Build Stuff and Make Things

To fix what deindustrialization broke, manufacturing still matters—don’t let anyone tell you otherwise.

Build Stuff and Make Things

Canton, North Carolina (pop. 4,400) will soon lose its largest employer, a century old paper mill. Layoffs were scheduled to begin on June 9, 2023. Ultimately, 900 mill workers will be out of a job. More than a quarter of the working-age population.

Worse still, if the closure is not prevented, the better part of the region’s remaining workforce will also soon find themselves unemployed. Truck drivers who move materials in and finished products out of the mill will be laid off. Technicians and mechanics who worked on the factory’s various machines will be laid off. Security firms, administrative firms, and other contractors will be let go. Restaurants and bars will go under. Doctors and private practicing professionals will leave. In short order, the skills and specialized knowledge of the mill’s workforce will be lost—making it that much harder to replace the plant in the future. Worst of all, unemployed workers will compete among themselves for what few jobs are left, putting intense downward pressure on wages in the region. Most will never again earn what they once did. The closure will suck all economic activity into its void like a black hole.

There is no more visceral a demonstration of the economic significance of manufacturing than the devastation wrought by its sudden disappearance. Replay this story thousands of times and you can approach where we stand today. Plant closures, off-shoring, and mass layoffs like these have been a staple feature of our economy for the last half-century. The scale of social costs is hard to quantify—though, rates of incarceration, poverty, overdose deaths, and murder offer a statistical approximation.

The collapse of manufacturing also helps explain a great deal of our current political situation. It explains why organized labor has shriveled from a behemoth that represented 1 in 3 workers in the immediate postwar moment, to a fraction of the size, representing only 1 in 10 today. Relatedly, it helps us understand why the Democratic Party has decided to tailor its appeal to urban and suburban professionals and the city-dwelling poor—groups that work on opposite income tails of the service sector in starkly unequal “knowledge cities.” Accommodating themselves to the “New Economy,” liberals see appealing to blue-collar production workers as a lost cause; they are a stubborn economic anachronism, a culturally retrograde relic of a bygone era. Hopefully they’ll soon be extinct.

Meanwhile, the loss of manufacturing has generated a profound instability for those workers not lucky enough to work in proximity to the tech, medical, and education hubs that dot the coasts. That instability has, not surprisingly, driven many of them toward an increasingly erratic and anti-democratic Republican Party. The Right has railed against bad trade deals and promised to restore the old economic order, capitalizing on the disaffection of workers in left-behind regions. And not unlike the period before and between the World Wars, unstable and unequal societies, bifurcated as much by geography as by educational demography, tend to produce authoritarian outcomes.

More immediately, the loss of industrial capacity has made economic management very difficult (to the apparent surprise of many elites). After the pandemic, we found that our government was totally unable to regulate the supply of critical goods—even after the president dusted off wartime production policies. Supply-chain jams and logistics bottlenecks brought the delivery of goods from the global marketplace to a standstill, which meant increased prices. And during the record inflation that followed, leaders couldn’t flip a switch to bring prices down by simply making more things. There were no factories to make them in. Instead, we were told, the only way to “cool off” the economy was to “rein in” the consumers who were living fat off of “excess savings.” An insult added to the industrial injury.

All of this, it seems, has finally resulted in a rethinking.

Jake Sullivan, one of President Biden’s national security advisors, recently outlined the administration’s new “industrial strategy.” Sullivan, speaking for the administration, wholeheartedly embraced the once taboo idea that the government can and should incentivize manufacturing to suit national interests. Biden has poured hundreds of billions into manufacturing in direct and indirect investments. And recently, European Commission President Ursula von der Leyen committed even greater resources to infrastructural projects and rebuilding the industrial base of Europe. In policy journals and political magazines across the spectrum, the turn toward “industrial policy” has been widely praised. The nationalist Claremont Institute offers a blueprint for manufacturing growth. The liberal New York Magazine praised Biden’s industrial shift as “the death of neoliberalism.” Even the socialist New Left Review somewhat begrudgingly admits that “this neo-industrial turn should be welcomed.”

