pro-(U.S.) business conservatism

Michael Lind tries to imagine a conservative movement that really wants American businesses, rather than the investor class, to succeed. E.g.,

The devastation of American industry by foreign mercantilism need not be of concern to individual investors, as long as they can invest their millions or billions abroad. Nor does it bother multinational companies like Apple, which may be chartered in the U.S. but use production facilities in other countries as export platforms for the American consumer market. In contrast, a pro-business conservatism would call for defending American industries that are targeted for destruction or takeover by foreign governments and their “national champions.” Pro-business conservatives would not call unilateral appeasement of foreign state capitalism “free trade.”

And:

As individuals, American investors have no particular interest in adequate wages for the majority of Americans. Like Latin American oligarchs, elite Americans who live off global investments can retreat to gated communities in a system of class apartheid. The immiseration of the American people can provide the rentier elite with a buyer’s market in low-wage servants and private security guards. Productive businesses that depend on an American mass market, in contrast, recognize as Henry Ford did that workers are also consumers and that a domestic mass market for goods and services is sustained by adequate wages.

It’s an interesting read, but I’ve selected these two sections because they seem related. I.e., the Henry Ford model — pay your workers enough that they can afford your products — does American businesses little good if your workers can buy a cheap Kia instead and pocket the difference. (Which they will then spend on an iPad built in China.)

The world where consumers and producers rely on each other in a mostly closed national system — i.e., the world that spawned traditional pro-business conservatism — is largely gone. American investors and corporations are free to invest overseas instead of on American soil, and, by the same token, American consumers are free to buy goods made overseas.

On the other hand, we should carefully scrutinize why and in what ways other countries have an edge on us in terms of producing goods cheaply. It’s not as simple as lower wages. As Charles Duhigg, a reporter for the New York Times, points out in this episode of This American Life (and I think possibly also here, although I’m blocked by the paywall at the moment), wages account for relatively little of the cost of most consumer goods, and a rise in wages (i.e., bringing factories back from China to the U.S.) would not greatly increase the cost of (or reduce the profitability of) an iPad.

Instead, Duhigg thinks the main reason companies like Apple like building factories in China is that China has worked very hard to create special industrial zones, where components and final products are manufactured within blocks of each other. This enables companies to be nimble, quickly making changes to the product in order to react to sudden shifts in global markets. The U.S. generally does not engage in this kind of business/government creative partnership, because it smacks of central planning.

This is not to say wage and price differentials between countries are unimportant — after all, even a $10 difference in the manufacturing cost of an iPad means a substantial loss in profits when multiplied by the millions of units being manufactured and sold. But even here, the differences are not all about thrifty (and non-unionized) Chinese workers being willing to take less. A huge part of the problem, as Lind points out, is that other countries embrace mercantilism, while the U.S. largely embraces free trade. So other countries protect their key industries from competition and work to devalue their currencies in the global market (making their workers even cheaper than they otherwise would be, compared to workers paid in the strong American dollar).

We can address these problems, of course — help American manufacturing become more concentrated and more coordinated, build our infrastructure, and fight other countries’ mercantilism through trade agreements or through some judicious mercantilism of our own. But we can’t do it without a strong, empowered national government. In our competition with China, India, and other rising giants, we’re not just competing with their cheap labor. We’re also competing with governments that are willing to give their nation’s businesses what they need — while our government tries to privatize itself and also reduce taxes on the investor class. We can’t do all those things at once. A choice has to be made.

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