Manufacturing / News

Industrial Buildup, Not War on China

A Report on the May 21 Webinar sponsored by the Alliance for American Manufacturing

By Nancy Spannaus

May 23, 2020—The Alliance for American Manufacturing (AAMFG), a group sponsored by the United Steelworkers of America (USWA) and several steel manufacturers, did a public service by putting on a webinar devoted to discussing “U.S. Industrial Policy in the COVID-19 World” on May 21. More than 500 people joined the Zoom meeting, which featured interviews with four U.S. Senators, two Republican and two Democratic, as well as commentators from the USWA, the Marlin Steel Company, the National Coalition of Textile Organizations, and the Horizon Advisory.

Republican Senators Marco Rubio (FLA) and Josh Harley (MO) were interviewed by anti-China hardliner CNN correspondent Josh Rogin, while Democratic Senators Tammy Baldwin (WI) and Sherrod Brown (OH) were interviewed by AAMFG president Scott Paul, who also introduced the two-hour long event.

A modern metals plant.

The convergence among the featured speakers on the need for re-establishing a U.S.-based supply chain in vital sectors such as health, and a broad swath of U.S. manufacturing was striking, and in some respects promising. But productive discussion about what U.S. policies were required to re-industrialize and modernize far too often veered into bouts of China-bashing and virtual warmongering.

Such rhetoric, which attributes the take-down of the U.S. industrial base to Chinese industrial policy, not only distorts reality, but lets the major culprit in de-industrializing our country off the hook. That culprit is Wall Street, with its determination to milk the last ounce of profit by any means necessary.  Indeed, an effective industrial policy cannot be accomplished without taking on Wall Street’s addiction to speculation and financialization of all aspects of the economy. We need to build up our industry, not take down China’s.

As I argued in my book Hamilton Versus Wall Street: The Core Principles of the American System of Economics , it is Hamiltonian policies that have historically allowed us to contain Wall Street and undergo spectacular economic advance.  Those policies, not launching economic warfare against other nations, are what will restore our economy once again.

In the remainder of this post, I will first summarize the consensus. Then I will concentrate on other highlights of the Senators’ remarks, with minimal references to the other participants, and conclude with my reflections. (See the video here.)

Points of Agreement

Every speaker agreed that the COVID-19 pandemic has revealed devastating vulnerabilities in the U.S. industrial supply chain, especially in the realm of pharmaceuticals. Senator Brown noted that over half of the ingredients of key drugs are made in China. In a situation of crisis, where transportation is restricted and China itself needs the medicines, this is a formula for disaster. Senator Baldwin has addressed this issue in pending legislation called the Medical Supply Transparency and Delivery Act. This act would first call for an assessment of U.S. capabilities, and then develop a strategy for their buildup, using the “full potential of the Defense Production Act.”

Industrial Buildup, Not War on China

AAM head Scott Paul introducing the webinar. (screenshot)

All also expressed their belief that China is unfairly subsidizing its industries, and thus gaining a decisive advantage in the current trade system. Not surprisingly, the most extreme of the criticism was advanced by Senators Rubio and Hawley, who both consider China’s economic strategy to be a nefarious global threat to the United States and its allies. Senator Brown put the least emphasis on China as the source of the problem.

The four Senators also agreed that Congress had to change Federal economic policy in order to bring jobs back to the United States and strengthen American industry. Specific measures mentioned were tax incentives for re-shoring, buy American provisions, and a tougher trade policy.

Republicans for Labor?

The most intriguing aspects of the remarks by the Republican Senators were their appeals to the interests of the working population. One must keep in mind, of course, that not only one of the sponsors, but many of the participants in this event were members of the United Steelworkers union.

Industrial Buildup, Not War on China

Florida Senator Marco Rubio addressing the webinar. (screenshot)

Senator Rubio distinguished himself by being the only speaker to directly criticize Wall Street! In response to a question about Americans investing in Chinese companies, he raised the fact that Wall Street has had some of its most dramatically profitable days in the course of this pandemic, even as the general population is suffering. Wall Street clearly is not the same as “the economy,” he said. He elaborated by saying that while Wall Street may be right that investing is China is the “most efficient” allocation of capital, the most efficient outcome is not always in the national interest. In that case, other choices must be made.

Rubio’s attack on Wall Street’s hunger for its own short-term profits was more elaborated in his April 20 op-ed in the New York Times. Under the headline “We Need a More Resilient American Economy,” he argues that “With a sensible industrial policy, workers will take precedence over short-term corporate gain.” Rubio’s views are being elaborated by the group American Compass, which features some comprehensive, high-quality articles about the history of the American System.

Industrial Buildup, Not War on China

Missouri Senator Josh Hawley addressing the webinar (screenshot)

Senator Hawley also made a strong pitch for labor support, by identifying his policies for rebuilding American manufacturing with those of Republican Abraham Lincoln. Lincoln saw Americans as producers, he emphasized, adding a glancing attack on Wall Street. There is nothing more American than bringing jobs back to America, focusing on improving the lives of working people like those he represents in Missouri.

Unfortunately, these sentiments were mixed in with virulent attacks on China. The Chinese Communist Party is out to dominate the world, Rubio asserted, and they are trying to take advantage of us under these pandemic conditions. We have to build an international coalition to combat them. The fact that Hawkins shares this view came out in a May 20 speech he gave on the Senate floor, where he claimed that “imperialist China seeks to remake the world in its own image, and to bend the global economy to its own will.”

Democrats Stress Manufacturing

Both Democratic Senators come from states with among the highest concentration of manufacturing jobs in the country, and their interviews reflected that appeal to their constituencies. Senator Baldwin was the most concrete in offering specific legislative remedies, ranging from the Medical Supply Act to bills on consumer labeling online (to show country of origin), and cutting Chinese companies (presumed to be subsidized by the Chinese government) out of contracts in U.S. government-funded projects, such as transportation.