Industrial politics are back. Yet if the industrial turn is going to succeed, it must be built on sound assumptions and worthy political goals. First, if plant closures are like black holes, then reversing the damage needs to be akin to an investment supernova. Tackling the compounding problems posed by industrial collapse will not be cheap, and the only realistic source of funding for such big projects is the federal government. Second, we need more than semiconductors. We would make a big mistake if we limit the industrial renaissance to competitive high-tech exports. We need to fix our roads, bridges, tunnels, telecommunications, mass transit, public schools, and more. All of these things require tons of concrete, steel, rubber, glass, and other industrial products, products that can and should be produced in proximity to the project they are intended for and products that do not require cutting-edge technological breakthroughs. Third, any industrial strategy must be a self-conscious jobs program, and plants must be built where their economic impact will be greatest, not where costs are lowest. If the industrial revival is to mean anything, it must mean new plants in former industrial small towns and in large deindustrialized cities. There is no point in spending hundreds of billions of tax dollars on projects that will employ a few hundred workers in plants parked in hitherto unpopulated industrial parks when millions have been trapped in the economic jail cells created by deindustrialization.

We Get the Industrial Renaissance We Pay For

Even if everyone agrees that we need to bring back manufacturing jobs, deep skepticism remains: is re-industrialization even possible? The disappearance of manufacturing jobs has been naturalized, and the commonsense view is that there is no going back to those postwar glory years. Naysayers fret that the global economy is “oversaturated” with cheap goods, that there just aren’t enough people in Europe or the United States to keep buying toaster ovens and refrigerators. And the consumers that do exist won’t tolerate the kind of prices that would result from them being made in the United States.

The first response to pessimists is to point to what has been a somewhat remarkable turnaround in a few short years. The United States was set to create some 350,000 manufacturing jobs in 2022. In the end, the Biden administration exceeded this goal, reshoring around 364,904 factory jobs. Something is working. But to reverse the damage a lot more is needed. Industrial pessimists do have a point: it will cost a lot to fix this problem.

Since 1998 the United States has closed nearly 70,000 factories, which meant a loss of around five million jobs—and significantly more job losses in linked industries. At least two million of those were union jobs. We have swapped millions of well-paying, often unionized, factory jobs for low-wage, often part-time, jobs in services. Reversing that trend will be expensive. Unlike services and tech, manufacturing is capital intensive. Whereas, a dozen Silicon Valley startups can open with small loans for low overhead costs, a single factory requires sustained large-scale investments if it is to succeed. The trouble is, few private investors are willing and able to fork up the kind of cash needed.

Despite all the talk about the private sector leading the way, the plain truth is that the federal government is the only reliable investor capable of leading an industrial rebirth. It would be hard to find a single new manufacturing firm that hasn’t taken great advantage of the elephantine public subsidies provided in Biden’s signature legislation. The need for public investment has become so economically obvious that even some Republican legislators have come to terms with it. But, ever vigilant against the slippery slope of socialism, conservatives have urged caution and seek to prune back already modest investments.

Biden’s CHIPS and Science Act “provides $52.7 billion for American semiconductor research, development, manufacturing, and workforce development.” That’s a good start, but it’s not nearly enough, and it is unnecessarily limited in its scope. Consider that the much heralded industrial renewal currently underway added less than a tenth of the manufacturing jobs lost in just the last 25 years. In order to claw back high-wage jobs, let alone approach post-war levels of industrial capacity, we would need the equivalent of a new CHIPS and Science Act every year for the next ten years.

Relatedly, while offering private investors plenty of carrots, the Biden administration has seemingly forgotten about the need for sticks—there are few means to discipline big firms in cases of fraud, production failures, or unrealized promises. In typically American fashion, policymakers have assumed the very best intentions of private industry and the absolute worst of the public sector. The existing suite of policies provides public money, assumes socialized risk, and results in largely private gains. Biden’s Inflation Reduction Act could even result in the privatization of already existing public infrastructure. The moral hazard of this investment philosophy is seldom discussed, but that doesn’t make it any less parlous. Imagine the joy of the plant owner when he learns that, through public subsidy, he will have the good fortune to hire and fire his own investors—the taxpayers who happen to work in his factory. Imagine his glee when he realizes that, should his firm fail, the costs of failure will be borne by that same group, as they are all laid off. A perverted incentive system indeed.

The contemporary industrial renaissance is doomed to sputter and stall if it is limited by small investments and a philosophy that rewards private producers and assumes maximum public risk. The State must take on a much more muscular role. Unshackling the public sector’s role would mean spending much more money, forcing private enterprise to share profits with the government, and, most importantly, expanding the scope of what stuff gets made and where.

