Come December, months after it should have happened, the White House will convene a jobs summit. That’s a good thing if we’re really going to talk about all options. Because important ones are missing right now. To that end, I’d like to suggest a few names for the summit’s guest list: Bob Borosage and other people at the Institute for America’s Future; Leo Gerard, international president of the United Steelworkers; Carolyn Barthomew, chair of the U.S. China Economic and Security Review Commission; Bob Kuttner, founding co-editor of The American Prospect; and L. Randy Wray, professor of economics at the University of Missouri-Kansas City, and Research Director with the Center for Full Employment and Price Stability. These five take the long view, the big picture view. And what they see – what anybody who really looks sees – is that America’s job situation needs a transformation before the race to the bottom becomes an irrevocable plunge.
The key to that transformation is industrial policy, which includes trade policy and a labor-market strategy. The kind of thing countries as far apart culturally and politically as Denmark and China have successfully engineered to make life for their citizens better. America’s fate now rests in the hands of other countries’ industrial policies. Not having our own is, ultimately, an economic suicide pact courtesy of the promoters of the same policies and behavior that got us into this gigantic economic mess.
While the festering unemployment rolls and the growing number of experts with clout mouthing the words "jobless recovery" may not fall into the traditional category of leading economic indicator, they clearly are a leading indicator on the minds of people who still care about working Americans. And also on the minds of a few politicians who normally don’t care but are pondering the approach of midterm elections.
It can never be repeated too often that Barack Obama inherited the mess. Not just the disaster bred of the Cheney-Bush years, the longest recession since the Depression, but that deeper wider mess that’s plagued us for far longer than any single administration. The mop the President chose includes some fiscal and relief policies which prove that progressive economic policy isn’t totally dead. But so far it’s been little beyond old-fashioned stimulus and saying hosannas to the pieces of the New Deal and Great Society whose continued existence have made the situation a good deal less horrendous than it would otherwise have been. But relying on decades-old cushioning programs and inadequate government spending isn’t going to solve either the short term or underlying long-term problems of the economy.
After close to four decades of allowing the screwing of American workers to take place amid a chorus of lionized public intellectuals shouting that the screwing is good for us, the current disaster ought to be one of those crises that Rahm Emanuel says we should never waste. Forty years after LBJ added to the New Deal, it’s time to do it again. This time with a permanent jobs program such as the one that L. Randall Wray proposes here:
Direct job creation programs have been common in the US and around the world. Americans immediately think of the various New Deal programs such as the Works Progress Administration (which employed about 8 million), the Civilian Conservation Corps (2.75 million employed), and the National Youth Administration (over 2 million part-time jobs for students). Indeed, there have been calls for revival of jobs programs like VISTA and CETA to help provide employment of new high school and college graduates now facing unemployment due to the crisis.
But what I am advocating is something both broader and permanent: a universal jobs program available through the thick and thin of the business cycle. The federal government would ensure a job offer to anyone ready and willing to work, at the established program compensation level, including wages and benefits package. To make matters simple, the program wage could be set at the current minimum wage level, and then adjusted periodically as the minimum wage is raised. The usual benefits would be provided, including vacation and sick leave, and contributions to Social Security.
Note that the program compensation package would set the minimum standard that other (private and public) employers would have to meet. In this way, public policy would effectively establish the basic wage and benefits permitted in our nation--with benefits enhanced as our capacity to provide them increases. I do not imagine that determining the level of compensation will be easy; however, a public debate that brings into the open matters concerning the minimum living standard our nation should provide to its workers is not only necessary but also would be healthy. ...
As the economy begins to recover, the private sector (as well as the public sector) will begin to hire again; this will draw workers out of the program. That is a good thing; indeed, one of the major purposes of this program is to keep people working so that a pool of employable labor will be available when a downturn comes to an end. Further, the program should do what it can to upgrade the skills and training of participants, and it will provide a work history for each participant to use to obtain better and higher paying work. Experience and on-the-job training is especially important for those who tend to be left behind no matter how well the economy is doing. The program can provide an alternative path to employment for those who do not go to college and cannot get into private sector apprenticeship programs.
A year-round, year-after-year jobs program that produces real value in new public infrastructure and maintenance and repair of what already exists.
Or you could go for the Danish model. In his book, Obama’s Challenges, Bob Kuttner writes:
This idea [of an active labor-market strategy] is not just to cultivate a broadly educated population but to subsidize the customized training of workers for emergent technologies, as well as their living expenses so that they can afford to train – and do so at a scale to make a difference. This strategy is combined with a national commitment that there shall be no bad jobs an; and that every job shall pay a true living wage, with the productivity to justify it.
