Sunday, September 11, 2011

Prejudice is Rampant Among US Elites

Yves Smith of the Naked Capitalist blog has been writing posts on the decline of manufacturing in America. They are all worth reading. Here is a bit from one post:
Why do those at the top of the food chain not like manufacturing? Let us count the reasons. It’s physical. Plants are located where land is cheap. That usually means in the boonies. Powerful people do not hang out in the boonies. Production facilities are noisy, and often dirty and dangerous (my father knew people who were killed or had limbs ripped off in paper mills). Most of the employees are blue collar workers, while to get in the door at McKinsey, you had to be smart and well educated (even the secretarial jobs required high caliber types).

Some readers may react viscerally to the idea of having what amounts to industrial policy. Wake up and smell the coffee, we have it now, by default. As we have discussed, the financial services industry is so heavily subsidized as to not be credibly called private enterprise, save for its governance and compensation structures. Arms merchants benefit not only from government funded research and development, but also from the very long product lives assured by government contracts. Look at the subsidies big Pharma enjoys (and consider: the NIH is the biggest but far from the only source of government R&D dollars. The other big players are National Science Foundation, the National Aeronautics and Space Administration, the Environmental Protection Agency, the Veterans Administration, and other units in the Departments of Energy, Commerce, Defense, and Health and Human Services).


There are no easy solutions to over 20 years of abandoning manufacturing to pursue a “knowledge economy” when there was no reason to treat this as an either/or decision. But misdiagnosis, via blaming the foot soldiers for the failings of the generals, is certain to keep the US from coming up with better courses of action.
I remember in the early 1980s reading how Nixon in the early 1970s had essentially given the US television manufacturing industry to Japan in exchange for Japanese "support" on some political issue. I don't know whether that story is true, but in essence the idea is true. The political leadership has treated manufacturing as a "chip" to be played on the world stage and allowed the US to de-industrialize. It was, and continues to be, a huge mistake. The geeks and the suits make like the idea that the future economy is in office buildings, but you can't eat, sleep in, drive with, etc. the stuff coming out of office buildings. I worked in high tech. We built computer-based systems, but 90% of the value was in the software, stuff done in offices. So I appreciate office work. But I realize it is a horrible mistake to think you can run a modern economy with no industrial base. Sadly, it doesn't appear that the elite or their political poodles recognize that fact.

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