Build Big Stuff to Make Things

Manufacturing has a special way of fixing sick economies—a fact long known to developmental economists, and long ignored by leaders in the supposedly “advanced” world. As economist Nicholas Kaldor summed up in 1967, “the dominant influence on the rate of economic growth seems to be the growth rate of manufacturing.” By the most conservative estimates, a single manufacturing job creates somewhere between two and three jobs in services and other linked industries. Further, there is good reason to suspect that just as the process of deindustrialization resulted in de-unionization (some 70% of union job losses were due to the loss of manufacturing jobs), the process of re-industrialization could result in a re-unionization of the American workforce. And because manufacturing firms yield relatively large profit margins, workers, when well organized, can wring significant wage concessions from these employers. This is one reason that increases in the rate of manufacturing also increase the rate of wage growth, and not only for those who work in factories, but also for all those who work in industries dependent on manufacturing. Higher wage job growth, then, means a larger amount of demand in the economy, which in turn means more money spent on more manufactured goods. A virtuous cycle.

Biden’s industrial planners seek to unlock a similar cycle. But it’s easier said than done. The United States is at a particular disadvantage for rebuilding industrial capacity. Because of the unique strength of the dollar, American manufactures are necessarily more expensive than those built abroad. A strong dollar, ironically, suppresses strong demand for American exports. To meet this challenge, the government has decided to focus on making goods that are uniquely high-value and capital intensive. Instead of simply trying to make a better microwave oven, which a consumer can just as easily get from any number of countries, American industrial planners want to focus on ultra-high-tech competitive goods. The hope is that American firms will find the cutting edge and thereby increase the demand for these high-value exports that few other countries can produce. Increased exports will help restore the trade balance (one of the administration’s major goals) while boosting domestic production at home to help employ millions in higher wage jobs. That’s the theory at least.

Yet, as some critics have pointed out, the cycle of virtuosity might be harder to kickstart than it seems. In fact, it might not be possible at all. Pessimists lament that the real problem isn’t off-shoring, nor even the breakneck pace of automation in production. Instead, a global downturn in industrial growth is due to the problem of overcapacity. As more manufacturers enter the global marketplace, and as firms have radically increased productivity, the supply of manufactured goods has simply outstripped demand—everywhere all at once. Global returns on investments have shrunk, and manufacturers are pulling back worldwide. Once burgeoning developing economies like Brazil have witnessed a shocking collapse in industrial output—deindustrialization is a global pandemic.

Industrial cynics thus ask menacingly: what is to stop the production of semiconductors and microchips from reaching overcapacity the very same way that cars or televisions have? No commodity is dear for very long. Eventually, even the highest-tech will saturate the market.

There is, however, another investment strategy.

Infrastructure, another historic driver of manufacturing demand, is an elastic need. The only thing stopping the building of public gymnasiums, new school buildings, highways, parks, and piers, is the government's willingness to spend the money on these projects. There are plenty of projects like these that demand investments in the production of high-value industrial products. And infrastructure oriented development has one enormous advantage over an export-dependent industrial strategy: infrastructure projects are necessarily sheltered from the overcapacity problem.

One explanation for China’s enormous manufacturing growth is their enormous investments in infrastructure. Consider that the United States spends a little more than one-half of one percent of its GDP on infrastructure (and it shows!). China, by contrast, spends about 5.8 percent—more than ten times as much. And those big investments have reaped big rewards, even for Chinese exports. When the world was plunged into the Great Recession, instead of doubling down on cheap exports, Chinese planners invested hundreds of billions in new rail infrastructure—a project that required hundreds of millions of tons of steel. Rather than import that tonnage they sought to boost steel production at home. In 2008, while the world was busy bailing out banks, the Chinese injected steroids into their iron and steel producers. At the start of the recession, China produced about 500 million tons of steel per year; they now produce about 1 billion. A new virtuous cycle was unlocked. In a few short years, the country has become the world’s top innovator, producer, and exporter of steel—plus they have a sparkling new train system. The United States, by contrast, now produces about 10 million tons less than we did in 2008. Obama’s fabled high-speed rail projects never materialized.

The Biden administration is certainly fond of infrastructure projects (and trains), but it seems a false curtain is drawn between “infrastructure” and “manufacturing”—and not enough money is coughed up for either. A successful strategy should integrate infrastructure and industrial goals. In order to supply regular new bus models to metropolitan transit agencies, we ought to lure bus manufacturing companies willing to abide by high labor standards to major American cities. Incidentally, this would mean an army of mechanics and technicians would need to be hired. And, on the other side of the production chain, a cache of warehouses would need to be built and filled with workers to stock and ship parts. Repeat the same localizing process across hundreds of metropolitan areas and the short-term costs will be more than paid for by the long-term gains.

