By Nancy Spannaus
Nov. 21, 2019–“We Must Save America’s Manufacturing Sector, Prosperity in the post-industrial service economy is a myth,” read the headline of an article in Industry Week yesterday. The article presents a solid argument about the disastrous results for empires which have relied on their financial power, rather than their ability to produce; it also includes substantial information which refutes the myth of how our post-industrial society, with its low unemployment rate, ballooning stock market, and awesome levels of debt has allegedly brought prosperity to the nation.
Author Michael Collins, a manufacturer turned management consultant and author, has a track record of such trenchant analysis against the financialization of the economy. Back in June of 2018, he wrote an article for Industry Week on a similar theme, which I reviewed in a post on this blog. This time, Collins marshalls facts and figures to argue that without a revival of manufacturing, there is no happy future for this nation. And, as he writes ironically in his last sentence “reliance on the post-industrial service economy might lead to a nation of software programmers and tattoo parlors looking for someone to invoice.”
That said, Collins has some important omissions, which I think are crucial when dealing with this subject. The first is the role of Federal government policy, both in the disastrous take-down of our manufacturing might, but also in the necessary rebuilding of an advanced capability. The second is the need for a drastic upgrading of vital national infrastructure, from transport, to energy, water, health, and education. Current deficits in this area are potentially crippling to any major revival of manufacturing.
Most importantly, Collins doesn’t even hint at the historical record of success of the former U.S. industrial policy known as the American System of Economics. A knowledge of the history of how the United States went from an embattled, utterly bankrupt colony to the industrial envy of the world (in the 1940s and ’50s) is absolutely crucial to reversing the trends which are taking us down the road to destruction today.
As I argue in my book Hamilton Versus Wall Street: The Core Principles of the American System of Economics, this nation is in desperate need of reacquainting itself with Hamilton’s economic principles and perspective. In his Report on Manufactures, and his work on building the political economy of our nation, Hamilton advanced ideas which I believe fill in those omissions in Collins’ argument.
Some Hamiltonian Lessons
The first critical point I would take from Hamilton is his assertion that the Federal government must play an active, energetic role in advancing the economy. Hamilton provided a crucial example in his use of Federal debt to create the capital base for the Bank of the United States, a model which could very usefully be applied today. He similarly argued for Federal government involvement in the building of infrastructure, promotion of science and the arts, and promotion and protection for then-nascent industries.
While the building of crucial infrastructure to connect the nation and stimulate unity through commerce was limited in Hamilton’s time, it had a prominent position in the policies of those who took up Hamilton’s policies in the 19th century. The proliferation of canals and railroads, the establishment of educational institutions, and the early creation of some basic health infrastructure all took off under Hamiltonian Presidents John Quincy Adams and Abraham Lincoln.
The example of Franklin Roosevelt is even more dramatic, and further proves the point. His administration’s provision of huge amounts of credit by the Federal government for investment in crucial technological/infrastructural upgrades – especially electrification and water projects for energy and water control – all resulted in a major boost in productivity for the economy as a whole, raising living standards all across the board and putting the nation on the edge of the atomic age. This investment did not crush private industry, but in fact, allowed it to thrive in the face of what was often criminal denial of credit from the major Wall Street banks.
Indeed, every President who pursued policies to promote major technological, industry advance in our economy, had to face the opposition of Wall Street, which was often all-too-successful in stymying their efforts. It was major Wall Street banks, for example, who backed Andrew Jackson’s successful populist drive to destroy the Second Bank of the United States, a major partner in funding our infrastructure and industrial boom in the late 1820s. It was Wall Street’s financial blackmail of President Lincoln that led him to establish the greenbacks and the national banking system. And it was Wall Street’s refusal to invest in the real economy that led FDR to take the actions he did, especially through the Reconstruction Financial Corporation.
Read the Book
My criticisms notwithstanding, Michael Collins’ article should be read. He provides useful documentation, and delivers an important message.
But if we are to revive manufacturing in such a way as to actually jump-start our productivity, eliminate poverty, and launch ourselves into the new, prosperous world of nuclear fusion power and space exploration, we need to go to the core principles of the American System. That’s why I wrote Hamilton Versus Wall Street.
You can order the book online on Amazon (either paperback or Kindle), Barnes & Noble, or the publisher, iuniverse. You will be happily surprised to learn about our real legacy, and hopefully inspired to pursue it today.
Tags: Alexander Hamilton, Hamilton Versus Wall Street, Industry Week, manufactures, Michael Collins, Nancy Spannaus