Tuesday, July 9, 2013

Cheap Labor Only, Please

Manufacturing and trade news do not get much coverage in our mainstream press. Japanese obsess over trade data, as do the Chinese, Koreans, and most others who take manufacturing seriously. This is obvious from reading any of the mainstream and  business-oriented newspapers overseas.

Ours? The focus is more on Wall Street, corporate profits, and finance. Our corporate media does not want to spend much time on the implications of large, chronic, and structural trade deficits, except for the predictable paeans to free trade, how much we benefit, and how boorishly stupid you are if you are not a committed free trader. Honest analyses of how we arrived at our current condition are rare; most commentary is ideologically driven tripe that contends workers are overpaid and investors need more profits. 

To be sure, we have all read of the decline of American manufacturing. And for those who are determined to know, many websites and blogs, especially those hosted by academics, cover these subjects very well. But while complaints about Chinese currency manipulation and the hazards of doing business in China do get coverage, little is said in the mainstream media about the role of American corporations and how they turned over technology and manufacturing to China and other trade competitors, all in an effort to tap cheap labor, ignore the challenges and capital requirements of advanced manufacturing, boost short-term profits, and please the investor class.

As Chinese wages continue to climb, we are now seeing some evidence of a pick-up in US manufacturing. But a central conundrum remains: Should it be a matter of policy to promote the return of manufacturing to the US? Or is the market going to resolve domestic manufacturing, and perhaps give a boost to exports, without policy intervention?

It is hard to get enthusiastic about an improving manufacturing sector, especially in the face of new data. I once would have welcomed it more openly, but it is becoming increasingly clear that a global economy or neo-mercantilist trading partners are only secondary reasons. In other words, less blame should be attributed to cheap labor in China and more to the desire for cheap labor in the US. The current condition of the US, complete with massive trade and current account deficits, is the direct result of wealthy and well-connected purveyors of neo-liberal free markets. It is they who have hobbled government's essential regulatory role (derivatives anyone?) and facilitated the dominance of finance and the rentier class.

So there is little reason to think that newly created manufacturing jobs are going to pay very well. Neo-liberal policy wonks, along with right-wing politicians, have had a 30+ year run promoting ideas, policies, and legislation that has weakened labor unions, kept minimum wages low, undermined workers' rights and put into place an elaborate tax code that ensures that corporations will largely avoid taxes. All of that in addition to the glories of free and unfettered international trade.

All of which was always the goal. To the extent that corporations locate or relocate manufacturing in the US, it will only be in response to low wages, obscene tax giveaways from states, the absence of unions, and elaborate agreements with government officials that ensure corporations will continue to privatize the benefits and socialize that costs. If manufacturing does meaningfully increase in the US, it will only be because wages have been driven down. If wages go up, even in accordance with productivity gains, corporations will threaten to off-shore production once again.

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