The economic benefit is obvious. Equally important are the political and social returns: these kinds of projects offer us a path to targeted place-based manufacturing jobs initiatives. A means to heal the scars of our hoped-to-be post-industrial past.

We Need Jobs in Poor Places

The soundest reason for industrial renewal is not, as some believe, to better compete with China or anyone else in the global marketplace. As I’ve tried to show above, that is something of a fools’ errand—a new Cold War techno-arms race whereby competing powers try to one-up each other churning out expensive high-value goods, only to realize that they are hiring fewer and fewer workers and making cheaper and cheaper chips. Instead, the aim of improving industrial capacity should always be to improve the social condition—and specifically, to fix what deindustrialization broke.

The damage done by a half-century of industrial neglect has left some regions of the country much worse off than others. Phrases like “Rust Belt” evoke a distinctly regional understanding of decline; heat maps of opioid overdoses offer a morbid map. Luckily, some in government have considered that manufacturing renewal, without specific consideration of the regionally specific social outcomes, would be a wasted effort.

Representative Ro Khanna, a progressive congressman from California, has argued for the admirable but modest goal of building “100 new factories in 100 small towns.” The focus on the forgotten American small town is good politics, especially for Democrats. This constituency is so important for the party that even modest success, a change of a single percentage point or two, could decisively shift the outcome of the next presidential election. Moreover, it’s one group of voters that progressives, in particular, have failed disastrously to win over. Of the 100 members of the Congressional Progressive Caucus, only two represent small-town, predominantly working-class districts.

There is also good evidence that place-based industrial strategies work to repair the social damage wrought by disinvestment. Timothy Bartik, a senior economist at the Upjohn Institute for Employment Research, shows that some regions have been able to buck national trends associated with industrial decline thanks to targeted state-led investments. Lehigh Valley, Pennsylvania, which suffered greatly with the loss of its steel industry, has since regained a significant share of new production jobs. Similarly, Grand Rapids, Michigan has seen its share of manufacturing jobs grow by 15% since 1990. And, as a result, both regions have managed to stave off the social collapse characteristic of former factory towns.

Unfortunately, these examples are the exception. And without an explicit federal commitment to rebuilding deindustrialized regions, we risk letting these places continue their social descent while happily subsidizing new plants in hitherto unpopulated industrial parks.

A place-based focus, and especially a focus on former industrial powerhouses, is necessary if workers are going to feel the effects of any industrial renaissance. Further, the American big city is no less deserving of big investments. A tour through North Philadelphia would shock most observers by the sheer scale of poverty and disinvestment. Some neighborhoods have a staggering 61% poverty rate—nearly six times the national rate. Nearly everyone who studies poverty in Philadelphia insists that deindustrialization is one of, if not the, driving cause of these trends. The same can be said about Cleveland, Baltimore, St. Louis, Memphis, etc. The increase in poverty, and more importantly the decrease in steady employment for young men, has resulted in social disaster. In Philadelphia, zip codes with over 20% chronic male unemployment were the very same that posted skyrocketing rates of murder and gun violence. The Venn diagram between these statistics is nearly a perfect circle. There are all sorts of explanations for why this is—poor education, “street culture,” and single-motherhood are some of the most-cited culprits—but no matter how these factors complicate the picture, no story about urban poverty can escape the fact that derelict factories and crumbling smokestacks cast a sinister shadow over the ghetto. Despite this, most analyses of the contemporary urban crisis seem to ignore the very possibility of industrial renewal in the urban core.

Indeed, the growth and development strategies of many major American cities seem blind to the possibility of a manufacturing rebirth. In Pennsylvania, the modest manufacturing revival has entirely missed its principal city of Philadelphia. Big city developers and politicians have sought, instead, to replace high-wage, blue-collar work with high-salaried tech and medical jobs. The Silicon-ification of these cities does not bode well. There is no good explanation for how the hundreds of thousands of workers trapped in former industrial wastelands will get hired in the gleaming tech campuses of the future. “Learn to code” is not a jobs program. And the obliviousness with which that command is spat at poor people is matched only by the hubris of those who assume that our big cities no longer need people who build stuff and make things.

