Americans really want to know why we don't make stuff anymore. What happened to American manufacturing? Why is everything made in China now?

The answer: Because we are now at the economic -- and political -- mercy of the nation's financial-services sector.

Here's an illustration of what's happened to America in the past 30 years, taken from page 33 of Kevin Phillips' fine book, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, which predicted the global economic crisis well before it happened:

enlarge

As Phillips explains, this shift came about because both political parties in Washington -- well fed with Wall Street money -- decided America's economic future lay in the financial sector, not in manufacturing.

Phillips describes in detail how the financial-services sector came to be seen within the Beltway as "the winner" for politicians to back as the nation’s economic workhorse, fueled in no small part by the ongoing activities of the President’s Working Group on Financial Markets, even as the nation’s manufacturing capacity was slowly being gutted. He explores how this was facilitated by Republican governance this past decade, particularly from a Bush White House that favored the familial oligarchical approach to economics, and rapidly accelerated during the post-9/11 push to expand credit. This was manifested in the "securitization" mania that took root in the context of a "Wild West" milieu for all kinds of moneymaking devices, especially low-interest adjustable-rate mortgages.

In the process, both of America's political parties have largely been subsumed by the financial-services sector. The most recent manifestation of this is the work of the supposedly bipartisan Catfood Commission, whose recommendations, if followed, would produce "a major transfer of income upward, from the middle class to a small minority of wealthy Americans," according to Paul Krugman.

What's particularly striking about its work is that it quite patently intends to place all the burden for solving the deficit on the backs of working people (mainly through serious Social Security cutbacks) while steadfastly refusing to consider new ways of improving its revenues, as Matt Yglesias has observed.

And atop that list of ignored potential revenue sources: The financial sector.

Dean Baker made an acute observation about this:

The deficit report put out by the commission's co-chairs, Alan Simpson and Erskine Bowles, had one striking omission. It does not includes plans for a Wall Street speculation tax or any other tax on the financial industry.

Continue reading »

You'll remember I wrote about this before, when I first found out Whirlpool took millions in bailout money and then announced they were moving this plant to Mexico.

Now they've closed the plant and soon the town will turn into a ghost town:

“We were considered the refrigerator capital of the world,” said Randall Reynolds, who was a forklift driver.

But that family tradition will soon end because Whirlpool plans to close the plant on Friday and move the operation to Mexico, eliminating 1,100 jobs here. Many in this city in southern Indiana are seething and sad — sad about losing what was long the city’s economic centerpiece and a ticket to the middle class for one generation after another.

“This is all about corporate greed,” said Ms. Ford, who took a job at Whirlpool 19 years ago. “It’s devastating to our family and to everyone in the plant. I wonder where we’ll be two years or four years from now. There aren’t any jobs here. How is this community going to survive?”

At a time when the nation’s economy is struggling to gain momentum, Whirlpool’s decision is an unwelcome step backward. It continues a trend in which the nation has lost nearly six million factory jobs over the past dozen years, representing one in three manufacturing jobs.
Connie Brasel, who earned $18.44 an hour making thermal liners for the refrigerators, sees Whirlpool’s move as a betrayal not just of the workers but also of the United States.

“This country made Whirlpool what it is,” she said. “They didn’t get world-class quality because they had the best managers. They got world-class quality because of the U.S. and because of their workers. And now they want to pack up and move to Mexico. I find it offensive.”

[...] The closing leaves not just Ms. Ford and her son without a job, but also her husband, a worker in the metal-pressing shop.

“My mom and dad told me that when they were young, there were jobs everywhere,” she said. “They said we had Whirlpool, Bristol-Myers, Mead Johnson, Windsor Plastics, Guardian Automotive, Zenith. Now if you want to find a job, there’s nothing around.”

Ask the workers who is to blame, and they say not just Whirlpool, but also President Bill Clinton for having negotiated the North American Free Trade Agreement, which eliminated tariffs on trade with the United States’ neighbors. They say the pact has siphoned jobs to Mexico.

They also blame Indiana’s governor, Mitch Daniels, saying he has largely ignored their plight, and President George W. Bush and President Obama, saying they had done little to reverse manufacturing’s decline.

“When people are unemployed for a long period, they would look at any administration, including this one, as being part of the problem and not doing enough,” said Mohammed F. Khayum, the dean of the University of Southern Indiana’s business school. “It can definitely play a role in this November’s elections unless things turn around before then.”

Our country is missing a strong industrial policy, with an administration and Congress that chooses which manufacturers are important to support --and why. As long as economic disasters like this are repeated all over the country, I don't think Democrats are going to be pleasantly surprised this November.