April 5, 2009

Bailout manufacturing and the infrastructure

Filed under: opinion article — newritings @ 3:59 pm
The great depression that followed the 1929 crash...

The great depression that followed the 1929 crash...

Contrary to conventional wisdom, the global financial meltdown has its roots in the decline of manufacturing in the United States. The global economy is horribly unbalanced and completely unsustainable for two fundamental reasons: first, many countries make it their priority to sell, literally, boatloads of manufactured goods to the United States, while much of the American system of manufactures has long been outsourced and off-shored. In return, exporting countries receive dollars, not goods. What to do with the dollars? We are witnessing the answer — the Chinese, Europeans, Japanese and others are losing their shirts in American real estate Ponzi schemes and other “sure bets”.

The second reason the current global economic system is unsustainable is that the oil and other critical materials used to run the global industrial system will soon start running out, and the global climate will soon start running amok. We have overshot the capacity of the Earth’s ecosystems to provide for unlimited resource use, while at the same time the center of the global system, the U.S, has no there. It seems like a good time to set up a globalization death watch.

The good news is, we can solve both disastrous structural problems at the same time. Manufacturing is the means of production for creating a set of green infrastructure systems that can get us through this set of environmental challenges. A well-designed governmental program of directing trillions of dollars toward infrastructure renewal can simultaneously be used to rebuild the deteriorating manufacturing sectors and put us on a path of long-term, sustainable growth.

Economies are made up of a mutually reinforcing set of systems, much of which we consider “infrastructure” — transportation, energy, urban, communications, water, waste, agricultural, and manufacturing systems. No wealthy society can do without all of them, theories of comparative advantage notwithstanding. The American Society of Civil Engineers estimates that we need to spend 2.2 trillion over 5 years just to make the current infrastructural systems adequate, but the problems are actually much deeper than that.

The transportation system is the most clearly vulnerable, because 99% of its energy comes from petroleum, a resource whose global production is peaking and whose long-term availability is declining. Transportation equipment will have to run on electricity, not oil — and electrified trains are the currently available technology.

Imagine if we replicated just half of the Interstate Highway System in order to create a high-speed rail system for passenger and freight rail. Using California’s high-speed rail program as an example of cost, the 20,000 mile system would cost about $1 trillion — much to conservatives’ chagrin, a number that seems reasonable these days.

The factories to build these systems are available — the global capacity for the production of cars is 90 million per year, while at their present rate the annual demand is about 45 million. Michigan could become a center of rail production, and networks of industrial suppliers and subcontractors could be rebuilt.

We also need to offer an alternative to the exclusive use of cars within urban and suburban areas by creating networks of light rail and subways within metropolitan regions, and perhaps most critically, we need to increase the density within our cities and suburbs that would make those public transit lines efficient. Creating town centers within suburbs, adding millions of affordable apartments within cities, and mixing stores with residences would not only revive a collapsing construction industry and help the middle class and the poor, but would also provide a market for manufactured construction materials.

In order to power electrified transportation networks, dense cities and towns, and the attendant factories, we will need to construct an entirely new, renewable electricity system. Work at Stanford University has shown that a national grid of wind farms could provide much of the constant supply of electricity now generated by coal plants. If every building was fitted with an underground source of heat and cooling, called a ground source heat pump, all the coal plants in the country could be shut down. If the federal government provided the financing for a national network of silicon purification plants, solar panels would be cheap enough to plaster on every building’s roof and sides. Imagine the millions of manufacturing and installation jobs that could be created from these three projects alone, and the hundreds of factories that would be needed for fabrication.

The manufacturing sector, and particularly the machinery industries, have been the source of the kind of technological dynamism that allows us to build wind turbines, high-speed trains, and low-cost computer power. For too long, our industrial policy has been warped by a huge military budget. Since the military will collapse along with the manufacturing sector that makes their tanks and planes; the only way to insure that the U.S. will be able to protect itself in the long-term, ironically, is to use most of the Pentagon’s budget for a manufacturing and infrastructure bailout.

Thatcher and Reagan used to claim that “there is no alternative” to their version of free-market fundamentalism. Let’s stand them on their head: there is no alternative but to create huge government-financed programs, running into the trillions of dollars, that can rebuild manufacturing while making the American and global economies economically and environmentally sustainable.

Jon Rynn, March 29, 2009

1 Comment »

  1. […] newritings put an intriguing blog post on Bailout manufacturing and the infrastructureHere’s a quick excerptThe great depression that followed the 1929 crash… Normal 0 21 false false false ES X-NONE X-NONE MicrosoftInternetExplorer4 […] […]

    Pingback by Topics about Economy » Archive » Bailout manufacturing and the infrastructure — April 5, 2009 @ 7:38 pm | Reply

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