats on the boards of directors of companies, depending on the number of workers. Government-funded research and vocational training, and policies to retain skilled workers bring another competitive advantage. Germany values manufacturing and the government has an industrial policy. The government is currently helping promote green manufacturing, for example.

The result of all this government interference is that Germany's export-oriented manufacturing economy recovered from the recession and is doing OK, and their workers are paid well and have great benefits.

Socialism?

Our government is supposed to be of, by and for the people. But today in the U.S. it is considered "socialistic" to talk about these things because it violates the dominant conservative "free market" ideology that is designed to enrich a few at the expense of the rest of us. If we try to talk about a national industrial/economic policy, it is derided with such slogans as "government interference" or "picking winners and losers." If the discussion is allowed it very quickly will move to the dominance of fossil fuels and the other industries that are holding us back but have a lock on influence over the government. If we talk about taking the burden of health care off of the people and businesses, the giant insurance companies beat it back, calling it "socialized medicine," to keep us from doing something about how their profits are draining the rest of the economy. And imagine the furor that would result if anyone even suggested mandating worker representatives on boards of directors so the companies take the interests of workers and communities into account!

Our adherence to conservative free-market ideology is clearly holding our country back. The ideology is designed to transfer wealth from the public to a very few, and hold the lead of the already-dominant. This is killing market innovation and it is destroying our competitiveness and standard of living. We should be looking at what works for the country instead of what keeps the few at the top at the top.

Just Who Is Interfering With Our System?

We need to develop a national economic/industrial policy to help us with our competitive position relative to the rest of the world. We need Medicare-For-All to lower the burden on our people and companies. We need to reorient our labor policies to bring better wages and benefits to our people. We need to restore a level playing field on which innovative smaller companies can complete with the giants—who are interfering with the system while complaining that the attempts by We, the People to stop them are interfering with our system.

Later we can talk about whether China's government interferes with its businesses, and how their economic growth is doing compared to ours.

Jobs: It's BOLD PLAN Time

Dave Johnson — Fri, 05 Nov 2010 12:39:19 -0400

Today's jobs report showed that the economy added 151,000 jobs in October, the biggest rise since May. The 159,000 increase in private sector employment was the second-largest monthly rise of the "recovery." The official unemployment rate stayed at 9.6 percent. NY Times: U.S. Added Jobs Last Month for First Time Since May,

On many levels, the October report was much stronger than expected. Forecasters had been expecting a gain of only 60,000 jobs. The report also revised the numbers for August and September, showing 110,000 fewer jobs losses than previously estimated. Hourly wages were slightly higher, too.

... A broader measure of unemployment, which includes people who are working part-time because they cannot find full-time jobs and people who have given up looking for work, ticked down slightly to 17 percent from 17.1 percent in September.

This might seem like good news -- until you think about it. We are so used to really bad news that new that just sort of OK sounds great. Dean Baker, writing at the Center for Economic and Policy Research,

At this rate it would take more than 15 years to make up the job shortfall from the downturn, but at least the economy is moving in the right direction.

Meanwhile, the Federal Reserve this week announced "quantitative easing," through which they will pump another $600 billion into the economy by purchasing US treasury bills, also known as "printing money." I guess the idea is to top off and overflow the coffers of the already-wealthy, thereby forcing up the price of stocks and other assets held by the already-wealthy, while keeping interest rates low on the savings of working and retired people. At the same time conservatives in Congress are demanding further extensions of tax cuts for the rich, which did so well stimulating jobs up to now. The thinking seems to be that at some point the really, really wealthy will have so astonishingly much extra cash on hand that they will hire a few more servants, which will then stimulate purchasing of necessities by said servants, which will then drive the economy.

It's time to call out this nonsense for what it is.

We Need A Bold Plan

It is time for the President to announce a BOLD PLAN for a job-creation agenda. (Actually, it was time for him to do this a year or two ago...) Here are three badly-needed 5-year plans:
* A 5-year plan to revive American manufacturing. This is how our country and our people can make a living again.
* A 5-year plan to bring America's infrastructure into the 21st century, making our economy competitive again.
* A 5-year plan to make our homes, buildings and electric grid energy efficient to lower our energy costs and reduce our imports of oil.

These are things that we have to do anyway. We have a lot of unemployed people, and any one of these three plans will put a huge dent in unemployment. Any one of these three revives our economy. Any one of these three restores American competitiveness. ALL THREE restore us as the economy leader in the world.

And, the politics will be good because it is what is needed and good for the country and everyone knows it.

We Need To Build

Dave Johnson — Fri, 05 Nov 2010 09:43:54 -0400

Watch Chris Matthews, "We need to build!": (thanks Open Left)

And, again, Frank Sobotka:

Obama’s Export Goal: How We Can Make it

Eric Lotke — Wed, 29 Sep 2010 13:36:52 -0400

Yesterday I attended a conference on the Renaissance of American Manufacturing in Washington DC. It included a variety of organizations with interests in trade, from the US Business and Industry Council to the International Association of Machinists and the U.S.-China Economic and Security Review Commission. It was another step in our turn towards renewing the American economy, and everyone agreed on two main points: (1) President Obama’s goal of doubling exports is important, but (2) it can’t be achieved without a robust industrial policy.

