The Covid-19 pandemic proves that our country needs an economy defined by solidarity.
The pandemic puts a strain on the idea that our county can depend on China for manufacturing. It should also change our definition of security. In a press conference on the pandemic, New York Governor Andrew Cuomo said: “We need masks, they’re made in China; we need gowns, they’re made in China; we need face shields, they’re made in China; we need ventilators, they’re made in China…And these are all like national security issues when you’re in this situation.” In 2000, President Bill Clinton spoke highly of giving permanent normal trade relations with China: “Our administration has negotiated an agreement which will open China’s markets to American products made on American soil, everything from corn to chemicals to computers. Today the House has affirmed that agreement. We will be exporting, however, more than products. By this agreement, we will export more of our most cherished values, economic freedom.” Many of the items we could use to fight this pandemic are controlled by Chinese companies.
American companies have moved much of their production overseas to take advantage of low wages and lax environmental standards. The move takes its toll on the financial well-being of working people, their municipalities and efforts to conserve the environment we depend on. In addition, the American political caste thought that China would be happy acting as a platform for low-wage labor and the U.S. could then specialize in high-end knowledge work – the work done in places like Silicon Valley. However, the political caste was wrong, as China now aspires to enter fields such as information technology and biotechnology. This plan was flawed from another standpoint because information technology and biotechnology are not labor-intensive enough to make up for the jobs in manufacturing sector. Manufacturing has become more technology-intensive and does not require the labor it once did. It could become even less labor-intensive if companies invest more in robotics and innovative software. However, hiring cheap workers in other countries represents and easier path, leaving most of today’s workforce today employed in the service sector in areas such as restaurants and retail.
Manufacturing is important in the pandemic because we need to quickly move ventilators and masks to where they are needed. Of course, China quit shipping us those things when Covid-19 broke out. As writer Michael Lind points out on his recent story on manufacturing (“The China Question”, Tablet, May 19), the rich people who control our money-drenched political system do just fine as our manufacturing base goes overseas. They also suffer less in the pandemic.
Alexander Hamilton, America’s first Secretary of the Treasury, delivered his “Report on Manufacturers” to Congress in 1791. Hamilton did not want our country to be dependent on the factories of the United Kingdom, the world’s first industrial superpower, and thought it was best to develop our own manufacturing base. He felt that tariffs could be used to build what he called a “machine economy,” or industrial economy, but he really preferred subsides to the industrial sector. As stated by Lind, all modern economies are mixed economies that feature not only free-market economics but also government provided social insurance – unemployment insurance, age-old pensions, national health insurance, public assistance for the long-term unemployed, and disability insurance – to lift up working people in times of need. Trade policies should be mixed in nature, with nation-states and city-states protecting vital industries and engaging in free trade at the same time.
All countries should keep a manufacturing base for medicine, medical gear, aircraft, machine tools, and consumer electronics and other sectors, as Lind points out. It would save lives around the world in a pandemic. Corporations like Boeing, who benefit from government military contracts, cannot and should not claim to be, on the one hand, international companies who need to be freed from the constraints of national government in economic boomtimes and then, on the other hand, portray themselves as national champions that need a bailout in pandemics.
Lind compares a future industrial policy to arms-control deals in which each side engages in a give-and-take agreement where arms are reduced while each country maintains some control over its military spending. In a quality industrial policy, each country should be able to produce some essentials while engaging in some economic competition on essentials and even more economic competition on other items. The ideal of absolute free trade might be the cause of future wars if American companies nudge political leaders into a war with China, or any other adversary, because their factories are threatened by the politics of the nation-state where factories are located. It is hard to imagine any arms-control treaties being struck, with the size of national militaries already being reduced, in that environment!
A future industrial policy would place some controls on the manufacturing tendencies of corporate America, a key feature of a more social democratic America. The federal government could offer companies a subsidy, which Hamilton would approve of, to manufacture some essential items here. We should move money away from the bloated military-industrial complex, which manufactures unnecessary weapons, and toward items that would be useful in pandemics or in fighting or adapting to the greenhouse effect. The strategy would avoid demonizing China and other geopolitical competitors as an evil greater than Nazi Germany and would also reject racist attacks on Chinese-Americans or the Chinese people in general. This limited free trade model would allow each state in the international system a certain amount of security and for a more peaceful international order where arms-control can become a bigger part of our national-security strategy.
Jason Sibert is the Executive Director of the Peace Economy Project in St. Louis.