Yes, we need a manufacturing base

June 1, 2003
The debate over whether or not America needs to remain a strong manufacturing nation has been going on for at least two decades

The debate over whether or not America needs to remain a strong manufacturing nation has been going on for at least two decades. On one side are economists who claim the United States does not need brick-and-mortar factories. They say we can grow prosperous as a service economy oriented around such activities as banking, insurance, the information age, telecommunications, cable TV, selling real estate, and making rap videos.

An opposing group says we can’t be prosperous just by exchanging slips of paper or electronic messages with one another. We actually have to make products for people to buy and sell. Say what you will about wealth, most of us still gauge how prosperous we are by how much “stuff” we have or how much we can buy.

After reading supposedly learned and persuasive dissertations by scholars who say we do not need a manufacturing capability, I think of how labor leader George Meany summed up the issue. Paraphrasing his thoughts, he said that our nation will never be prosperous if all we do is wash each other’s laundry.

I think he was right, and sometimes a folksy comment like Mr. Meany’s can make all the scholars in the world look foolish. We are a diverse nation, and we all can’t be stockbrokers, investment bankers, and insurance executives. We have to have room for people who can’t offer much more than an ability to put a nut on a bolt or back a truck to a loading dock. And that means we need manufacturing plants, and lots of them.

Of course, even the nut-on-a-bolt thing is an outdated view of manufacturing. Today, manufacturing provides jobs not only for unskilled people, but also for some of the most skilled people in the world. And here I am talking about those who write software for industrial control, design sophisticated motion systems, and know how to do sophisticated design engineering.

One of the major problems with manufacturing is the class warfare that seems to bubble just under the surface of every political initiative in our nation. America definitely has a lovehate relationship with corporations. John Q. Public, egged on by populist politicians, begrudges every penny of profit that manufacturers earn. The word profit is almost always equated with exploitation. As just one example, consider the double taxation of dividends.

Corporations are taxed on any profits they earn. Then when they give these profits to stockholders, the earnings are taxed again. Unfortunately, too many people don’t see anything wrong with this. They think that eliminating double taxation on corporate profits would merely provide welfare for the rich, and the money would be lost to the economy. But the supposedly fat-cat owners of corporations are ordinary people like you, me, our neighbors, and our pension funds. Today, 52% of all households own stocks either directly or indirectly through mutual funds. Eliminating the tax on dividends for just senior citizens, almost 10 million of whom own stocks, would give each of them more than $900 per year in additional purchasing power.

The Cold War is heating up again

Here is something you won’t read in your local newspaper but was pipelined to me from inside the Beltway of our nation’s capitol. Among the big losers in the Iraq war are the Russians.

An unpublicized fact is that the Russians designed virtually every bit of Iraq’s defenses before the U.S. invasion, and they also orchestrated the military moves in response to it. The war, in a sense, was a battle between Russia and the U.S., and the Russians were soundly beaten.

Moreover, the U.S. went into Afghanistan and in a few weeks did what the Soviets couldn’t do in 10 years of military action. All of this is causing great consternation and soulsearching in Russian military circles.

On the opposite side of the coin, the Russian weapons industry believes the war will give it a boost. They say that obsolete Soviet-era hardware put up a good fight against the latest U.S. technology. They are bragging about how an anti-tank grenade launcher introduced more than 40 years ago managed to stop an Abrams tank. They say lack of adequate air defenses is what made Baghdad fall so quickly.

The Russians are expecting to see sales boom for anti-tank weapons, night-vision equipment, and air defenses, especially among Arab countries that have money and are not pro-U.S. Referring to the U.S. going into action against Russian arms in Iraq, the Russian defense minister said, “Thank you for the free advertisement.”

Another Russian official, however, cautioned against undue optimism. He says that if Middle Eastern countries are warned that they are not to mess with the U.S., the prospect for Russian sales will go to zero.

Finally, something else on the downside. China is putting into place an impressive railroad-based system of intercontinental nuclear missiles. Being launched from railroad cars constantly on the move, the missiles have significant capability to survive attacks. Apparently, the Cold War isn’t over.

Joe DiFranco, Group Publisher
[email protected]

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