Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

21 May 2020

For Our Skilled Workers

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A Durable Coalition for the Dems

As an incisive op-ed in the New York Times argues, a Democratic strategy that focuses on attracting undecided “independents” would be suicidal. For starters, it’s wrong on the numbers. Yes, Trump’s 2016 margins of victory were tiny in Michigan, Pennsylvania and Wisconsin. And yes, the numbers of “swing” voters who voted for Obama in 2012 but for Trump in 2016 were larger. But much larger still were the number of voters for protest candidates and the number of Democrats and independents who didn’t even bother to register and/or vote.

Motivate them and Dems win. Fail to inspire them, and—at very best—Dems spin the roulette wheel again. We all know how that turned out last time.

People who haven’t chosen sides by now are brain-dead. Voters are either trapped inside the Fox-Trump-Twitter alternate universe of conspiracies and lies, or they are pumped to remove a sitting president, more than they have ever been in their lives. The notion that there is a significant group who just can’t make up their minds is nonsense. For Democrats it’s insane, suicidal nonsense.

Trump understands this basic truth. It’s why he’s getting even more insulting, nasty and belligerent than usual. This will be a “base” election. It’s all about which side can turn our more voters.

Quite rightly, Biden has tied up the “moderate,” ”middle of the road” voters. If he wins, he will be in charge. Now the question is what to do about the Democrats and independents who think Biden and his program don’t go far enough. Fail to motivate them and we likely will suffer another four years of Trump. Then we could lose our democracy forever.

The most important thing Biden could do before November to motivate progressives and minorities is to pick the right running mate. That means someone like Stacey Abrams, Elizabeth Warren, or a Latina: Michelle Lujan Grisham, governor of New Mexico, or Senator Catherine Cortez Masto of Nevada. So Rachel Bitecofer, the author of the must-read op-ed, writes.

But I would add a twist. To me, Elizabeth Warren would make the best president, although not the best campaigner, of anyone running as a Dem this cycle. Nevertheless, I would cut her from the running-mate list (while putting her in the Cabinet!) for three reasons.

First, minorities will make or break this election for Democrats. Their enthusiasm will be decisive. Yet many are apathetic, and many more think their votes just won’t count, literally. Without their solid support, Dems will likely lose this election.

Second, African-Americans and Latinos offer unique prospects for winning outside the upper Midwest. Dems now have shots at turning the Old South purple and the Southwest solidly blue, even including Texas. Democrats no longer have to depend on the upper Midwest to win presidential elections, if only they’d look to the future.

Third and most important, Trump’s fanatics are overwhelmingly white. That means a huge chunk of whites is irreconcilable with Democrats, no matter how “centrist” they claim to be. The future of Democrats, progressives and small-d democracy in this nation must include minorities. The time is long past when Democrats could win by baiting minorities during the campaign and then switching after winning the election.

By far the best way to enthuse them is to pick a qualified running mate from their own ranks. Nothing else could so forcefully and credibly, in a single stroke, repudiate the vile notion of white supremacy.

Then, if Dems win, they will have a solid coalition of minorities and white progressives for the foreseeable future. We won’t have to wait until 2043, when the US will be a majority-minority nation, to enjoy sensible, popular and progressive government that reflects our marvelously diverse people. If Dems drag their heels in forming that coalition, we might find ourselves in a majority-minority nation that is a democracy only in name.

1. Rebuilding our dilapidated infrastructure
2. Preserving and securing our industrial future
3. Protecting know-how

Tens of millions of skilled workers used to make and build things here. A minority still do. But millions lost their jobs to offshoring. Many of them became Trump supporters. Lots died so-called “deaths of despair.” Many more got junk jobs and became working poor.

Can America ever become great again without giving them work worthy of their skill? Can an economy of “service” workers really make a nation great? Can such a nation do more than “serve”? Can it even defend itself?

Can a nation thrive when the computers and devices it uses, the cars it drives, the planes it flies, the medical devices that save its people’s lives, and the higher technology we can’t yet imagine are all made by someone else, offshore? Don’t these questions answer themselves?

There are at least three ways to create skilled jobs onshore. They existed before the pandemic, and they’ll be there when it settles down. Trump never really tried the first and easiest. The second and third he botched by trying to make geopolitical war, rather than making smart, inward-focused industrial policy. Let’s review the strategies and the record.

1. Rebuilding our dilapidated infrastructure. Rebuilding our crumbling physical infrastructure is by far the simplest and easiest way to create good jobs for skilled workers. You can’t outsource rebuilding highways, bridges, waterworks, and air-traffic control here. They aren’t virtual and don’t “download” through the Internet.