Start with the problem. The United States has lost half of its manufacturing jobs since 1980, and manufacturing as a share of GDP fell by 43 percent. Roughly $600 billion leaves our country every year to buy things made somewhere else, a deficit in goods that dwarfs our $100 billion surplus in services. America needs to borrow money or sell off assets to cover the difference. The result is unsustainable.

As Majority Leader Steny Hoyer (D-Md.) put it at the conference, “If we can’t make it in America, we can’t make it in America.”

How did this happen? How did we dig a hole this deep? The answer has many layers but several themes emerged.

First, America is losing a global trade war. It’s not just that China cheats (though it does) or that it manipulates its currency (it does that too). It’s that America’s stance in trade is all wrong. America champions open markets and free trade, even as other countries seek their own advantage and play to win. We act as if more trade is always better, even as we lose on every deal (Thea Lee of the AFL-CIO: “NAFTA then CAFTA, and we get the shaft-a”). We act as if consumer spending will drive our recovery, even as more consumer spending simply means more goods imported from afar and more American money leaving the American economy. We can’t do that forever.

Second, the interests of American multi-national corporations have diverged from the interests of America. Once upon a time, what was good for General Motors was good for America. Not anymore. Nowadays, American companies that relocate to China can (a) accept Chinese subsidies for the move, (b) avoid paying US taxes on overseas operations, (c) take advantage of lower Chinese costs for labor, environmental protection and worker safety, and (d) sell the products back to Americans at American prices for American dollars. It’s a win for the corporation, the shareholders and CEO. But it’s a loss for America, the American people and the American worker. Until we recognize this divergence and the power of these large corporations over US policy, we will continue on a fatal trajectory. (Ralph Gomory, formerly of IBM, now the Sloan Foundation: “There are none so blind as those who do not want to see”).

Third, manufacturing is key to our revival. We can’t design things here and manufacture them someplace else. Innovation follows manufacturing. That’s why other countries lure away American factories for batteries (in the 1980s), semiconductors (in the 1990s) and solar cells (in the 2000s). Soon enough the next generation is invented overseas and Americans have to give their money to someone else. (Clyde Prestowitz, principal trade negotiator to Asia under Ronald Reagan: “We gave Japan computer chip technology, then they took it to the next level and sold it back to us.”).

But still something was missing. Everyone agreed with Obama that increasing exports is a good idea. “But doubling gross exports is silly,” exclaimed Leo Hindery, managing partner of Intermedia Partners and project director at the New America Foundation. “Net exports matter more.” After all, America doubled our exports in the 1990s — but we nearly tripled our imports at the same time. Making more money is good, of course — but we also need to stop the bleeding.

That led to the most important conclusion. “We need an industrial policy,” said Rep. Paterson (D-NJ). “Our problems are large but our solutions are small,” said former Senator Don Riegle (D-MI). People craved leadership and vision. Doubling exports is a worthy goal, but it will require coordination among many parts.

The individual elements were itemized, of course. Some were modest and straightforward. Change the incentives in the tax code. Enforce trade rules when other countries violate the terms. Rebuild our infrastructure, increase our investments in R&D, and race to lead the revolution in clean energy production. Other recommendations were more profound. Declare a national emergency and take emergency trade measures allowed under section 12 of GATT. Add a value added tax or across-the-board tariffs to increase the price of imports. Negotiate different trade agreements in the future, or exit the WTO altogether since mercantilist countries use the rules against us but violate them themselves. Several speakers proposed a Secretary of Manufacturing or US Development Board, with Vice President as Chair and myriad agencies represented, tasked with looking globally at our needs and coordinating our response.

We can pick which of those to do first, or do several together. And we should certainly work to double our exports. But if we don’t craft an industrial policy or link the pieces with a strategic vision, it’s likely to fall apart all over again. As Governor Jennifer Granholm of Michigan closed her presentation, we can “come to the table and feast … or be an item on the menu as our economic competitors forge ahead.”

I vote for the feast.

Obama Jobs Plan Needs Industrial Policy

Dave Johnson — Wed, 08 Sep 2010 15:00:38 -0400

Speaking in Ohio today President Obama described his new jobs and economic programs. (Full text here.)

The two major pieces of Mr. Obama’s package — expanding and making permanent a popular credit for businesses’ research and experimentation expenses, and allowing them to write off the full value of new equipment purchases immediately in 2011, have longstanding Republican and corporate support.

From the text of today's speech,

I’m proposing a more generous, permanent extension of the tax credit that goes to companies for all the research and innovation they do right here in America. And I’m proposing that all American businesses should be allowed to write off all the investment they do in 2011. This will help small businesses upgrade their plants and equipment, and will encourage large corporations to get off the sidelines and start putting their profits to work in places like Cleveland and Toledo and Dayton.

