PrintJuly 10, 2010
The Reindustrialization of America
Consumer spending drives 70 percent of the American economy. In such an economy, the individual must spend continually and lustily lest the economy fall into recession.
But what's good for the economy isn't necessarily good for the individual. Right now the individual sees a 10 percent unemployment rate and fears he may be the next to be laid off. So he begins to save his money, reining in his spending. And as consumption ebbs, businesses fail, unemployment rises.
The conflict between the interests of the individual and the interests of the economy is not an indication of some fundamental flaw in capitalism, but of a need for rebalance: Things have gotten out of whack. Too much of the economy is made up of products and services that simply aren't essential. When hard times come, such enterprises are especially vulnerable to going out of business. Folks discover that their town, like mine, really doesn't need stores like Saks Fifth Avenue, Gucci, and The Sharper Image.
In a recession, the individual learns that there are countless ways to economize. One can "brown bag" lunch, cut out the premium movie channels on cable/satellite TV, and on and on. Why buy books when they're available for free at public libraries? Such cutbacks in spending create a downward spiral that feeds on itself, weeding out non-essential enterprises.
Since the 1950s, the character of the American economy has changed dramatically. We used to make what we consumed; now we import it. We made our own electronics, and our own apparel, and in the Fifties we manufactured nearly all of our cars. But now instead of making cars, we make lattes. And, irony of ironies, if one is in the market for a wallet in which to put one's American dollar bills, one will discover that the wallets carried at the department stores are all made in India and China.
Essential industries, along with their jobs, have been off-shored, while the non-essential has stayed home. By not producing the essential, America is made vulnerable.
So why has so much of America's industrial base been exported overseas?
We all know the answer: Even though finished goods as well as raw materials must be shipped at considerable expense across vast oceans to land on America's store shelves, it beats paying the high price of American labor to make products here. The biggest expense for many businesses is personnel. And in the cost of employees, America can't compete. Or won't.
But America's unemployment rate is unacceptably high, and the feds say jobs aren't coming back soon. So maybe it's time to "repatriate" those industries that were off-shored years ago, along with their jobs. Let's start making stuff again.
Unfortunately, there are enormous roadblocks to bringing industries home. The cost to employers of ObamaCare is just the latest disincentive to reindustrializing America. If the Japanese carry through with their plan to cut corporate tax rates, America will have the highest corporate tax rates of any major economy. The Daily Caller reports:
But with a corporate tax rate of 39.2 percent (when combining state and federal taxes), the United States would find itself taxing businesses more than any of the other nations in the organization. Economists say that high corporate tax rates will do little but drive business and investment out of the United States."You will see companies begin to expand abroad rather than here in the United States because the business environment here is not conducive to the growth of their company," said Scott Hodge, president of the Tax Foundation, a think tank in Washington DC. "By keeping our corporate tax rate so high, we're creating an economic Berlin Wall around the United States."
And then there are all the government mandates and regulations that have made America an unattractive place to do business. But even if government did all the right things to bring industry home, there would still be another formidable roadblock: the individual.
The American worker more and more resembles his European brother; he expects high pay and generous benefits for very little work. And now America has entered a new stage of European-style unemployment. So the American worker must ask himself what he is willing to give up so that he can have the dignity and security of a job.
But even if the American worker were willing to give up higher wages for a job, the current regime is unwilling to give up its plans for a worker's paradise. There are no plans to end federal mandates, relax regulations and slash corporate tax rates, just the opposite. And as for repealing ObamaCare, Obama recently said: "We're not going back. I refuse to go back."
So the reindustrialization of America, along with the jobs, remains on the distant horizon. Vice President Biden recently said: "there's no possibility to restore 8 million jobs lost in the Great Recession."
That's probably true if the government refuses to do what it must to attract business. What's good for government isn't necessarily good for the individual.
The only way America can be great while being post-industrial is if we're the brains of the world's economy. That is, we have all the ideas and invent everything. But we have no monopoly on brains. Indeed, due to our lousy K-12 public education industry, we must import brains. And our idled workforce is losing its skills.
It's appalling to discover that the berets for one of our elite military units were to be manufactured abroad. When China contracts to build our Nimitz-class aircraft carriers for us, it'll be a good time to learn Mandarin.
The longer America postpones her reindustrialization, the weaker she'll become.
A nation of burger flippers cannot stand.
Jon N. Hall is a programmer/analyst from Kansas City.
