Just One Word: Factories
It was a line that spoke to, and for, a generation. In "The Graduate," the 1967 film that depicted a young man's inspection and, then, rejection of grown-up American society, Dustin Hoffman's Benjamin is given a one-word bit of career counseling by one of those shallow and corrupt grown-ups at a shallow and corrupt grown-up cocktail party: "Plastics."
Forty-two years later, the line has picked up a meaning that the makers of "The Graduate" could not possibly have anticipated. When the high school senior of 1967 -- me -- who thought then that the line was a brilliant exposé of American shallowness sees that scene today, his reaction is, "Oh, right: America still made things then."
We don't any more -- at least, not like we used to. Since 1987, manufacturing as a share of our gross domestic product has declined 30 percent. Once the world's leading net exporter, we have become the world's leading net importer. In 2007, we exported $1.2 trillion worth of goods and services but imported $1.8 trillion. If there were a debtor's prison for nations, we'd all be in the clink.
Within the Obama administration and on Capitol Hill, there are moves afoot that could begin to end this travesty. Last week, the president announced $2.4 billion in grants from the American Recovery and Reinvestment Act to U.S. companies developing batteries for hybrid and electric cars. The embattled Waxman-Markey climate change bill has a provision to lend $30 billion to auto parts companies to convert to alternative energy manufacturing plants. Sen. Sherrod Brown (D-Ohio), who is Congress's leading proponent of American manufacturing, is calling to make permanent the research-and-development tax credit (right now, it must be renewed every couple of years) and injecting some pro-American considerations into our trade policy.
Inside the administration, there are debates over policies that would increase our government's commitment to American manufacturing. For one thing, the decline of manufacturing presents a huge obstacle to U.S. economic recovery. As scholars and journalists have noted, in every recovery since the Great Depression through 1990, when American consumers started buying more, U.S. factories recalled laid-off workers and started making more. Today, when the government puts more money into consumers' pockets, it means that Chinese factories recall their workers and start making more. It means that American retailers will hire more low-wage workers, while American manufacturers won't -- a sectoral shift that will lower Americans' median income, since manufacturing wages are roughly 20 percent higher than the wages of the rest of the non-professional, non-managerial workforce.
The long-term decline of American manufacturing has depleted our high-tech, cutting-edge industries as much as it has our more venerable sectors. Our furniture makers have lost 60 percent of their productive capacity since 2000, Richard McCormack, the editor of Manufacturing & Technology News, points out in an essay in a new book he has edited, "Manufacturing a Better Future for America." But at the high end, only one of the world's top 10 photovoltaic cell manufacturers is American. The United States fell behind China in the value of our high-tech exports in 2004, and we've fallen further behind every year since.
What makes the decline of American manufacturing particularly galling is that we're not falling behind because we're inefficient: American factories are among the most productive on the planet, as McCormack notes. But alone among the world's industrial powers, we have left the task of enticing manufacturers not to the federal government but to state and local governments, which try to attract factories and research facilities with tax abatements and public investments that are dwarfed by the efforts of national governments in other lands. China not only throws money at companies looking for a deal for their factories, it also manipulates its currency so that its exports are too cheap for any American manufacturer, no matter how productive or innovative, to match. According to a 2008 report by the global accounting firm KPMG, within five years, China "should become the most influential country in IT and telecom," while we have done effectively nothing to promote and protect these 21st-century industries.
It's not just that the United States uniquely lacks an industrial policy. It's that the United States uniquely has an anti-industrial policy.
Turning that around could help the economy as well as convey some political rewards to an administration that could use some rewards just now. Brown, for instance, is a liberal from a not-famously liberal state, and it's his support for manufacturing that has won him the votes of the very same white working-class voters who are souring on Obama. At some point, the White House might realize that championing manufacturing is not only necessary economics but smart Democratic politics.
Besides, if we were making things again, the word "plastics" wouldn't unleash a wave of nostalgia.