No one can pretend to be surprised when Bail-out Barack talks up an interventionist manufacturing policy in his campaign for re-election in November 2012. The man who defied the United States Constitution in displacing prior creditors at Chysler and GM during the bail-out bonanza of 2009, is unlikely to change his industrial policy spots a little more than two years on, given that he has focused his campaign towards the left-of- center of the Democratic Party.
The President is intent on pursuing an industrial policy driven by special subsidies and tax breaks for politically correct manufacturers such as Solyndra and GM, while punishing multinationals that do business overseas. He is prepared to force down the liabilities of failing companies such as GM to provide a facade of economic success under a mantle of continuing corporate failure.
What is more surprising, at first sight, is to find one of the three front-runners in the GOP presidential primaries – Rick Santorum – also running to the left-of-center in economic policy space with an industrial policy designed to outflank the President while a second front-runner – Newt Gingrich – runs on a far left-of-center policy to discriminate in favor of financial services.
Rick Santorum’s policy is to discriminate against all non-manufacturing corporations in terms of the corporation tax. No doubt campaign monies are being funneled into his campaign from corporations that are borderline manufacturing. One can only imagine the Washington lobbying frenzy that will work its way across that borderline should his policies be enacted.
Newt Gingrich ,of course, is the champion of Fannie Mae and Freddie Mac and of securitized junk bonds fouling up world financial markets. With Newt Gingrich in office, a new housing market bubble would rage across America, while President Gingrich would fill his worthless deep pockets with financial sector campaign monies.
The economic reality is that industrial policies of any kind typically foul up the United States economy. The manufacturing sector is fully capable of holding its own in the absence of government intervention, as key statistics clearly show.
Between 1970 and 2010, America’s global manufacturing share has held firm at 22 percent despite the rise of Germany, Japan, Korea and China. Since 1947, the U.S. economy has grown sevenfold. So has U.S. manufacturing output. U.S. manufacturing has declined as a share of GDP, from 26 per cent in 1960 to 11.7 per cent in 2010, largely as a consequence of rapid growth in the service sector. It remains a powerful contributor. Taken alone, U.S. manufacturing would still be the eighth largest economy in the world.
The true measure of economic success in U.S. manufacturing has been the decline in jobs. In 1946, U.S. manufacturers employed one in three workers. In 2010, they employed one in eight. This adjustment has been driven by economic progress in the form of productivity gains. In constant dollars, real manufacturing output stood at $35,000 per worker in 1947. In 2010, it had risen to a remarkable $150,000.
Keep your political hands off U.S. manufacturing, Messrs Obama and Santorum. Quite frankly neither of you know what you are doing. Keep your campaign hungry fingers off Fannie Mae and Freddie Mac, Newt Gingrich. Your rent extraction policies have already caused more than enough harm. You surely do know what you are about.
The only front-running market-oriented candidate in the 2012 Presidential race is Mitt Romney. GOP voters should keep this well in mind as this primary season advances.