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 Richmans' Trade and Taxes Blog

Judith Stein: US government research funds should require that the developed products be produced here
Howard Richman, 2/5/2010

CUNY professor Judith Stein is the author of the forthcoming Yale University Press book, Pivotal Decade: How the United States Traded Factories for Finance in the Seventies. In a commentary in the February 4 Philsadephia Inquirer she compares Obama's policy today with that of the United States back then. Here's her basic argument:

Green jobs are surely needed. But green Democrats simply echo the Atari Democrats of the 1980s, who concluded that traditional manufacturing was disposable and high technology was the wave of the future. During this era, the young Barack Obama attempted - and failed - to find jobs for displaced steelworkers in Chicago.

She cites some interesting statistics about solar panel manufacturing:

The U.S. government has invested millions in photovoltaics research, yet the country accounted for only 5.6 percent of global production in 2008, down from 30 percent in 1999. Despite the government's investment, the only leading American company in the field does its manufacturing abroad.

And here's a telling anecdote about our wind turbine trade with China:

The Chinese government ... rigged the bids for large contracts to supply wind turbines by creating technical requirements that disqualified multinational companies. By contrast, when American stimulus funds subsidized a joint U.S.-China wind-power farm in West Texas, it turned out that Texas stood to get 30 permanent jobs to China's 3,000. After Sen. Charles Schumer (D., N.Y.) protested, the Chinese agreed to build a wind-turbine factory in Texas.

Her solution is that US government research funding should be tied to commitments to produce the products in the United States. To this end, she is willing to take on free trade orthodoxy. She concludes her commentary:

The Obama administration needs to do more than simply throw money at research or offer tax credits. If it wants green jobs not simply to please environmentalists, but to provide work for Americans, it will have to make aid contingent upon domestic job creation. This means altering decades-old policies built on free trade, financial deregulation, and tax cuts.

Stein is part of a trend of academics who are now realizing that we are "Trading Away Our Future", as we noted in our 2008 book. How different Stein's 2010 book will be from, say, New York Times columnist Thomas Friedman's 2005 book The World is Flat, with its non-ending promotion of the benefits of free trade!

Academia is coming around, but the truth has not yet penetrated to Washington. Free trade policy is the equivalent of unilateral disarmament when trading with mercantilist countries. Stein gets it! We look forward to reviewing Stein's new book.