This time around the disaster didn’t originate with a deluge but inept national level industrial and trade policy. The result was a hollowed-out country, especially in the Middle West. Like it or not, these issues have since been elevated to our fierce national politics, a fact reconfirmed every time you hear the word “tariff.”
Back in 2007 official attitudes at every level were shot through with laissez faire “free trade” rhetoric and an absurdly romantic view of moving good-paying industries abroad – the offshoring that seemed to benefit only offshore-happy business executives and stockholders.
Credit: Jim Witmer
Credit: Jim Witmer
Tragically many victims – largely working-class workers - were told to just move on to the knowledge-digital-information economy or whatever euphemistic marketing-style term was being employed at the moment. That usually meant retraining for jobs that would be offshored in the next round. Meanwhile, the story went, foreign workers would do all that dumb labor under governments with their own hostile agendas. How naïve it all seems now. It seems obvious today that when production moves abroad, the innovation that arises from the factory floor moves abroad too.
But just how bad was the biggest downtown since World War II?
Our Dayton Daily News Fighting the Trade War series, an extensive investigation I wrote with Ken McCall and Tim Tresslar, found:
- Annual inflation adjusted private payrolls in Montgomery County dropped $3 billion from 2000 to 2010, the biggest percent decline among all six Ohio metro counties. The total state private payroll drop - $22 billion.
- Auto parts maker Delphi alone lost 5,473 employees in the Dayton area.
- The state of Ohio’s industrial electric consumption declined 28 percent from 2000 to 2010, largely from offshoring and plant closures.
- By 2011 Ohio lost 3,500 manufacturing companies over a decade, including 200 in Montgomery County and about 130 in other Miami Valley counties. The loss of all those businesses cut the state’s annual manufacturing payroll by $7.8 billion.
We concluded that the run-up to the Great Recession brought historic economic harm long before the downturn officially began. That explains why the experienced length of the recession went beyond its official dates of 2007-09 – and lingers today. By the time a recovery happens you can’t add a third shift to plants that closed. Offshoring as a trend, if not corrected, can cascade industry by industry, deepening downturns.
Reindustrialization, or rebuilding both production and supply chains, is an appropriate call to arms. The first Trump administration upended free trade platitudes with NAFTA renegotiated, China pressured, and heavier tariffs. Biden followed with a similar approach. Now Trump 2.0. is promising more.
A newly published book, Industrial Policy for the United States: Winning the International Competition for Good Jobs and High-Value Industries by Marc Fasteau and Ian Fletcher, covers centuries of American trade with case histories of specific inventions and industries. It’s also a sweeping nation-by-nation exam of economic development and trade tactics that worked or failed - and why. It finishes with an extensive list of action items to regain innovation and economic momentum.
Industrial Policy for the United States is “free market” myth-busting, showing how our past short-termism and taking our eye off the ball when an immediate crisis passes will lead to a diminished future for everybody.
It advises an all-of-government approach to rebuild and foster industry, not only in high tech but also in critical production for military and other essential functions. Tools include well-designed tariffs, expanding federal manufacturing innovation programs like Manufacturing USA and the Manufacturing Extension Partnership, and controls to keep the dollar at a competitive level to achieve a trade balance with other nations.
Some of this policy shift is already underway. It’s no accident that a change in perception has already sunk in among federal policymakers who now understand how emerging innovations like AI and quantum computing could become our national champions and transform the landscape. But so do other nations. Will these slip away like consumer electronics?
What’s needed here is more focus, coordination and making reindustrialization a top national priority, the authors argue.
Early results of our wake-up call have already appeared within commuting distance to Dayton. There’s the Honda battery plant, the Intel manufacturing complex outside Columbus, and many other new production plants and expansions.
Other nations are acting, too. Germany in 2019 announced a national industrial strategy following major tech company acquisitions by China, including a top robotics firm. In 2022 Japan passed the Economic Security Promotion Act to reinforce Japan’s technology base and develop “a new class of secret patents in militarily and economically strategic areas.”
The path forward is uphill, not the least because mainstream economics is still religiously devoted to free market theory. Industrial Policy argues that success requires filling gaps where the markets can’t – placing practicality above theory. For this reason, the United States must redouble its vigilance and time-honored tactics that trace back to the early history of the nation to keep the flood waters at bay and avoid another disastrous downturn – or worse.
Steve Bennish is a 30-year daily newspaper veteran and a founding member of the Journalism Lab, an educational nonprofit serving the Dayton region.
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