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August 2012, Week 2

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Fri, 10 Aug 2012 20:27:52 -0400
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U.S. Industrial Policy Needed, But Elites in Both Parties Have No Answers

By Roger Bybee

http://www.inthesetimes.com/working/entry/13658/u.s._industrial_policy_needed_but_elites_in_both_parties_have_no_answers/

In These Times

Friday Aug 10, 2012 12:00 pm

After decoding the Sunday New York Times' opaque
front-page article on U.S. manufacturing, it becomes
clear that the stunning 32% loss in factory jobs since
2000 has finally convinced President Barack Obama and
some members of the Democratic Party elite to promote a
highly-skilled American manufacturing industry.

But further decoding suggests that these efforts are
likely to go nowhere, as Obama and his team remain
strait-jacketed by their "free trade" ideology. The
administration is unwilling to pressure U.S. CEOs
against offshoring more jobs, reluctant to discuss U.S.
firms' loss of interest in advance training for their
workers, and utterly silent about a new wave of vicious
job-slashing, wage-cutting, and benefit-vaporizing by
highly profitable firms like Caterpillar and GE.
Indeed, Obama has celebrated those two firms for their
"competitiveness."

The only alternative that Obama offers to the rapid
deterioration of America's productive base is
"insourcing" production--a supposed trend wherein
American firms bring jobs back to the United States
because of rising Chinese wages and transportation
costs. Not only is there almost no evidence of this
"trend," but Obama's strategy for accelerating
it--creating tax breaks for firms that bring work back
stateside and revoking them for offshoring firms--is far
too feeble to make a difference. (GE, for example,
hasn't paid any federal corporate taxes for years.)

The stakes of this inaction are immense: If current
trends continue, despite a mild rise in U.S.
manufacturing in recent months, America would have
virtually no productive base left within a decade or
so. We now find that our leading export to
China--despite all of America's industrial might and
advanced technology--is, incredibly, waste paper and
cardboard.

Obama's circle of advisors, while somewhat divided,
remains unwilling to push high-tech corporations--which
sell a huge share of their products in the United
States--to start producing here. As Sunday's front-page
Times article noted:

"The U.S. has a long history of demanding that
companies build here if they want to sell here, because
it jump-starts industries," said Clyde V. Prestowitz
Jr., a senior trade official in the Reagan
administration who helped negotiate with Japan in the
1980s. The government could also encourage domestic
production of technologies, including display
manufacturing and advanced semiconductor fabrication,
that would nurture new industries. "Instead, we let
those jobs go to Asia, and then the supply chains
follow, and then R&D follows, and soon it makes sense
to build everything overseas," he said. "If Apple or
Congress wanted to make the valuable parts of the
iPhone in America, it wouldn't be hard."

To contrast the high-tech situation with a positive
model of industrial policy, the Times cites the effort
to entice Japan to shift a significant share of its
auto production and auto supply chain to our shores in
the 1980s, and wonders why a similar approach cannot be
launched today. (The ferociously anti-union policies
and racist hiring practices of Japanese auto firms--both
emulating local U.S. firms and public officials--along
with their penchant for extorting billions in
"incentive" packages from America's most impoverished
states, curiously goes unexamined.)

But such an aggressive course--however seriously flawed
by its anti-unionism and racism--toward foreign
operations selling heavily in the United States is now
unthinkable, according to Obama administration
officials quoted by the Times. While the emerging
economy of Brazil managed to use a combination of
threats and incentives to persuade Apple supplier
Foxconn--widely condemned for its inhumane treatment of
Chinese workers--to begin iPhone production in Brazil, a
similar approach in the United States would be derided
as "protectionist."

Further, various "free trade" agreements" like NAFTA,
the World Trade Organization's rules, and the
Trans-Pacific Partnership now being negotiated
constrain the United States. As the Times reported,
"Taking a hard line to reduce imports of technology
goods and encourage domestic manufacturing could
violate international trade agreements and set off a
trade confrontation."

At the same time, corporations are loudly complaining
about a shortage of U.S. workers, while ignoring the
vast pools of discarded workers with high skills. "Our
labor force is too expensive and poorly educated for
today's market place," whined PIMCO private-equity fund
owner Bill Gross.

But the shortage of technically skilled workers remains
wildly overblown. The complaints serve more as a
shallow pretext for increased offshoring of U.S. jobs
and the importation of foreign workers to be exploited
at relatively low pay in exchange for H-1B visas.

And to the extent a genuine shortage exists, CEOs are
unwilling to invest in training programs or to reward
workers who gain advanced skills, warns Professor
Emeritus Frank Emspak of the University of Wisconsin's
School For Workers. A third-generation General Electric
worker for 15 years before turning to academia, Emspak
has witnessed the large-scale elimination of training
and apprenticeship programs by major corporations along
with cutbacks in publicly-funded technical education
schools.

"Training programs have been eliminated by major
corporations," he notes grimly. "Trade schools and
apprenticeships are being abolished."

At the same time, the rewards for obtaining advanced
skills are rapidly falling and the risks of undertaking
technical education to become a skilled machinist are
falling sharply due to pervasive wage cuts. "You'd have
to be crazy now to want to become a machinist," says
Emspak.

"You cannot de-link skills from the system needed to
produce skilled workers and to sustain them," Emspak
adds. "You can't separate issue of skills from
employment security."

For example, even as it announces record profits and
increases in executive pay, the Caterpillar Corporation
has forced a lengthy strike in Joliet, Ill. As the New
York Times' Steven Greenhouse recounts:

Despite earning a record $4.9 billion profit last year
and projecting even better results for 2012, the
company is insisting on a six-year wage freeze and a
pension freeze for most of the 780 production workers
at its factory here. Caterpillar says it needs to keep
its labor costs down to ensure its future
competitiveness. ...

Caterpillar ...is also demanding far higher health care
contributions from its workers, up to $1,900 a year
more, according to the union. The company had profit of
$39,000 per employee last year.

Caterpillar's vicious policy even departs sharply from
that of capitalism's pioneering theorist Adam Smith,
who argued "the wise producer" will avoid actions that
"break the bonds of common sympathy, the sense that
we're all in this together, on which the
producer's...well-being ultimately depends." Smith
further stressed the importance of decent wages: "the
high price of labor," Smith once wrote, "is the essence
of public opulence."

But "Caterpillar Capitalism" is winning out over Adam
Smith. GE has repeatedly informed labor that it views
$13 per hour as a competitive wage in manufacturing.
Toyota's goal has become $12.64 an hour, the median
wage for comparable manufacturing in Kentucky, where it
has its largest plant, or $10.79 in Alabama, where it
is building a new plant.

Given the elite consensus in both major parties in
support of offshoring jobs, withdrawing support for
training, opposing industrial policy, and tacitly
accepting wage-cutting, the future for U.S.
manufacturing looks bleak indeed.

____________________________________________

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