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Economics vs. The Economy – How To Win The War Against US Manufacturing

Surely you’ve heard the war drums.

In the past year – since Obama & the gubmint have seemed to get manufacturing religion – the din between two distinct camps has been rising slowly toward what could become a classic battle of ideologies.

I was just writing a post in response to Do Manufacturers Need Special Treatment? – an article from Christina Romer that ran in the NY Times, claiming that US manufacturing doesn’t need tax breaks or special considerations. Let the invisible hand and free markets handle it, she said. It is, I believe, the watershed moment of the most recent skirmish in this long war on US manufacturing that began with Hamilton and Adams when our nation was founded. Economy vs. economics. Doers vs. takers.

But I was beaten to the punch, and I’m damned glad I was. Clyde Prestowitz is a former Reagan White House adviser & as pragmatic a cat as you’ll find. Clyde understands not only economics, but the ECONOMY too – that is, what generates the beans that economists have the luxury to count. Clyde dropped two articles this morning that succinctly & thoroughly define the sides of this imminent confrontation about manufacturing in the US, and I defer to him on this matter. Simply put, Clyde rocks.

But I have something to add if you don’t mind, Clyde.

Clyde’s two articles – US Industrial Policy Neglects Manufacturing & America’s War On Manufacturing – confront the Romer piece and similar economists’ calls for ‘no policy’ with two basic, irrefutable facts:

  1. History: The US has a long, SUCCESSFUL track record of supporting industries & initiatives to promote growth and innovation. Agriculture has long been subsidized. The Military/Industrial industries. Universities. Health care. The Financial industries, including Banking & the Mortgage subsets. Airlines. Big Oil. I’d also like to add that several initiatives, including the electrification of rural America and our development of nuclear power, have been wildly successful with governmental policy support. And I find it ironic that Ms. Romer is, of all things, an economics history professor …
  2. Manufacturing Is The Step-Child Of Industrial Policy: For some reason, manufacturing & production have been neglected in favor of hands-off strategies that have resulted in the dismantling of our ability to create. According to Clyde, ” … (t)he fantasy of pristine free markets is just that — a fantasy that exists only in economists’ models. In the real world, there is inevitably massive government intervention in the economy. At the moment, American industrial policy is what emerges from the arbitrage of special interests (emphasis mine). It is incoherent, contradictory, and counterproductive.” Amen, brother.

The point I would like to add, one that I think needs to be thought long & hard about, is that we’re out numbered in the coming conflict. Listen to Clyde’s wise words, once more:

Rather than opposing industrial policy economists should be promoting one that could provide a rational framework within which the trade-offs could be made in a way that would be positive for long-term wealth creation. Manufacturing would then not be a despised orphan, but would be treated at least as kindly as banking and finance.

But that’s not likely to happen, because the economics fox is running the manufacturing hen house. It’s been that way since ’72, when Nixon dropped into China with a deal they’d have been fools not to take. We sold ’em the rope with which they would hang us. And those ‘special interests’ are primarily soldiers for the Economics army – well-educated, well-healed storm troopers that have never run a lemonade stand, and that know the cost of everything and the value of nothing. They outnumber us in the statehouses, the courts and our financial institutions.

This is a war of ideologies. We have an opportunity to force the issue, and this latest battle for the soul of US manufacturing is different –  because we’re more connected than at any time in world history. While we may not agree with some of the details of the manufacturing policies and initiatives being discussed, it’s more important for us to not let up. To keep bombing, and fight the war to win.

Our industrial – and yes, economic – might came directly from our ability to to imagine, conceptualize, build and innovate. It didn’t come from our ability to read a P&L statement or sell mortgages to gerbils. It came from our unique ability to control and manage those 4 elements through the entire value chain. We can’t let any of those things go, because they feed each other. Economists don’t know that. We do. We can help each other be better. It doesn’t have to be a zero sum game.

So let’s move beyond Clyde’s wisdom, his valuable message that would be correct for any era. Use the media. Use Social Media. Contact your representatives. Blog about it. Add this topic to your trade show programs. Don’t let up. Don’t lose this foothold.

We’re the good guys. WE are the economy, not them. The time is right to bang some drums, ourselves.

AJ Sweatt
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