Last year, I conducted a study of the country that comes closest to realizing this strategy, the small, highly trade-dependent nation of Denmark. The Danes call their model "flexicurity" – great labor-market flexibility combined with superb worker security. If that sounds lie an oxymoron, the rest of the Danish model defies the usual economic categories and manages to square several other circles
I published my findings in the March-April 2008 issue of Foreign Affairs, but here are the headlines.
On the one hand, the Danes are passionate free traders. They score well in the ratings constructed by pro-market organizations. The World Economic Forum Competitiveness Index ranks Denmark third, just behind the United States and Switzerland, and even the far-right Heritage Foundation ranks Denmark eleventh, giving it demerits only for the size of its public sector. Denmark’s financial markets are clean and transparent, its barrier to imports minimal, its labor markets the most flexible in Europe, its multinational corporations dynamic and largely unmolested by industry policies, and its unemployment rate of 2.8 percent, the lowest in the OECD. [Now 4.1%, and the lowest in the OECD – MB.]
On the other hand, Denmark spends about 50 percent of its GDP socially and has the world’s second-highest tax rate after Sweden, as well as strong trade unions and one of the world’s most equal income distributions. For the half of the GDP that they pay in taxes, the Danes get not just universal health insurance but also generous child-care and family-leave arrangements, unemployment compensation that typically covers around 95 percent of lost wages, free higher education, secure pensions in old age, and the world’s most creative system of worker retraining.
What makes the flexicurity model both attractive to workers and dynamic for society are six key features: full employment; strong unions recognized as social partners; fairly equal wages among different sectors, so that a shift from manufacturing to service-sector work does not typically entail a pay cut; employer freedom to hire and fire as necessary; a comprehensive income floor; and a set of labor-market programs that spend an astonishing 4.5 percent of Danish GDP on programs such as transitional unemployment assistance, wage subsidies, and highly customized retraining. In return for such spending, the unions actively support both employer flexibility and a set of tough rules to weed out welfare chiselers; workers are understood to have duties as well as rights.
It’s not hard to come up with all kinds of reasons why the programs of a small, far more homogeneous country won’t work as well in big, diverse America. But if Democrats really want policies that go further than merely wielding a mop every time there’s a recession, they should invent an American version of an active labor-market strategy that helps stop putting so many people through the wringer.
Combined with this fresh approach to the labor market should be a focused effort to create green jobs and green careers, and more investment in research and development. Currently, the United States ranks 7th among the 30-country membership of the Organization for Economic Cooperation and Development when it comes to R&D, 22nd when it comes to non-defense R&D.
Several billions in stimulus money have already gone into weatherization projects, providing jobs and home upgrades that will pay off in lower utility bills and reduced energy consumption. But other stimulus money is not being so well spent. In fact, it’s exacerbating one of the very problems we should be trying to solve, off-shoring American jobs.
Some students at American University concluded in their report Blown Away that more than 80% of the $1.05 billion federal clean-energy grants handed out since September 1 has gone to foreign wind companies.
Even more striking is the fact that there are few restrictions on the how the grants can be used, according to a transcript of a Treasury Department briefing. In fact, more than $800 million has been given to firms for wind farms that were already producing electricity before they received the grants, according to a review of the records by the Investigative Reporting Workshop at American University.
"There are no restrictions on the use of the funds," Dan Tangherlini, an assistant secretary for management at the Department of Treasury, said, during a Sept. 1 conference call to announce the grants.
Could the money be used to pay shareholders?
"You know, that's possible," Tangherlini said, when a reporter asked that question during the call.
Foreign wind companies, however, say that their U.S. subsidiaries are creating jobs.
But where? As Muskegon Critic and others have discovered, a lot of those jobs are being stimulated abroad – the vast majority in the case of the Chinese wind-turbine manufacturer who will be supplying the machines for a Texas wind farm. In America, 330 jobs, 300 of them temporary; in China, 2000 jobs. The Campaign for America’s Future is urging progressives to send emails or letters backing Sen. Chuck Schumer's call for Steven Chu at the Department of Energy to "reject any request for stimulus money unless the high-value components, including the wind turbines, are manufactured in the United States."
