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Keep It Made in America: Our Future Depends On It
The pundits and politicians inside the Washington Beltway don’t get: If the United States continues to send its manufacturing jobs overseas—as General Motors and Chrysler are now proposing—the result will be more low-income U.S. families.
So today, workers, economists, academics and business and union leaders, fresh from the “Keep It Made in America” bus tour through the nation’s heartland, brought that message to the policymakers’ doorstep as part of a teach-in on Capitol Hill.
The 11-day, 34-city bus tour showcased the ripple effect on communities of the lost jobs in manufacturing. (See video.) Today, during the teach-in, those who took part brought the stories they heard along the tour and presented principles for revitalizing the auto industry to members of Congress and the press.
(You can support the 7.2 million people whose jobs depend on the auto industry by joining the Campaign for America’s Future action to bring back American manufacturing by pledging to buy fuel-efficient, union-built American cars here. You also can sign the Keep It Made in America petition urging Congress and the administration to ensure that auto industry restructuring plans preserve and enhance the manufacture of automobiles in America here.)
The auto industry is tied to 7.2 million jobs. Losing the industry would affect not only autoworkers in Detroit and workers in auto supply industries and car dealerships. It would cause restaurants that serve the factory workers to shut down, force retailers out of business, mean workers’ children could not attend college and rip the social fabric of this country, speakers warned. Municipal tax bases will plummet and firefighters, police and hospital workers will lose their jobs, making our cities and towns less safe.
From Tennessee to Texas, Michigan and Ohio, hardworking folks said they want to see family-supporting jobs stay in America. “They want their shot at the American Dream,” United Steelworkers (USW) President Leo Gerard told the teach-in:
They are counting on our leaders in Washington to fight for them, to recognize there’s much more at stake than profits. The auto sector is fundamental to America’s manufacturing strength. It’s about saving the jobs that made America great.
Speaking at the teach-in, radio and TV host Ed Schulz says the national media doesn’t understand that “the social fabric of America is being ripped apart” and that it may require something akin to the civil rights movement of the 1960s to get their attention.
Laid-off steelworker Doug May from Edwardsville, Ill., put it in these stark terms:
As a USW member, I sent three children through college. I feel sorry for some of the younger families. They won’t have opportunities if the manufacturing base fails. How are we going to compete if we can’t send our kids to college?
If the mill closes, it will be an ugly scene [leading to] an increase in alcoholism, divorces. If pensioners are cut off, it could create an economic tsunami.
In a column today on Huffington Post, Gerard tells the stories of four steelworkers whose lives have been turned upside down by the closure of the plants where they worked.
Through no fault of their own, they’ve lost their jobs, their homes, their health care. These are the people who are the strength of America, who in better times volunteered in New York City after 9-11 and in New Orleans after Katrina. Now, they’re forced to get groceries at their union hall’s food bank. They’re humiliated.
Click here to read the entire column.
The biggest culprit in the decline of U.S. manufacturing is the “blind rush to free trade,” Gerard said. The result has been a $6.5 trillion trade deficit that must be serviced by sending $400 billion-$500 billion offshore every year—or by selling off our assets.
We can’t compete with that. If we can’t make things in America, we’re going to put ourselves in a spot where everyone is making $1.50 an hour with no health care, no pension and no one will be able to buy anything.
When manufacturing jobs leave, the service jobs that replace them do not measure up in terms of creating additional jobs or raising the standard of living, said USW economist Lisa Jordan. The 10 fastest growing jobs in the country are poverty-level service jobs, unless the worker belongs to a union, she said.
There is a fundamental mismatch—sending good jobs overseas and leaving the poor jobs here. It’s not just whether [laid-off manufacturing workers] can find jobs. It’s what kind of jobs we have.
The decision to send auto jobs overseas is not about cost, said Susan Helper, an economics professor at Case Western Reserve University. A Japanese car costs about the same to make as an American car and they sell for more. Labor costs only contribute 10 percent to the cost of an American car, she said.
