April 22, 2004

Two Wars?
Posted by McQ

Thomas Friedman thinks were actually engaged in two wars right now ... one we're addressing and one we're not:

The bottom line: we are actually in the middle of two struggles right now. One is against the Islamist terrorists in Iraq and elsewhere, and the other is a competitiveness-and-innovation struggle against India, China, Japan and their neighbors.

I've heard this argument a number of times over the decades. "We don't have enough students in science", or "We're being overwhelmed by Asian numbers in the hard sciences", etc. We all remember when Japan was going to take over the US in the '80s because they had quality and technical expertice plus government subsidizing their industries. We all were told that the big 3 would fold and we'd all be driving either Japanese or European cars in the future.

Of course none of that came true. That isn't to say we shouldn't have some concern over this. But, its my opinion that this isn't the crisis Friedman would have us believe EXCEPT in terms of making it too hard for foreign students to come here and study. That is something we have to sort out and do in fairly short fashion as it IS this "cross-pollinization" which allows us to take the best of the best and keep them here.

Another point worth mentioning concerning "outsourcing", Friedman mentions that American companies are setting up shop in other countries for good reasons:

It is because governments in these countries are so eager for employment and the transfer of technology to their young populations that they are offering huge tax holidays for U.S. manufacturers who will set up shop.

He also notes that many of them have national health care, which removes a huge cost and liability burden from the manufacturing.

I am NOT a proponent of national health care (it is NOT something the government is going to do better, faster or cheaper). But I AM a proponent of some sort of health care reform that removes health care as a responsiblity of business.

It should be a commodity which is purchased OUTSIDE business ... through large associations for instance ... which would have a large enough pool to spread cost and liablilty (that's not to say that business can't help with the cost ... an employment benefit or incentive for instance). That would dramatically reduce the cost of doing business here and eliminate portability and pre-existing conditions as problems faced by workers (keep your premiums paid and you can change jobs like you change your shirt and never have a health insurance problem).

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Friedman touches on a larger problem that is a function of the Bush administration and the GOP more generally. The Republicans represent old-line industries and the interests associated with those industries. Many of those industries are extractive, e.g., mining, oil, timber, etc. Indeed, Bush and Cheney are former oilmen. In this sense, the GOP is backward looking. It is not surprising that other countries may be over taking us in the new-line industries, i.e., those related to the internet and bio-tech. These new-line industries are not finding the U.S. to be hospitable territory these days, given the GOP's orientation. Indeed, there is a bias on the part of the Repub's against these new-line industries.

Alot of this bias has to do with the fact that new-line industries are based in liberal enclaves such as San Francisco/San Jose, Boston, Seattle, Minneapolis and the like. The right-wing hate machine like to denigrate these liberal enclaves and the people who inhabit them. But the fact is that it is these same creative environments - tolerant, open-minded environments - that drove the go-go 90's and put the U.S. at the forefront of innovative technology.

With the current administration's bias against new-line industries, we are losing are edge. Richard Florida wrote about this recently in the Washington Monthly:

http://www.washingtonmonthly.com/features/2004/0401.florida.html

Link to this article. If there is one reason the GOP should cede power, it is contained in this article. The GOP's backwardness is hurting us economically. It's time to get this country looking forward again.

Posted by: mkultra at April 22, 2004 11:37 AM

I'd have to disagree completely. Oil, lumber, mining aren't anymore "old" industries than are computer chips ... they're at most mature industries. An "old" industry would be the proverbial buggy whip manufacturer, and, frankly, industries like steel, textiles and the manufacturing of clothing ... all industries in which we find ourselves non-competitive. Oil, lumber, mining, etc, are resources and the business is where the resource is.

To say the Bush administration favors "old business" just doesn't pass the sanity check.

For instance, the tax cut benefited ALL business. It reduced taxes on companies which were a part of the 'go-go' '90s ... something the then Democrat administration COULD have done but didn't.

Face it, the previous administration got economically lucky and now wants to claim some sort of "formula of success". It just isn't there.

The"old" industries, if any, are steel, or textiles, or clothing manufacturing. The ones the unions, with Democrat support, keep trying to have kept in business through government subsidy and protection.

Some think that innovation and research are the job of government.

I disagree.

The job of government to provide the atmosphere (legal/regulatory) for both to take off on their own, and to get the hell out of the way when it does. And while it makes sense that government finance some research (that which has to do with defense, for instance), for the most part it should stay out of it.

No administration, to include the previous administration, has done that well.

So no, sorry, I don't buy the "Bush supports the OLD industries" theory you espouse. It just doesn't wash.

Posted by: McQ at April 22, 2004 02:35 PM

God, you are wrong on so many levels its hard to know where to start.

First, steel, textiles, mining and lumber ARE old industries in at least two senses. One, they have been around for over 100 years. And two, they deal with finite resources. We will run out of oil someday, you know. Don't think we will ever run out of silicon.

