Robert Borosage
By Robert L Borosage
Co-Director Campaign for America’s Future
Washington’s special genius is for gridlock. As we’re seeing in the health care debate, the entire system is designed to frustrate action — even when Democrats have a popular president, 60 votes in the Senate and a large majority in the House. Moneyed interests trump party loyalty. Partisan politics trumps national purpose. Congressional rules and egos favor dithering and delay.
So on health care, Republicans have lurched into partisan opposition, hoping that obstructing change will lead to Obama’s “Waterloo,” and they can replay 1994 and take back the Congress. Blue dog Democrats remain lap dogs for special interests, blind to the fury that they will face if reform fails.
But at least on health care, the administration is leading the charge. We haven’t even begun an adult conversation about the fundamental question of America’s global economic strategy. What is the economy we will build out of the ashes of the old?
Obama has raised the subject. He understands that we can’t go back to the old economy — and shouldn’t want to. We can’t go back to borrowing $2 billion a day, largely from the Chinese, to serve as consumer to the world. We can’t go back to an economy in which finance captures 45% of the nation’s profits. We can’t keep shipping good jobs, technology, and manufacturing capacity abroad and expect to sustain a broad middle class at home. We’ve got to start making it in America again. As Obama has declared, “The fight for American manufacturing is the fight for America’s future.”
As Louis Uchitelle in the New York Times reports, the United States now ranks behind every industrial nation except France in the percentage of overall economic activity devoted to manufacturing. We’ve been shedding manufacturing jobs for years, and the recession has been brutal, with nearly two million industrial jobs disappearing since it began.
But we haven’t even begun a serious conversation about what it would take to revive manufacturing in a global economy. The president’s trade representative, Ron Kirk, seems clueless, intent on passing free trade agreements with Panama, Columbia and South Korea that are but tribute to the old unsustainable ways. The president calls sensibly for investment in education and training, in 21st century infrastructure, in research and development — but his budgets project reducing domestic expenditures to levels lower as a percentage of GDP than the early 1960s. And conservatives in both parties say that isn’t low enough.
Obama has suggested that America must lead in the green industries that surely will grow in the future — new energy, more efficient appliances, more sophisticated building efficiencies — and the supply chains associated with windmills, solar cells, batteries, fast trains, electric cars and more. Yet, Obama opposed the weak “buy America” provision put into the stimulus bill. His energy bill contained no serious effort at insuring that these products would be built here. Amendments designed to help manufacturers here were introduced into the bill in the dead of night because the administration needed the votes of industrial state Democrats to pass it. And because Ohio Senator Sherrod Brown and the Apollo Alliance had put together elements of a new energy industrial policy that House members could elbow into the legislation.
Contrast that with China. China has determined that new energy will be one of its strategic industries. It is now the largest manufacturer of solar panels — exporting 95% of its production, largely to Europe and the U.S.
While Obama felt it necessary to distance himself from the “buy America” provisions put in the stimulus bill, China has no such compunctions. As the Times reports, “when China authorized its first solar power plant this spring, it required that at least 80 percent of the equipment be made in China. When the Chinese government took bids this spring for 25 large contracts to supply wind turbines, every contract was won by one of seven domestic companies. All six multinationals that submitted bids were disqualified on various technical grounds, like not providing sufficiently detailed data.”
The European companies weren’t exactly foreigners. They had built turbine factories in China to meet the government’s requirement that the turbines contain 70 percent local content. But having no doubt benefited from that transfer of technology and engineering experience, the Chinese contracted with home-grown companies, rejecting the bids of the Chinese-based European companies while approving those of Chinese companies that had never built a turbine before. European wind turbine makers have now stopped bidding on Chinese contracts, concluding that their bids had no chance.
China is intent on dominating the new energy markets of the future. If its past practices are any indication, it will subsidize exports, manipulate its currency, buy China at home, force multinationals to transfer technology and partner with Chinese companies, and engage in industrial piracy to make its way.
If the U.S. wants new energy to be the centerpiece of a new economy in which — in the president’s words, the U.S. “consumes less and produces more,” then it will have to have an industrial strategy. It doesn’t have to mimic the Chinese, but it has to respond to them, rather than invoking old shibboleths about “free trade,” and ignoring the reality of the world marketplace.
A new book issued by the Alliance for American Manufacturing with the ungainly title of Manufacturing for a Better Future for America shows how China is not alone, detailing the practices that our trading partners use to sustain their industrial capacity and export markets.
A new global strategy is essential. But getting there won’t be easy. Just as the insurance companies impede sensible reforms in health care, and big oil and coal block vital changes in energy, and Wall Street guts vital reform of finance, global corporations and banks will spend a lot of money to defend the unsustainable trade policies of the old economy.
This can lead to cynical resignation or to fury. But one thing is clear. Little will get done until Americans show politicians that while the lobbies can pay for their campaigns and provide employment in retirement, they can’t defend them against the justified anger of a citizenry no longer willing to put up with gridlock.
Fig. 1 Our trade policies are tipped in favor of imports and against domestic industry.
