U.S. Economic Future Is Endangered

(The American Prospect)  This column was written by Ernest C. Hollings.

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Dubai could have a silver lining. The government didn't think twice about the security of six major seaports in the United States. It thought that what was good for the transnationals, for globalization, was good for the country. People now realize that corporate America is blind to the nation's security and its economy. Only government can protect our manufacturers, our economic strength. The bubble of "free trade," and of "protectionism," has popped. The charades of the "trade war" and of "globalization" are over. As Henry Clay observed in 1832, "The call for free trade is as unavailing as the cry of a spoiled child, in its nurse's arms… It never has existed; it never will exist."

We started a "trade war" when Alexander Hamilton rebuffed Britain's proposal that the freed colony should trade what it produced best while Britain would trade what it produced best — David Ricardo's "Doctrine of Comparative Advantage." In his famous "Report on Manufacturers," Hamilton told the Brits to bug off: We are not going to remain your colony, trading our rice, cotton, indigo for your finished goods. We will become a nation-state by building our own manufacture. The first bill to pass Congress on July 4, 1789, was for the seal of the United States. The second bill was a 50-percent tariff on numerous articles. The United States was built on managed trade or protectionism. Abraham Lincoln managed trade for steel for the intercontinental railroad; Franklin Roosevelt managed trade for agriculture; Dwight Eisenhower for oil; John Kennedy for textiles; Ronald Reagan for semiconductors.

By the time of Teddy Roosevelt, Edwin Morris in "Theodore Rex" writes: "This first year of the new century found her (U.S.) worth $25 billion more than her nearest rival, Great Britain, with a gross national product more than twice that of Germany and Russia. The United States was already so rich in goods and services that she was more self-sustaining than any industrial power … More than half the world's cotton, corn, copper, and oil flowed from the American cornucopia, and at least one third of all steel, iron, silver, and gold…the excellence of her manufactured products guaranteed her dominance of world markets." This industrial might — personified by Rosie the Riveter — was a principal force for victory in World War II. At the end of the war, the United States had the world's only manufacture and wisely launched the Marshall Plan to develop manufacture in Europe and the Pacific Rim. We called for "free trade" in an effort to open markets. But Japan and South Korea's markets remained closed. Even our winking at dumping violations and transshipments failed to budge Japan and South Korea. Now China follows suit.

In recent years, Congress strained to protect the nation's manufacture. It passed four textile bills, with Jimmy Carter vetoing one, Reagan vetoing two, and George H. W. Bush vetoing the fourth. Corporate America got the message: Our standard of living and domestic production were not to be protected — head offshore. By the time of the Clinton administration, the nation was not only losing hard manufacture but service jobs. With this outsourcing, candidate Bill Clinton campaigned on protecting the workforce of America with the slogan "it's the economy, stupid." After his inauguration, Clinton, who had been lukewarm about NAFTA with Mexico during the campaign, surprised everyone with his zeal for it. NAFTA with Canada provided free trade because Canada and the United States have the same standard of living. But Mexico needed to develop a free market for free trade — one including labor rights, property rights, a respected judiciary — in other words, the Common Market approach. In Europe, before admitting Greece and Portugal to the Common Market, the Market countries taxed themselves some $5 billion over five years to develop in those countries the conditions for a free market. Instead, NAFTA with Mexico protected corporate rights to produce, in disregard for labor, the environment, and the government.

Clinton placed the white tent on the White House lawn for the Fortune 500 and twisted arms to change the vote in Congress, joining congressmen in golf, granting C-17 contracts, cultural centers, and so on. This had the Democratic Party abandoning labor for corporate America. With the Democratic Leadership Council tending to corporate America, the multinationals, now transnationals, had a free run of government. Textile quotas were terminated, the Glass-Steagall Act was repealed, and offshore profits were repatriated at a reduced rate. Industry's Man of the Year, Jack Welch, announced that General Electric would not contract with any U.S. subcontractor that had not moved to Mexico. "Squeeze the lemon" was his slogan. Clinton led the way to give "most favored nation status" to China and put China in the World Trade Organization. The WTO pact, a 25,000-page document undermining trade, dumping, and environmental laws, provided an appeal to an unelected tribunal appointed by the transnationals and their consultants. Sen. Robert Dole from Kansas realized that this would leave U.S. production "in the hands of the philistines." He attempted to replace the appellate panel with a panel of three federal judges, but the transnationals turned him back.

The final blow to the United States workforce came with the admission of China to the WTO. Outsourcing hemorrhaged. Seven hundred-fifty research and development centers sprouted up in China to take advantage of the inexpensive talent pool. Microsoft is doubling its basic lab researchers this year to 800 full-time scientists. Two-and-a-half trillion dollars has been added to the national debt in the last five years. And George W. Bush now estimates a federal budget deficit this year of $706 billion. Foreigners have been financing a majority of this debt. Now these dollars flow back in as foreigners gobble up the production of the United States. Eighty-six hundred American companies, at a cost of $1.3 trillion, have been lost to foreign control in the last 10 years.

NAFTA with Mexico was supposed to create 200,000 U.S. jobs. Instead, we lost 400,000. NAFTA was supposed to limit immigration, but subsidized American agriculture put 2 million Mexican farmers out of business – farmers who later headed for the U.S. border. Even the Mexican industrial worker makes less today than before NAFTA. The U.S. trade deficit last year was $725.8 billion. The United States lost 2.8 million manufacturing jobs in the last five years. The growth of the U.S. labor force has also slowed. Had it continued at its normal rate, unemployment today would be 6.8 percent, instead of 4.8 percent. The Bureau of Labor Statistics reports that our workforce is so depleted that with two-and-a-half times the population, today we work less manufacturing hours than we worked when Japan hit Pearl Harbor. The Defense Department had to wait for Japan to furnish flat-panel displays so that we could attack Saddam Hussein during Desert Storm. Our defenses are down. The middle class disappears. Democracy weakens. The country is going out of business.

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