Back in December 2016, appalled by Trump’s election, I gave him the benefit of the doubt. If he really wanted to help the skilled workers who elected him, I reasoned, the first thing he would do would be to start rebuilding our decaying national infrastructure. With interest rates at historic lows, borrowing the money would be easy.

Trump talked about doing that but never did it. At that time, our own American Society of Civil Engineers calculated that we needed to invest $2.0 trillion over ten years in repairing and upgrading our national infrastructure. But Trump did nothing of the kind. Instead, he got Congress to borrow money to give big tax cuts, mostly to high rollers and big corporations.

He borrowed $1.5 trillion for this giveaway to the rich and powerful. If he had spent that money on infrastructure, he would have gotten three-quarters of the way toward patching us up. More important, he would have provided good jobs to millions of skilled workers. Yet over three years later, Trump and his GOP have still not put a real bill on the table, although he’s started talking about infrastructure again as his poll numbers plunge.

2. Preserving and securing our industrial future. When our oligarchs traded our factories and skilled jobs to places like China and Mexico for cheap labor, they didn’t just trade away our skilled jobs. They traded away our industrial and technical future.

Science, technology and industry are a seamless web. Everything relates to everything else. You never know from what corner a key discovery or product will come, or how much it will change everything.

Microwaves used for wireless, straight-line communication ended up powering the microwave ovens in American kitchens. The fluorinated hydrocarbons used to protect metal tubes in centrifuges for enriching uranium became the teflon in non-stick frying pans. Guys up on telephone poles testing microwave receivers discovered, as “noise,” the universal background radiation that proved the Big Bang theory of the Universe’s origin. A woman working with X-rays to plot the physical shapes of organic molecules took the final step in discovering DNA. She didn’t share the Nobel Prize because she died before it was granted.

I could write a book about this, but you get the idea. If you want to excel at innovation, you can’t pick and choose among the various fields of science, technology and industry. You’ve got to be at least a player in all of them. That’s how our specialized workers handle the natural and physical world.

When China was just making hand tools and lawn furniture, it didn’t seem to matter. But as China started making—and then copying—our computer chips, computers, smart phones and Internet backbone hardware, we began to wake up. Now China may be surging ahead in 5G telecom equipment, nanotechnology, quantum computing, and even electric cars, so our worry is intense.

We are right to worry. As our manufacturing and technology thin out, so do our science and industry. Along with them go our chances of making vital innovations and of giving good jobs to workers who might make them. The web of science, technology and industrial innovation may be seamless, but our part of it is getting thin, torn and tattered.

So how do we fix it? We can’t rely on free markets because they’re what got us here in the first place. Free “entrepreneurs” going for the lowest cost and highest profit were what pushed us to trade our factories and technology overseas.

At a minimum, we need leaders whose motives and thinking are more sophisticated than getting rich quickly. We don’t have to try to re-start making hand tools and lawn furniture again, but we do need a national industrial policy.

How would such an industrial policy work? In concept, easily. Experts in technology and industry would decide what key products and technologies we must make and develop at home. Then rifle-shot tariffs could protect those products when made here, and technologies developed here, by neutralizing the wage differentials between foreign and domestic labor.

These tariffs would be similar to the “countervailing duties” that we impose when an importer sells products in our country at a price less than its cost of foreign production. Those duties bring the prices of the imports up to the cost of production (as distinguished from price) abroad, but no more.

Just so, the rifle-shot tariffs would raise import prices to neutralize the labor-cost differential between the country of export and the US, but no more. To make sure these tariffs didn’t raise prices of imports for no reason, we would impose them only to protect an existing or nascent American industry.

Sure, lower-priced foreign products could still capture foreign markets. But the US has the world’s third biggest single market, after China and the EU.

So capturing global markets would no longer be the goal. Instead, the goals would be serving our own domestic market, securing our workers living wages in that market, and preserving and extending our industrial, technological and scientific infrastructure. In other words, the main goal would be stopping our oligarchs’ sellout to China and Mexico from reaching its logical conclusion: a feckless country with backward science, technology and industry, reliant on a “service” economy, content with abandoning global industrial leadership forever.

Trump, of course, has neither done nor suggested anything of the kind. His nearest proposal was a flat 35% tariff on imported goods made in US factories newly traded abroad. Even that blunderbuss proposal was too complex for Trump’s loyal minions and the GOP to get their minds around. It went nowhere.

What Trump did impose were huge, flat, across-the-board tariffs on basic commodities like steel and aluminum and on major products like cars. Far from trying to correct an international imbalance in wages, they were meant only to inflict pain on China and other trading partners, so as to make them do our will. These untargeted tariffs were a bit like the huge, multi-pointed clubs carried by primitive warriors of antiquity, designed to inflict pain without much rhyme, reason or subtlety.

