Corporate executives and holders of financial assets—I’ll call them “capitalists” for short—are ceasing to invest in American industry.
Instead corporations are investing their profits in buying back stock, which automatically increases the value of the rest of the stock. This, by the way, were an illegal form of stock market manipulation prior to 1982.
Meanwhile American manufacturing jobs are going away.
Commentators such as Kevin Drum and Jonathan Bernstein look at the upswing in employment during the Obama administration and conclude that American workers have nothing to complain about, and therefore there is no reason to be concerned about why so many of them vote for Donald Trump. The reality is that things have been getting worse for a long time and the pot is finally boiling over.
I don’t have a simple or a complete solution to this. In a capitalistic free enterprise system, it is hard and maybe impossible to resist the gravitational attraction of maximum profit.
Hillary Clinton’s idea is to give tax breaks to companies that invest in desirable ways. But this method has not had a big impact in the past. There are too many ways to game the system, and government bribery is not a good basis for making investment decisions.
Neither do I see much use in trying to browbeat China and other nations for protectionist policies. Instead of being concerned about what other countries are doing to help their industries, we should be concerned about what we can do to help our own.
Here are things I think would help:
- Stop government at all levels from dis-investing in needed public infrastructure. The nation needs roads, bridges, airports, seaports, dams and water and sewerage systems as much as it needs factories and machinery.
- Roll back the financialization of the U.S. economy by enforcing the laws against financial and consumer fraud, breaking up the “too big to fail” banks, and enact and enforce usury laws.
- Build up the domestic market by strengthening labor unions and raising the minimum wage.
- Let foreigners sell in our domestic market only if they make a positive contribution to U.S. productivity and employment (which is the policy of China, Japan and many other countries)
- Refrain from enacting trade treaties such as the TPP that limit the nation’s ability to help its manufacturing industries, and try to renegotiate existing treaties that do.
- Encourage worker-owned businesses. They will do everything they can to survive where they are.
Nationalization of industry in theory would work. In practice it would be likely to result in economic policies based on what Robert Reich called “historic preservation”—propping up declining industries rather than investing in new industries.
I think this is what happened with nationalized industries in Britain. Worker-owned and government-owned industries are both called “socialism,” but there is a world of difference between them.
The first step is just to admit that the economic system does not serve the interests of the vast majority of Americans. Then better minds than mine can try to come up with better answers than mine.
LINKS (and sources of the charts)
The Mystery of America’s Missing Capital Investment by Peter Coy for Bloomberg Business.
Why Poor White Males Are the Core of Trump’s Support by Ian Welsh. If he weren’t so obviously hostile to them, Trump probably would get the vote of a lot of African-American, Hispanic and even Muslim working people.