Bailouts and subsidies are bad policy.
Yes, bailouts and subsidies are bad policy, but the basic fact is that we are outsourcing the guts of an advanced nation to overseas competitors because of blind adherence to dogma of free trade where the rules and circumstances are fundamentally against the US worker and growingly, the US professional.
We have a trillion-dollar trade deficit and mass unemployment within the lower-skilled US population largely because foreigners and illegals can out-compete us on labor cost, freedom from environmental, legal, health care costs.
We lost our lead in 18 of 20 industries we used to dominate, and 16 of the 25 major technological areas (we never had a lead in 3 technologies) not because the American citizen suddenly got stupid and uncompetitive – but because we had built a better life and employment compensation structure than most.
(and for most of our history, with barriers that allowed us to develop industries and skills that would have never come to us if we had had “fair competition” with established European and to a lesser extent Asian competitors)
And the way we get competitive again is to either change the circumstances and rules rigged against us that kill us on “unfettered” free trade – or we get there by “levellizing” the citizen’s compensation to match overseas competitors who have similar intelligence and ability to do jobs at all skill levels. Levellized means the Chinese and Indian worker and professional average hourly compensation goes from 5.50 to 9 bucks, and the average American compensation goes from 28 bucks down to 11.50 to 12 an hour (outside the investor class and those protected by jobs that skirt “unfettered free trade” by requiring US citizenship (government jobs, security, lawyers) to make their particular “product”.
It is important to get past delusions:
1. Slogans like “the American worker can out produce and out-compete anyone” have proven false unless you exclude cost per unit of work produced in most US jobs. Which in the real world, no one does.
2. Suggesting that “education, more teachers, and retraining” will make us competitive again ignores many 3rd World nations have cheaper and equally, if not more succesful education systems cranking out workers….and the American edge is only in a small, high-end of elite jobs.
3. The “miracle cure” approach is no longer credible. Suggesting that miracle new High Technology will take care of American needs with new exciting “nanotech, green energy solutions” is about as realistic as saying we secured our future by great jobs that stayed in America from past “technology miracles” like electronics, Computer compenents, software programming, telecomm factories making fiber optics & cell phones. All that went overseas, for the most part.
At an investor summit, I heard from VC leaders asked about nanotech, “green energy”, and “unequalled American creativity” being a solution for all the jobs disappearing due to free trade.
A. Nanotech will be built in Japan, Korea, German-run plants in E Europe, China – without
the exercise of opening then closing factories in the US. Which were largely a bad historical investment play as investor losses for cell phones, chips, computer compenents, and flat screen components US manufacturing happened as soon as technology could migrate and cheaper product obtained outside America.
B. We don’t even lead in “green energy technology”. And the countries that do, have largely outsourced the environmentally unfriendly manufacturing of things like batteries, solar cells to 3rd world ratholes – and only diminished their fossil fuel use by moving energy-intensive basic material goods manufacture (common chemicals, cement, steel, aluminum) to developing countries not ashamed to use more coal.
C. To the extent that America had “unparalleled creativity value” that value was mostly captured in US production companies in the past. Most creativity is not protectable as intellectual property, is stolen by countries that ignore our laws that we wish to not antagonize because Ruling Elites see other benefits with them worth more than pushing IP, or it is given away as a condition of a country like China allowing wealthy owners to get a nice cut of the production and export action ..
D. The VC people said great creativity only benefits a small circle – it does not translate generally into significant benefits for the masses – unless a creative entrepreneur gets in early on a technology and manages to erect barriers to entry to freeze out other American competitors and foreign ones (Gates, JD Rockefeller).
One VC lady from McKinsey Associates gave an example of both the vitality of creativity and the mistake of thinking it translates into “a rising tide that lifts all boats”.
In the 60s and 70s, the Italians revolutionized fashion, industrial design, art – in a wave of tremendous creativity. It made many “creators” wealthy, but did little to nothing for the average Italian worker – who were legion while the “creative element” was tiny in comparison.
In the US, the longer innovation and creativity were kept “in house” – the greater the benefit to Americans of it. But now, like capital and technology, creativity and innovation are fungible – what the Italians did was lost to foreign firms using their own workers – who expressed in products the US, Japan, Brazil managed to mass produce in the 60s and 70s with almost no benefit of the “value” of Brazilian shoes, Italian-style suits made in North Carolina (in the pre-China textile dominace days), or Japanese cars with 100 Italian-inspired creative, innovative elements thrown in to sticker price. The Italians got a penny to a dollar or less, of the value of it’s creativity and innovation, realized elsewhere.
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My own read is that 1 trillion trade deficits are untenable.
That we must preserve basic US industries and retain semi-skilled jobs for those that will never get PhDs in “RNA-directed protein-folding as applied in a nanotech matrix.” so we start with some knowledge base and skills to resume building cars, electronic devices, our own cloths – again. Rather than face a future where we cannot compete because we have no ideas or means to make the stuff we used to make that Americans will always need..
That unfettered free trade has killed us and since we do not want a catastrophic drop in out standard of living by levelizing wages so Americans can compete against 2 billion excess people capable of good work elsewhere, and we don’t want to end environmental laws or end health care for workers or see 2 million surplus N Koreans applying for police jobs in the USA at a tenth of native’s cost – we need strongly modified, somewhat protectionist rules established for trade, who produces what we buy in our market, and no flood of people into the US or by outsourcing even service sector and white collar jobs – to wreck labor markets. Most Americans are not owners of companies or distribution channels that reap most of the benefit of “free trade, outsourcing, illegal workers”. Or in professions that have “rules” against competitors from foreign lands “eating their lunch” like teachers, lawyers, America’s “security heroes who protect us all..”.