These are in addition to the $50 billion infrastructure proposal the President unveiled on Labor Day. Eric Lotke has more on that in Obama’s Infrastructure Proposal: A Step Forward.

The infrastructure proposal, the R&D tax break and the accelerated capital investment write-offs are a positive approach as the stimulus winds down, but are not enough. Tax breaks might trigger a bit of activity but really, businesses want customers -- especially smaller businesses that are not profitable enough to take advantage of tax breaks. And compared to actually investing in infrastructure tax breaks are spending that just leaves behind debt.

What about an industrial policy that will empower workers, keep jobs in this country, and not be blanket tax cuts for millionaires? This is what has been lacking in this country for decades. Other countries have industrial policies, and follow long-term strategies to bring industries to them. They line all the ducks up, from education policies to local infrastructure, to supply chains, to regulatory environments to trade strategies, and use those as a package to lure the entire industry. We don't, and that's why we are losing out.

Dude, Where’s My Industrial Policy?

China - Industrial Policy, Not Just Currency

Dave Johnson — Mon, 21 Jun 2010 14:23:47 -0400

America needs an economic/industrial policy like other countries have. THAT is how we will pay off our debt -- by earning money.

You may have read about the back-and-forth on Chinese currency this weekend. China said they would let their exchange rate adjust, and then pulled the football away. The deal is that China manipulates its currency to keep undervalued, which makes Chinese good cost less than they otherwise would on the world market. So they end getting the manufacturing business (and jobs and supply chain and R&D and ...) In fact it looks like next year China will replace the US as the #1 manufacturer.

But it is not just cheating on currency that is the problem. Today's news brings a reminder of another reason it costs less to make things in China: 47 killed when explosion rips through China mine,

The blast hit a mine in Pingdingshan city in the province of Henan, the State Administration of Work Safety said. Seventy-five miners were trapped initially but 28 escaped, the central government said on its website.

This is not an uncommon headline. We see headlines like this from China all the time. More than 2,600 miners were killed just last year.

When life is that cheap you can charge less for things.

We all know about the environmental problems in China, another reason things made there cost less. It is so bad that there are "cancer villages" near polluting factories.

Here is a list of the main unfair advantages China uses to its advantage:

1) Currency manipulation. China "pegs" its currency at a very low, or "weak" rate, so goods from China cost up to 40% less than they otherwise should.
2) Labor-rights suppression has lowered manufacturing wages of Chinese workers by 47% to 86%.
3) There is massive direct government subsidization of export production in many key industries.
4) China allows environmental degradation that ends up affecting all of us.
5) Intellectual property theft and piracy mean that American products that could be sold are stolen instead.
6) China has a number of policies that block U.S. firms from market access.

All of these things that China is doing are collectively called a national industrial policy. China has one. We don't. China's share of the world's business has grown exponentially because they have and follow a national industrial policy. Ours has declined dramatically because we don't. I'm trying to drop a hint here, but for those in Washington who aren't following let me spell it out more clearly: America needs to develop and follow a national industrial policy.

Other countries are aggressively pursuing industrial policies. Germany is going to try to export its way out of their "austerity" posture. So is Japan. Where will we land when they do?

We don't have to cheat, but we have to protect our interests when others cheat. And we do need to start being strategic. For example, China's stimulus package was strategic and is paying off. They are getting wind turbine and high-speed rail business around the world now, and we aren't.

From a year ago: China's Stimulus Package: A Breakdown of Spending:

Compare the chart above to how we used our smaller (China spent 14% of 2008 GDP, US about 6%) stimulus package. The first chart of our plan from the stimulus bill (as proposed) provides detail. The second chart from Think Progress shows major categories.

China focused on investment in public infrastructure, which leads to future economic growth. We are mired in conservative ideology so we focused on tax cuts, which do little more than increase our debt.

Quick lessons on strategy:

- China spent serious money, quickly. It worked.
- China focused on infrastructure. It worked.
- China has a national economic/manufacturing strategy and invests in R&D and developing strategically important industries. We don't.
- Don't cut taxes, it only causes massive yearly deficits and accumulated debt.

Not having a clear forward-looking policy is hurting us. But this isn’t really accurate, because even if we don’t have a policy we have one, because it IS a policy not to have one. A vacuum is a policy. So current American policy appears to be:

Send manufacturing plants to other countries that do have proactive industrial policies.

Send manufacturing jobs to other countries that do have proactive industrial policies.

Send manufacturing technology to other countries that do have proactive industrial policies.

Send the manufacturing supply chain – parts, suppliers, designers, etc. – to other countries that do have proactive industrial policies.

Buy what other countries make, even if it is made by people who are exploited or by using processes that pollute.

Etc.

Face it, if we do not have an active and engaged industrial policy we are handing the business over to those who do. And they do. And we are. Meanwhile there are interests who benefit from this (lack of) policy and fight to keep it as it is. It is time to overcome the ideological "free market" and anti-government ideology and do what we need to do to compete in the world.

(This post originated at Open Left.)