It remains to be seen whether any of these gambits will force a proud, disciplined rising power like China to come to heel. More likely, they will just encourage China to seek markets elsewhere and redouble its efforts to duplicate and steal Western technology. Whatever China does, it will not build or rebuild American factories or beef up our scientific, technological and industrial infrastructure.

Only we can do that, and we must do it collectively. Even if domestic oligarchs tried, they would fail without rifle-shot tariffs or other governmental import protection.

So we must have some industrial policy, if only to determine what sectors deserve finely calibrated trade protection, and how much seed money, if any, government should invest in them. If we leave all this to the free market, our oligarchs will trade our moveable infrastructure to whatever place pays its workers the least, keeps them under the cheapest and vilest conditions, and cares the least about protecting its environment from pollution and climate change.

3. Protecting know-how. Under Item 2, we discussed protecting factories that produce things, and their workers, from being put out of business by foreign plants using cheaper labor. That’s not the same as protecting intellectual property, or “know-how.” (In precise parlance, “know-how” is a rough synonym for trade secrets, which don’t include other legal categories of intellectual property, such as patents, copyrights, trademarks and semiconductor chip designs. For present purposes, we ignore these subtleties and use the short term “know-how” generically for all types of intangible intellectual property.)

Know-how differs from things in three ways. First, it’s intangible. Second, it can be transmitted, or stolen, almost costlessly, in intangible form, over the Internet or by other means of telecommunication. Third, know-how is the sum total of knowledge gleaned from the process of developing and making products, including the accumulated experience of the scientists, engineers, technicians and line workers, who perfect the products as they design and make them.

An example may be helpful. A retired engineer from GE once told me about techniques used to balance the titanium turbine fans in jet engines on their shafts. These fans whirl at impossible speeds, in a white-hot environment. Even so, they have to withstand the immense forces that jet engines produce—more than 20,000 pounds of thrust per 737 engine. Obviously their symmetry and balance are key. GE and its employees kept secret the techniques used to achieve this vital fine balancing. They passed the secrets down from employee to employee on a need-to-know basis. GE didn’t apply for patents for fear that patents’ public disclosures would help rivals steal these secrets.

You can’t develop production secrets like that unless you make things. You have to be in the game. Yet such know-how is the essence of a company’s and a nation’s infrastructure of innovation. So as a nation trades its factories and manufacturing jobs offshore, its know-how and intangible infrastructure tends to diminish and eventually disappear.

Laws governing patents, trademarks, trade secrets and computer chips can help protect this intangible part of a nation’s scientific, technological and industrial infrastructure. But they can never develop it.

If rival nations steal it—whether through cybertheft, bribery, or force—the law is often of little help, too late. That’s why a practical nation sometimes has to keep this stuff close to its vest, just as GE did for decades with the means of balancing its jet-turbine blades. If industrial or national rivals can get this know-how, by means fair or foul, they can trade it away anywhere by arbitraging differing wage rates. That’s in fact just what our oligarchs did in reducing America to its current precarious state.

Protecting this intangible infrastructure may, at times, require something like the secrecy of our Manhattan Project. At very least, it requires a level of “situational awareness” that our national government, let alone our big corporations, now seems to lack.

Trump and his cronies have been incompetent and incoherent in dealing with this problem. They have ignored our crying need to preserve and protect our collective know-how. All the hoopla about Huawei and similar Chinese industrial threats revolves around a related but different issue—the use of “back doors” and malware in foreign equipment as tools of foreign military and industrial espionage.

Of course both threats are real and worthy of serious attention. But if we want to insure good jobs, at fair domestic wages, for skilled American workers, the threats we must overcome go far beyond the bounds of military or diplomatic espionage. If we want to protect the technology and industry that our scientific innovation promises, we may, for a time, have to consider keeping things secret, contrary to the norms of free scientific interchange. (Without picking any particular discovery, let alone a field, I have suggested that some applications of the gene-editing technology CRISPR/Cas9 may be of that character.)

The point here is not to debate specifics, but to establish a principle. There may be cases in which the national interest in our own workers’ well-being and know-how, and in our own scientific, technological and industrial infrastructure, demands abandoning the notions of absolute freedom of exchange of ideas, at least for a limited time. It goes without saying that decisions of this sort (if not the secret details of their subjects) must be public and made by government, lest the self-interest of private parties skew the decisions in their own private interest and against our workers’ and the nation’s. As vital as it is, I have not heard Trump or anyone in his administration so much as suggest the outline of this analysis.

Conclusion. We are living in a brave new world. In this world, jobs are wealth. Science and technology are wealth. The ability and infrastructure to make things, to improve them, and to innovate are wealth.