And yes, Bush does favor old industries. Just look at the FACTS. Here is the money passage from the Florida article:

"Bill Clinton was, in many ways the midwife of the new creative economy. Present at the birth of the '90s boom, he recognized it quickly for what it was and helped spur it by such projects as wiring poor and middle-class school classrooms around the country for the Internet and beating back Republican efforts to cut immigration. For this, he was beloved not only by creatives, but also by many of those in Red America whom he convinced would benefit from the new economy. But he also personally symbolized the creative-class archetype--its libertine character, its cleverness, its global-mindedness. For this, he drew the lasting enmity of many millions of those in the "other" America. It's often been said that Clinton was the embodiment of the '60s, and one's position for or against him revealed one's attitude towards that era. It's perhaps more precise to say that with his constant hyping of new technologies and "bridge to the twenty-first century" rhetoric, Clinton was the embodiment of what the '60s became--the creative class '90s, hip but pro-growth, open-minded and progressive but ambitious.

"While Clinton and the Democrats increasingly drew their support from the high-tech parts of the country, the Republicans increasingly came to represent the low-tech areas. Republican leaders like Tom DeLay and Dick Armey were beginning, during the early 1990s, to articulate the cultural and political antagonism Red America felt towards the emerging creative-class culture. But the politician who most skillfully spoke to these grievances was George W. Bush.

"Clinton's whole life is a testimony to the power of education to change class. Bush prides himself on the idea that his Yale education had no effect on how he sees things. Clinton was a famous world traveler, appreciative of foreign cultures and ideas. Bush, throughout his life, has been indifferent if not hostile to all of that. Clinton, especially in the early years of his administration, had the loose, unstructured management style of an academic department or a dot-com--manic work hours, meetings that went on forever, lots of diffuse power centers, young people running around in casual clothing, and a constant reappraising of plans and strategies. The Bush management style embodies the pre-creative corporate era--formal, hierarchal, with decision-making concentrated in the hands of only the most senior executives. Clinton was happy in Hollywood and vacationed in Martha's Vineyard. Bush can't wait to get back to Crawford. Clinton reveled in the company of writers, artists, scientists, and members of the intellectual elite. Bush has little tolerance for them. Clinton, in his rhetoric and policies, wanted to bring the gifts of the creative class--high technology, a tolerant culture--to the hinterlands. Bush aimed to bring the values and economic priorities of the hinterlands to that ultimate creative center, Washington, D.C.

"As president, Bush chose a group of senior advisors whose economic backgrounds have a century-old flavor. His vice president is an oil man. His treasury secretary, John Snow, is a railroad man. The White House's economic and fiscal policies have been similarly designed to provide life support for these aging red-state industries: $190 billion in subsidies for farmers; tariffs for steel; subsidies, tax breaks, and regulatory relief for logging, mining, coal, and natural gas. Even Bush's tax policy shows the same old-economy preference. His dividend tax cut was supported by mainstream, blue-chip companies, which stood to gain, but opposed by high-tech executives, whose company stocks seldom pay dividends.

Thanks to the GOP takeover of Washington, and the harsh realities of the Big Sort, economically lagging parts of the country now wield ultimate political power, while the creative centers--source of most of America's economic growth--have virtually none. Democrats Dianne Feinstein and Barbara Boxer speak for Silicon Valley and Hollywood. New York's Charles Schumer and Hillary Clinton, also Democrats, represent New York's finance and publishing industries. Washington State, home to Starbucks and Microsoft, has two Democratic senators, Patty Murray and Maria Cantwell. Boston's Route 128 and Washington's high-tech Maryland suburbs are also represented by Democratic senators. It's hard to understate how little influence these senators have with the Bush White House and in the GOP-controlled Congress."

At the quoted passage makes clear, Bush tax policy favors the old over the new, the extractive over the creative. Contrary your assertion, the tax cuts favored the old industries because of the nature of how these businesses are valued and the nature of how they compensate their employees. Bush also subsidizes these old line industries, as Florida makes clear too.

But more to the point, Bush represents a portion of the culture that despises the new engine of economic development in this country, along with the engineers. They despise and envy the Blue states. Yet it is these Blue states that are the economic engines of this country. It is also in the Blue states that we find the best colleges and universities. Harvard and MIT are in MA. Stanford is in CA. Yale is in CT. I could go on. Your elite universities - PRIVATE engines of innovation and research - do not find a home in Bush's Red America.

The funniest part about your post is how far removed from reality it is. Today, the Blue states contribute more to the federal government than they get back. The opposite is true for the Red states. In other words, the Red states - those that support Bush - have become the new welfare queens. They are the ones dependent on the public teat. They are the ones that demand and receive subsidies. And Bush represents their interests.

It isn't the Democrates protecting old line industries. Bush was the one who imposed the steel tariffs, not Clinton. In fact, Clinton was more of a free-trader than Bush has ever been.

C'mon McQ - look at the facts. Just because you say it doesn't make it true.

Posted by: mkultra at April 22, 2004 06:42 PM