There’s enough of interest in Judge Glock’s rather sprawling post at City Journal, “Can American Cities Manufacture Again?”, that I recommend you read the whole thing. It touches on industrial policy, subsidies, taxes, educational policy and other subjects. I’ll just quote some snippets and then add my own commentary afterwards.
The confluence of the Great Lakes and their tributaries helps explain why the large area that comprises St. Louis, Pittsburgh, Rochester, and Milwaukee has dominated U.S. manufacturing for more than a century. While manufacturing employs only about 7 percent of the workforce in most states, these numbers remain at about 14 percent in much of the Rust Belt, and at over 16 percent in Wisconsin and Indiana. One finds a similar zone—called an industrial “banana,” ranging from Essen in Germany down to Milan in Italy—that has dominated European industry for generations. Its location in Western Europe’s center, which includes the intersection of the Rhine and the Danube, helped establish its preeminence.
Even when the importance of geography wanes, these industrial heartlands remain powerful. One reason is that existing industries inspire the creation of new infrastructure. New canals, railroads, highways, and airports attract more industry and then more infrastructure in a virtuous cycle. And the output of one industry, such as steel, is often the input of another, such as cars, so that the industries benefit from proximity and from being near to that burgeoning infrastructure, too.
Despite a national obsession with high-tech clusters like Silicon Valley, manufacturing industries and their workers are much more concentrated than service industries. The most concentrated industries in America are sectors such as carpet-weaving (still based in Dalton), paper products, and steel-rolling. Though proportionally a small part of our economy, these clusters are a matter of life and death for their home cities.
America’s deindustrialization is not only a story of failure. One reason U.S. manufacturing has declined is that we have been more successful in other spheres, partly because of our light-touch employment regulations. Economists Stian Westlake and Jonathan Haskel have shown that a positive relationship exists between the relative laxness of job regulations—that is, how easy it is to hire and fire people—and the amount of investment in “intangibles,” or nonmanufactured things like brands, software, and job training. Europe’s strict labor regulations encourage tangible investments and large-scale factories, for instance, since these can succeed even with stilted, immobile labor forces. But such regulations discourage the more ethereal investments and mobile workers who power the freer American economy.
Deindustrialization in the U.S. owes perhaps less to factors driving factories away than to the pull of productive and tradable service industries, such as software and movies. A Brookings Institution study ranked the U.S. as having one of the globe’s best manufacturing environments, a reality reflected in how, despite our proportionally smaller workforce, we still produce more real goods than any other country, though we’re now neck-and-neck with China in that regard. But America has an even more dynamic service industry. We wouldn’t want to follow the European path and revive manufacturing at the cost of discouraging mobility and eroding the nation’s dominance in service industries, which make up more than 80 percent of our economy.
The key problem with American deindustrialization is that those who have benefited have been a very different cohort from those who lost out. Those who lost out have never really recovered. And those who have benefited represent a much smaller slice of the American population. What of the other 75% of the population?
I think that in the final analysis Mr. Glock fails to apprehend the enormity of what has happened in the U. S. over the last 40 years. 40 years ago you could drive throughout the Midwest or the Northeast, off the main roads and in town after town after town there would be a court hour or seat of government, churches, stores, and a small number of light manufacturing facilities. Now much of that is gone and those towns are either ghost towns, greatly diminished, impoverished or all of the above.
As I have said before I think that we need a re-commitment to primary production (mining, agriculture, lumbering, etc.), secondary production (steel, refining, etc.), and tertiary production. We need to be a lot less reliant on finance and consumption in its various forms than we are today.
And as I have also said before the U. S. is actually better at mass engineering projects than it is at subsidized industrial planning and research. With new mass engineering projects the research and industry will happen.