Industrial Buildup, Not War on China

Wisconsin Senator Tammy Baldwin addresses the webinar (screenshot).

Senator Brown consistently and usefully took a broader view, stressing the need for a comprehensive industrial policy. This pandemic has finally taught Americans about the indispensable role of government, he said; the private sector is not going to protect the people. The Federal government now must move to improve our trade and tax policy in order to make it profitable to invest in the United States, and to bring back manufacturing.

Brown chose to intersperse his discussion of the policies required to restore manufacturing with constant attacks on President Trump and the Republicans, on issues ranging from race to tax cuts and the Administration’s response to the coronavirus pandemic. The partisan nature of these attacks drew a distinct shift in the nature of the “chat” comments being shown on the screen, toward sharp polarization.

Ohio Senator Sherrod Brown

The Commentators

It was interesting to hear the reports of those commentators who are part of the productive economy here in the United States. Drew Greenblatt, CEO of Marlin Steel, expressed great frustration at China’s impact on the steel sector, accusing them of stealing his patents, and demanding a “total reset” on relations. Roxanne Brown, international vice president at large for the steel workers union, spoke of how the USWA’s workers across many industries, including health care, have been put in jeopardy due to the lack of adequate medical supply capacity in this pandemic. Kim Glass, CEO of the National Council of Textile Organizations, described the devastation in that industry, as well as the extraordinary mobilization to make PPE.

While all three attacked Chinese policy, it was Horizon Advisory’s Emily de la Bruyère who took the cake. Bruyère accused the Chinese of “economic and security coercion,” and an industrial offensive to steal Western intellectual property since the 1970s! (By all accounts, China was then a very poor country; does she think it should have stayed that way?) Since then they have been out to “hollow out” our strategy industries, she said, and take away our jobs and freedoms.

A Way Ahead

The concluding segment, comprised largely of some questions from the audience, featured two important, hard-hitting elements. The first came from USWA representative Roxanne Brown, who gave an impassioned argument for putting people to work building the desperately needed infrastructure the United States needs. She referenced the dam break in Michigan, the lack of broadband, and the fact that two million Americans have no regular access to clean water at a time when everyone is saying to wash your hands.

Industrial Buildup, Not War on China

USWA vice-president Roxanne Brown addresses the webinar (screenshot)

Then, at the conclusion, Paul showed a short video which reviewed the unpreparedness of the country for the pandemic, and listed five priorities to reverse that disaster: 1) Make essential items in America; 2) Expand buy American; 3) Incentivize companies to re-shore jobs; 4) enforce our trade laws; and 5) invest in infrastructure.

Yet, overall, the China-bashing tended to divert the focus from the central question of the United States developing an industrial policy to rebuild its manufacturing sector, and thus its economic productivity and ability to withstand all manner of future threats, including disease. It would have been useful to highlight the ideas of Alexander Hamilton, especially in using government-backed credit to provide the trillions of dollars needed to rebuild our infrastructure.

In addition to providing us guidelines on the proper government role in promoting and funding our infrastructure and strategic industries, I believe that Alexander Hamilton and his American System followers give us some guidance on the China question as well.

The main obstacle to restoring American manufacturing is not Chinese policy. The reality is that since the death of Franklin Roosevelt, we have allowed private interests, Wall Street, to increasingly dictate our tax, trade, and general economic policy to the detriment of our productive capacity. We have based our wealth on finance, not production, and hollowed out our own economy. In so doing, our big financiers, with sections of the Federal government in tow, have played no small part in turning China into the world’s workshop, in the name of providing “cheaper” goods for Americans, and more profits for themselves.

Those financier interests have to be brought to heel, and government credit put to work to rebuild our economy again, and then help in lifting up conditions for the billions of desperately poor in Africa, Asia, and Latin America. Protectionist measures may indeed be needed as we expand our own home market.

Alexander Hamilton, in a painting by John Trumbull.

To do this does not require economic warfare against China, or any other nation; far from it. Rather, once we have begun to set our own house in order, we should be eager to collaborate on sovereign terms with other nations, as is occurring, for example, with the ITER project on thermonuclear fusion. Rather than demand that the Chinese or anyone else stop subsidizing their industries, or reduce their production,  we should subsidize our own crucial industries, and work to create conditions to utilize that “excess” in constructing much needed infrastructure all over the world.

To Hamilton and Washington, not to mention Lincoln and FDR, U.S. foreign policy was to be grounded in promoting mutually beneficial commerce with other nations.  No “womanish affections” for (or against) one nation or another were to be tolerated. Rather, our nation would seek to upgrade the living standards of all through our economic relations.

In my research for Hamilton Versus Wall Street, I was struck by the fact that American System presidents after Lincoln, such as Ulysses S. Grant and William McKinley, were eager to share “American System” knowledge with other nations.  Indeed, the Grant Administration sent E. Peshine Smith to Japan from 1871 to 1876 to proselytize for the American System as an adviser to the Japanese government. There was none of the fear of other nations gaining access to the advanced technology we have today; their advances in living standards were considered progress for all humanity.

Sound utopian?  Perhaps now, when predatory finance has such a grip on our institutions, and even our thinking. But to achieve such an outcome, one has to have that goal in mind.

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One Comment

  1. Yes, Nancy, FDR did not bash any other nation’s economy but cut off the predator Wall Street by Glass-Steagall, funded huge industrial projects with national credit, and made the U.S. a formidable enemy of Hitler. He knew Hamilton’s principles and immediately put them in place for the working people of America. Hamilton, Lincoln, FDR are our examples–all we need is the resolve and will to do as they did.

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