As Jerome a Paris has pointed out, one of the reasons for this is exactly what we’re talking about, the lack of an industrial policy, especially a green industrial policy, over the past 30 years. The U.S. doesn’t currently have the manufacturing capability to supply all the wind turbines slated for installation. Inconsistent and incomplete government policy nearly bankrupted some turbine makers who, if they weren’t bought out, downsized their operations to avoid being caught in a bind the next time Congress decided to let the production tax credit expire. Not just no industrial policy but an anti-industrial one.
Leo Gerard fumed:
So accustomed to being bought and sold, Washington simply begins processing forms so it can hand over your tax dollars to create jobs in a turbine factory in the city of Shenyang, China at a subsidy of $193,133 each.
It's like these bureaucrats live in Wonderland. Or an America where the unemployment rate isn't 10.2 percent. Or where 40,000 American manufacturing facilities didn't disappear in the past decade. Or where banks didn't repossess nearly a quarter million American homes in the past three months.
We've got a message for Washington: Hell no! We're not giving tax dollars to China. What's wrong with these businesses and our government? It is the $787 billion American Recovery and Reinvestment Act of 2009. It's not the Chinese Recovery and Reinvestment Act. ...
China has an industrial policy. And it uses that policy to dominate. Here is how Keith Bradsher of the New York Times described China's policy to become a world leader in renewable energy, which of course, would include construction of wind turbine factories:
"Calling renewable energy a strategic industry, China is trying hard to make sure that its companies dominate globally. Just as Japan and South Korea made it hard for Detroit automakers to compete in those countries - giving their own automakers time to amass economies of scale in sheltered domestic markets - China is shielding its clean energy sector while it grows to a point where it can take on the world." ...
"European wind turbine makers have stopped even bidding for some Chinese contracts after concluding that their bids would not be seriously considered, said Jorg Wuttke, the president of the European Union Chamber of Commerce in China."
As Gerard says, this wouldn’t be happening if the U.S. had an industrial plan that operated with the same kind of attitude toward Americans that China has toward the Chinese. Free trade on level-playing field, sure. But accepting the masquerade of a free trade policy while China engages in broad-based protectionism is not on the level. And stimulating their economy with our stimulus money demonstrates just how far our lack of an industrial policy has pushed us out of whack.
Nobody should begrudge tens of millions of Chinese who are being lifted from poverty by the Red capitalists running their government. But that doesn’t mean we should let this happen at the expense of American workers, today’s and tomorrow’s. That’s not a prescription for a trade war, but rather a plea for common-sense trade policy, one that doesn’t cower every time the Chinese scowl when the U.S. or some European company files a World Trade Organization complaint against them.
Next Thursday, the U.S.-China Economic And Security Review Commission will release its 2009 Annual Report to Congress. Included will be a look at:
China’s detailed industrial policy designed to attract foreign investment and production
and to create "national champions" to compete on a global scale.
China’s use of subsidies and other trade-distorting measures in violation of its international commitments.
China’s role in the creation of the economic imbalances that that helped produce the global financial crisis.
At Building the New Economy: Making it in America, a conference put on by the Institute for America’s Future and the Alliance for American Manufacturing two weeks ago, the chair of the China commission, Carolyn Bartholomew, pointed out that China has adopted a centralized process focused on China’s national interests, a policy that builds, supports and protects. China owns many companies and highly controls others. It uses subsidies, intellectual property theft, currency manipulation, price controls, ruthless eminent domain. It underpays its workers and it permits no free unions. The arsenal of government policies in no way makes for level ground. The green wave that is bringing those Shenyang wind turbines to America isn’t going to lift our boats, it’s going to swamp us if Washington fails to adopt an industrial trade policy that doesn’t ignore these inequities.
Finally, when Democrats start talking about an industrial, trade and labor-market policy, they shouldn’t forget the labor movement itself. Without the pressures it once brought to bear, we wouldn’t have minimum wage laws, Society Security, unemployment compensation or a very big middle class in this country. Over the years, Democrats have let their alliance with labor drift as union membership – along with union jobs – have disappeared or departed overseas. Forming unions, the legal right of all workers as another consequence of the progressive pressure in the New Deal years, has been made more difficult by decades of union-busting and negligent enforcement of the law.
There’s a campaign promise on the table in this regard. It’s not radical, won’t take nearly the political capital of initiating an industrial policy or even a permanent jobs program. It’s called the Employee Free Choice Act. By giving workers wishing to unionize a better chance against the corporate foes of anything that says they can’t treat employees exactly as they please, it would help even the playing field between corporations and workers whose productivity gains in the past 30 years have been siphoned into profits.
Altogether that's a big bite. But we're in a big crisis. The jobs summit can tread old ground. Or it can go bold.