When it comes to manufacturing, liberal political imagination has been constrained by the narrow bounds of the Democrats’ political constituency. Big city mayors court professional-class employers; they entice young professionals with slick luxury housing developments; they look to mold the tech industry’s cutting edge in lush, ever expanding universities. Blue-collar workers just don’t fit into the new urban Democratic vista. Biden and other national leaders have realized that winning back small-town, working-class voters is vital, but the Party risks ignoring the trouble brewing in its own backyard—in shockingly unequal, big cities, home to pockets of poverty now several generations deep. Progressive professionals, with a public lament that often betrays a secret hope, see “gentrification” and intensive real-estate development as the only real solution for neighborhoods plagued with poverty, unemployment, and violence.

An industrial strategy that limits its reach to microchips and small towns just isn’t thinking big enough. Tearing down the walls between industrial policy, infrastructure projects, and urban development could go a long way to providing the kind of jobs initiatives that we sorely need.

Monumental Politics

Pisistratus, maybe the first “populist” in recorded history, spent a good deal of his rule reining in the powers of the elite and spreading Athenian wealth among the lower classes in the form of monumental construction projects and great popular cultural festivals. He sponsored public arts and built massive new temples and halls for the people of Attica to enjoy. Though he lacked any modern notions of “equality,” he rightly recognized that the gulf between the rich and the poor had grown untenable. The only means of stabilizing Athenian society was to reach some kind of compromise whereby the lower classes were afforded some leisure and could share in the wealth of their city. As a result, Pisistratus enjoyed considerable popularity.

A couple thousand years later, Franklin Delano Roosevelt, maybe the last successful populist in American history, repeated the playbook. Like Pisistratus, FDR rose to power in a climate of unrest and yawning inequality, he attacked the very wealthy, and he set about implementing his New Deal for Americans. Like Pisistratus, FDR left an infrastructural legacy that is unrivaled in American history. His Works Progress Administration employed some 3 million workers directly to build nearly 6,000 schools, 1,000 new libraries, 9,300 new auditoriums, gyms, and recreational buildings, over 2,000 stadiums, grandstands, and bleachers, over 1,500 parks, over 6,000 playgrounds and athletic fields, and nearly 1,000 swimming pools. And that's not counting the bridges, tunnels, roads, and highways, nor the monumental and iconic public buildings, like the Timberline Lodge (where The Shining was filmed). Most of these facilities are still in use today.

Not surprisingly, like Pisistratus, FDR was legendarily popular.

I don’t think the relationship between building monumental public infrastructure and political supremacy is coincidental. Today, the Left mainly remembers Roosevelt for his massive expansion of the welfare state. And while these improvements were a necessary and valuable contribution in the long march toward a more equal Union, FDR’s quest for public renewal was about much more than welfare expansions. Instead of seeing the poor as merely deserving of charity, pitiful and helpless, Roosevelt invited these men and women into the project of state building directly. They would build monumental public works projects. They would be employed by any number of three letter agencies: the CCC, the WPA, the CWA. And they would physically forge a new, more equal, public order through steel, brick, cement, and timber.

The scale of the New Deal’s infrastructure and industrial projects was awe inspiring, which was the intended effect. Even when many Americans were sacrificing, rationing, and experiencing the hardship of the lean war years, the work of building the New Deal inspired a sincere sense of economic optimism. By proving the power of public works, Roosevelt managed to raise the public spirit to soaring heights. Bayard Rustin, marveling at that moment, recalled that “During the period following Pearl Harbor, black and white illiterates from the farms of Mississippi, Georgia, and Alabama went into factories, and within three months they were making planes which flew.” Whenever we hear about how impossible it is to get this or that done, how we should focus on training and education over building and making, or how the “labor supply” is of poor quality, we should remember that ordinary workers, without the privilege of extraordinary skills, once made planes that could fly.

What is so peculiar about today’s political moment, and what perplexes so many in the Democratic Party, is that during a period of relative economic stability, of rising wages, and of low unemployment, it seems that almost no one is pleased with the economy—only 19% of Americans think the current economic conditions are “good,” and 35% rate the economy as poor. The masses, of course, are much wiser than their betters. They knew then that the New Deal epoch would be one of shared prosperity and public generosity. Today, however, they rightly suspect that the economy is very ill and that the disease can’t be easily fixed by taking the bitter medicine of the Federal Reserve. A wholesale economic renewal is needed. Industry and infrastructure are the means for that renewal, but the ends are much grander.

We ought to build monumental projects, not only so that we might make more things, and employ more people in better jobs, but in order that we might rebuild hope in the government’s capacity for social betterment, restore a sense of pride in the working class, and raise our public spirit once again.

Dustin “Dino” Guastella is a research associate at the Center for Working Class Politics and the Director of Operations for Teamsters Local 623 in Philadelphia.