Mayor Vince Bernero in Lansing, Mich., likened the current manufacturing crisis to a war, noting we understand what it means for the country to be in physical danger and how to react. But when it comes to the economic danger created by the unfair trade practices in the global economy, we don’t react.
Our response to free trade is unilateral surrender. We would never do that in a physical war; why do it in an economic war?
As UAW President Ron Gettelfinger told the Capitol Hill crowd:
Everybody’s talking about economic stimulus. A good-paying job is the best stimulus we can have.
To rebuild our manufacturing base, the co-sponsors of the “Keep It Made in America” tour—the USW, the Alliance for American Manufacturing (AAM) and Mayors and Municipalities Coalition—are presenting Congress and the Obama administration with principles for revitalizing auto and auto parts manufacturing and driving economic activity beyond the assembly floor:
- Stimulate domestic demand for automobiles. For example, the government could create an incentive program like cash-for-clunkers with a strong domestic content requirement and restore credit for consumers and businesses.
- Spend tax dollars to support domestic jobs, investment and innovation, and reject off-shoring as a path to profitability for GM and Chrysler.
- Restore cooperative innovation and development programs.
- Change health care policy to eliminate structural problems for the domestic auto industry. The Big Three automakers’ competitors benefit from national health care programs or by offering substandard benefits.
- Ensure our trade policies promotes U.S. interests by enforcing trade laws, currency mismanagement and other non-tariff barriers to fair trade in autos.
Other speakers at today’s event included the Rev. Jesse Jackson; Wilbur Ross, CEO of WL Ross and Co.; AAM Executive Director Scott Paul; and several mayors and members of Congress.
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5 Comments
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Our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the wealthiest nation on earth – its preeminent industrial power – into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It’s a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, exceeds $9.2 trillion. What will happen when those assets are depleted? Today’s recession is the answer.
Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit continues to grow. Our median wages and net worth have declined for decades. Our debt has soared.
Clearly, there is something amiss with “free trade.” The concept of free trade is rooted in Ricardo’s principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn’t consider?
At this point, I should introduce myself. I am author of a book titled “Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America.” My theory is that, as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.
This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It’s because these effects of an excessive population density – rising unemployment and poverty – are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.
One need look no further than the U.S.’s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable – nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. My point is not that our deficit with China isn’t a problem, but rather that it’s exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one fifth of the world’s population.
Ricardo’s principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.
If you‘re interested in learning more about this important new economic theory, then I invite you to visit either of my web sites at OpenWindowPublishingCo.com or PeteMurphy.wordpress.com where you can read the preface, join in the blog discussion and, of course, buy the book if you like. (It’s also available at Amazon.com.)
Please forgive me for the somewhat spammish nature of the previous paragraph, but I don’t know how else to inject this new theory into the debate about trade without drawing attention to the book that explains the theory.
Pete Murphy
Author, “Five Short Blasts”
Buy American is costing us good jobs – union and otherwise – as Canadians and others retaliate by refusing to buy American products. 95% of the world’s consumers are not Americans and the Buy American provisions the unions insist on in laws are self-defeating and violate basic reasoning and economics. Have we learned nothing form Smoot-Hawley and the great Depression.
Gary Shapiro that may be the most foolish thing I ever heard.No one is refusing to buy our products because of buy American.Many of the things that you are so concerned about are things they can get no where else and must have, and if we do not have the capability to manufacture it here what difference will it make where they get it?Our manufacturing base must be protected and we are losing it because of people like you.
Gary, “Buy ‘American” is nowhere near the Smoot-Hawley Act. I hear that thrown up so much, and I bet most people who do don’t even know what Smoot-Hawley did, put actual tariffs on a couple thousand items. I don’t hear any talk of that with “Buy American,” it’s more of an encouragement.
Gary, Smoot-Hawley (both Republicans) crafted their bill in 1930. How many foreign automobiles and appliances were in the U.S. in 1930? Virtually none! Today, its a complete reversal where virtually everything is foreign made and imported.
It doesn’t make sense buying domestically is going to weaken our economy some how. How could it, when the only thing exported is raw material and tooling from shuttered U.S. factories.