By Cesar Fernando Lumba
A few years ago I came across a report that said the U.S. was sitting on oil deposits so huge we would someday dwarf even Saudi Arabia.
I did not give that report much credence, knowing that the U.S. is the number one land of the too-good-to-be-true stories. Well, what do you know? Today, the U.S. is on its way to becoming the number one producer of oil and gas in the world – if it is not as yet. And we’re barely scratching the surface.
In Texas, Pennsylvania, North Dakota, in Louisiana and the common boundaries of Utah, Colorado and Wyoming, there are shale oil discoveries that dwarf even our most expansive imaginations.
What will this do for American business in general and manufacturing in particular? Manufacturing will return to the U.S. No doubt about it now.
Energy is one of the major costs in any manufacturing operation, and with the cost of energy in the U.S. headed for their near-historic nadir in real dollars, the U.S. suddenly finds itself with a huge advantage over manufacturing competitors such as China, South Korea, Taiwan, Japan, Germany, Italy, etc.
The major manufacturers that fled the U.S. at the turn of the century and well into the Bush, Jr. presidency have cast a fond gaze at the land they abandoned only a few years ago. While it’s not as yet a stampede, there’s no question that the U.S. government can help the formation of one by providing financial incentives to come back to America.
Here’s my proposal. Those companies sitting on huge profits overseas and are reluctant to bring the profits home to America because of our high corporate tax rates should be allowed to bring those profits into the country at a reduced flat rate of 15% provided that the money is used to build or renovate their abandoned factories in the U.S.
This simple, straightforward quid pro quo between the U.S. Congress and American multinational businesses will put America on track to become the most muscular manufacturing power once again.
The benefits are huge. Americans will once again have jobs that pay decent wages, not the McDonald’s and Walmart type jobs. The American middle class will be revived and strengthened. Those who immigrate to the U.S. will find good jobs and contribute to the Social Security and Medicare systems.
There will be more money available for the repair and maintenance of the crumbling U.S. roads and bridges, ports and airports.
There will be more money for research and development. Currently there are companies that are set to manufacture vehicles that double as cars and airplanes. Of them all I like Gilo Industries’ Parajet SkyRunner the best. Don’t ask me why, I just like the way it looks.
It’s a British company, but there are American companies also on the forefront of the revolution.
A major American manufacturing renaissance will lead directly to innovations that existed at one time only in science fiction.
That’s our brave new world. And in this brave new world, we are under severe stress to change our concept of free trade. No country, no manufacturer has a right to dismantle our manufacturing base and ship it to other countries.
What happens to our proposal to require major manufacturers to make 51% of products intended for the U.S. market within the boundaries of the United States? It will gain an even stronger headwind. There will be less economic reasons to oppose such a requirement
We will protect our manufacturing because it is not only the industries that we shall be protecting, it is the future of our children and the future of Americans yet to be born.
And this takes us back to what we have been suggesting in this blog all along: a revolution in economic thought, specifically in the way at we look at manufacturing.
Footnote: Historically, according to Tyler Duden in What Pickety Didn’t Say…about Economics: “Britain had the most protected economy in the capitalist world in the late 18th and the early 19th century. Much of this protection was provided in order to promote British manufacturers against superior foreign competitors in Europe, the Low Countries (what are Belgium and the Netherlands today) in particular.
“The US went even further. Taking inspiration from British protectionist policy, Alexander Hamilton, the first Treasury Secretary of the US (that’s the guy on the ten-dollar bill) developed a theory called the ‘infant industry argument’ – the view that the government of an economically backward nation should protect and nurture its young industries until they ‘grow up’ and can compete in the world market. Hamilton died in 1804 in a pistol duel, but the US adopted protectionism in the 1820s and remained the most protected economy in the world for most of the next century.”
Protectionism was the correct American trade posture in those days, it is the correct posture once again. But with a very, very important twist. Today we will encourage all nations in the world to protect their manufacturing sectors. America will not preach free trade outside the U.S. but practice protectionism at home. We will not be the world’s number one hypocrite.
If nearly all countries protect their manufacturers by requiring that most products sold in their countries are made within their territories, the result will be a world-wide boom in manufacturing and construction the world has never seen – ever.
(You may contact the author by email at firstname.lastname@example.org and by Twitter at @morningcall11.)