President Obama’s decision to appoint General Electric chairman Jeffrey Immelt as head of a revitalized Council on Jobs and Competitiveness is the latest installment in an encouraging pattern of moves likely to benefit America’s beleaguered manufacturers. Some right-wing critics will undoubtedly see this as a reward to Immelt for sustaining the progressive programming on MSNBC, but what really matters is that he runs one of America’s biggest producers of capital equipment, and has been a tireless proponent of rebuilding the nation’s industrial base. At a time when many observers think American manufacturing is in a secular decline, Immelt has reduced the role of financial services and entertainment in the GE business mix to focus on highly engineered products like jet engines, locomotives and power-generation turbines. This reverses GE’s multi-decade retreat from manufacturing in America, and gives the company a big stake in changing government policies that have encouraged companies to shift industrial jobs overseas.
President Obama has shown increasing affinity for other captains of industry like Boeing chairman James McNerney and Honeywell head David Cote, which shows that he understands the crucial linkage between revitalizing domestic manufacturing and economic recovery. During the Bush years, America lost an average of 50,000 manufacturing jobs every month for eight straight years due to a combination of automation, cutthroat foreign competition and poorly conceived federal policies. The president’s Republican critics correctly point to high corporate tax rates and stifling regulatory burdens as factors in the nation’s industrial decline, but the Right has made its own contribution to the decline by espousing naive trade policies and structuring the tax system to favor financial services over production of tangible goods (the shares of financial services and manufacturing in the economy have reversed since 1970, with financial services now comprising a bigger portion of national output).
Whatever his motivations may have been, President Obama did the right thing by bailing out General Motors and Chrysler during the recent recession. The Republicans who opposed the bailout for ideological and regional reasons could have caused grave harm to the nation, a fact which to this day many of them do not grasp. Not only did Obama do the right thing in an economic crisis, but he followed that up by supporting a series of trade actions penalizing unfair practices by China — the world’s leading mercantilist power. Much of the retreat in U.S. manufacturing over the last decade can be traced to allowing China into the World Trade Organization without insisting that it begin acting like a responsible member of the global economic community. For instance, nearly 80 percent of all the software used in China is pirated, and Beijing’s currency manipulation has given its exporters unfair pricing advantages to the detriment of other nations.
President Bush never gave much sign of understanding the consequences of Chinese trading practices, but President Obama has repeatedly demonstrated that he does. If China fails to show progress in its behavior, it can expect the recent ratcheting up of pressure by the administration to continue. That’s a positive trend essential to preserving the current free-trade system. But sanctioning China is just the beginning of what needs to be done to reverse America’s industrial decline. The real test for Obama will be what he does about taxes and regulation on industry — especially environmental regulation, which has gotten completely out of hand and is now a huge job-killer. It would also be nice to see the White House apply the same standards to European transgressions that it is now seeking to apply to China — starting with the persistent pattern of illegal trade subsidies enjoyed by Airbus. But having said all that, I’m impressed by the moves Obama is making to rebuild American manufacturing. Since economic strength is the foundation of everything else that America strives to achieve, the president’s moves on manufacturing make me think I will vote for him in 2012. Again.
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