As we trade all these things abroad, we make ourselves poorer, no matter how much short-term profit our oligarchs make. And the decline starts with trading away jobs.

No one can predict where science and technology will take industry in the future, and when. So their “lever arms” over time are extremely long. No one but experts can even hope to guess how valuable distinct bits of infrastructure may be, or when their inflection points might come. Who, for example, would have predicted that vital testing for Covid-19 would have halted for want of cotton swabs on sticks?

If we leave vital decisions that protect our skilled workers, our markets and our scientific, technological, and industrial infrastructure to self-interested private parties–let alone bankers, who as a class know nothing about science or engineering—we will inevitably lose ground to China and other nations that plan carefully and wisely. We are not talking here about central planning of the entire economy, but planning to protect our workers’ and our economy’s future in light of the wisest and most expert guesses about changes in science, technology and industry.

Trump’s red-hat slogan, “Make America Great Again,” (emphasis added) implicitly recognizes that we have lost some of our greatness. The loss is not hard to identify.

The twentieth century became the “American Century” because we excelled in science, technology, industry and the innovation that animates them. We invented or co-invented most of the things that made the twentieth century unique in human history: the telephone, motion pictures, the electric light, controlled flight (aircraft), television, digital computers, high-altitude flight (pressurized cabins), atomic weapons, atomic energy, polio vaccines, CAT scanners, MRI imaging machines, personal computers, the Internet, and cell phones.

Our infrastructure of innovation, which once included innumerable factories and related applied-research centers, was the ultimate source of our wealth and power. But science, technology, industry and innovation are a seamless web. Whenever we trade away factories and the jobs of workers who make and build things, we trade away key sources of our wealth.

We can’t get back what we’ve already traded away, far less the jobs we traded with it. But we can rebuild our wealth and advantage by rebuilding and protecting our physical infrastructure and our intangible infrastructure of science, technology, and industrial innovation. But we can’t protect any of these aspects of wealth by allowing private industry to sell them abroad for profit at will.

The Trump administration and the GOP have never dropped the slightest hint that they understand any of this. Worse yet, the steps we must take to preserve our intangible infrastructure of science, technology and industrial innovation contravene the GOP’s obsession with private industry and private prerogatives. Our dismal response to the Covid-19 pandemic shows just how low we can sink when we rely entirely on fractured self-interest to provide supplies of PPE, tests and ventilators.

So we have two choices. We can change our ways, rebuild our physical infrastructure and protect our intangible infrastructure better, and so recapture some of our twentieth-century luster. Or we can allow China and others who understand the real sources of our wealth to beat us at our own game, using (and sometimes stealing) what makes us prosper. If we take the latter course, our decline, as compared with the slow fall of Rome, will be meteoric. Then the last three years of social and political upheavals will be a pale harbinger of the pain and decline to come.

Footnote 1: Not all industrial improvements are secret, and not all involve products as complex as jet engines. Some twenty years ago, I bought clothes trees made somewhere in Asia. I still have them today. For ease of shipping, their main shaft, about six feet long, came in two sections. Whenever I picked a tree up roughly by the top section, it would come off the lower section. Yet a new tree I bought just this week has an improvement: a small bump on the top section that locks, with a twist, into a circumferential groove on the lower section, so the two don’t come apart.

A simple, obvious change, you say? Perhaps. But a firm in the business of making things like that tree can produce many small improvements. Some, like that bump and groove, are unlikely to be patented, so a new entrant might copy it by examining the incumbent firm’s products. But patents, trademarks, good brands, reputation, and closeness to customers often give an incumbent firm decisive advantages, quite apart from any significant innovation.

You can’t develop any of these improvements if you’re not making things at all. You can’t compete if you’re not present in the marketplace. And if you work in a nation that fails to compete pretty much across the board, your products may suffer simply by identification of origin, as products made by the Japanese and Chinese once did before they discovered quality control.

If you want to know just how far the Chinese have turned the tables today, visit any Wal Mart, Home Depot or Lowe’s and estimate what percentage of the hardware they carry is made in China. What you find will astonish and shame you. It will make you yearn for “rifle-shot” tariffs to protect our own skilled workers and the infrastructure they create.

Footnote 2: Sometimes secrecy can be counterproductive, if not harmful. Today’s pandemic is one of those times. Rapid development and production of tests, PPE, ventilators and vaccines requires global cooperation and full transparency.

But the contrast between these two cases illustrates the subtlety and sophistication of the industrial policy we need. That policy must be based on all the relevant circumstances and must be flexible enough to change when facts and circumstances change. Nothing that the Trump Administration has done or suggested in three years has anything like the necessary situational awareness or sophistication. That’s why we continue to bleed jobs and industrial infrastructure.

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