The American manufacturing industry went down to its own self -satisfaction

The drama of Janesville starts on 2 June 2008 as representative Paul Ryan receives a phone call from the director of Autofabriek General Motors, maker of the Oer-American Chevrolet. Tomorrow he will announce that GM will close the Janesville location, Wisconsin. Ryan is crushed, he still calls the names of a few popular models in despair: « Then give us the Cavaliers. The pick-up trucks. » He doesn’t get any commitment. « You destroy our city, you know that. »

Janesville would indeed destroy the closure of the factory. Journalist Amy Goldstein immortalized the city, his 63,000 inhabitants and the disaster that struck them as ‘an American story’. Janesville became a symbol for the decline of not only the car industry, but the entire manufacturing sector. Between 2000 and 2010, the American would Manufacturing industry 36 percent of her employment.

It is the seed soil for Trump’s political career

How can the closure of one factory, although it is a big one, the economy and the social coherence of an entire city? « Because the manufacturing industry has a much greater effect on the economy than just with its own production and own jobs, » says economist William Bonvillian, teacher at the Massachusetts Institute of Technology via Zoom from the American east coast. « If a few thousand inhabitants lose their job in the GM factory, and their relatively high wages, they will postpone big purchases. Then they wait with the repair of their roof. The roofers lose their jobs. Then the first stores close. It is an avalanche. »

The sleepy monopoly

That decline has also had non-economic consequences, says Bonvillian: « It is the seed soil for Donald Trump’s political career. » In the 2016 election campaign, the Republican presidential candidate addressed the workers who are in the Rest calls – named after the expired steel factories – their job had lost. If he’s talking about America That weather must be, then Trump is talking about the resurrection of the manufacturing industry that seemed so unassailable in much of his life. The fact that he threatens to deposit the entire world economy into a trade war is because he thinks that input duties blue-collar Being able to reduce jobs.

How did the American manufacturing industry come to that? Can the decline turn? And are Trumps input taxes really the key to a Renaissance?

In 1923 the first Chevrolet rolled in Janesville from the assembly line. The factory had to close one year in the big crisis of the 1930s. But then she reopened and rose with the entire American manufacturing sector, helped by consistent industrial policy by President Franklin Delano Roosevelt. The Second World War gave a new impulse. « In 1940, Roosevelt promised that the United States would produce fifty thousand combat aircraft per year, » says Bonvillian. « Everyone thought he was crazy. We made a thousand devices a year. But in 1943 there were fifty thousand. »

After the victory of the Allies, the US was lonely at the top of world production, says economic historian at the University of Florida Sean Adams on the phone. In 1945 the state of Pennsylvania produced more steel on its own than the pre -war industrial superpowers Germany and Japan together.

From the start, the manufacturing industry was the birthplace of technological innovations, says Bonvillian, such as the conveyor belt or standardized, machine -made parts. The physical link of production and innovation was an important factor in American growth.

But their inviolable position made the Americans self -satisfied, says Sean Adams. « This post -war period is called the ‘sleepy monopoly’. Government, trade unions and businesses had a tacit agreement in which the workers were kept satisfied with high wages, many days off and great secondary employment conditions. Some companies rewarded their employees with holiday homes. »

Wages in the car industry, protected by the United Auto Workers trade union, would always remain high, higher than for other low-skilled work. In the last year that the factory in Janesville ran, the entry -level wage was 28 dollars per hour. The minimum wage in the state of Wisconsin was (and is still) $ 7.25.

The ideology of free trade

The decline occurred steadily, with a few large shocks. Historian Adams places three benchmarks: firstly, the oil crisis of 1973. After the Second World War, the US had helped their defeated opponents Japan and Germany. While the economic giant America was stinging, they built up their industry. When the oil crisis raised gasoline prices by almost a quarter, the more economical Japanese models competed the American sledges.

Something else happened, says Bonvillian. The American manufacturing industry turned out to have missed a whole change of innovation that she would not catch up with either. The US were lord and master of mass production, the Japanese became the leaders in quality production. And in the meantime, the IT revolution erupted by innovation mainly from the US Department of Defense « then we just left it in terms of the manufacturing industry, » says Bonvillian.

Second benchmark: 1995, when the World Trade Organization WTO was founded. That was the seal of a capitalist ideology, that of free trade, says Adams. Democratic President Bill Clinton and his most important economic adviser Robert Reich – known for the book with the programmatic title The Work of Nations: Preparing Ourselves for 21st Century Capitalism -are fully committed to the high-tech economy. Adams: « Reich stated that the future of the American economy was no longer in the factory, no longer deposited from the assembly line. »

That would have enormous consequences, both for the manufacturing industry and for the workers. It opened the border wide for companies – not to enter the US, but to leave. The high wages from the manufacturing industry on which the prosperity of the American middle class was based were exchanged for low wages in other countries and high profits for the upper class. The middle class was pushed to the underclass from that moment, because the promise that education and retraining would prepare former workers and their children for high-paid jobs in the tech sector, was never realized. They got much lower paid jobs in the service sector in return.

In the ideology of Clinton (and George W. Bush and to a certain extent also Barack Obama) it was not bad that the industrial employment of steel to textile to low -wage countries disappeared. The tech industry and the service sector had to bear the economy from now on. « The benefits of low prices for consumers would make the job loss more than good, » said Bonvillian.

The magic wand

The third benchmark points ahead to President Trump’s trade war: the moment when China is admitted to the WTO, in 2001. The moment when technology company Apple decides to assemble his things in China. And because Apple dominates the market with its success, other companies think that this is the golden formula. « In 2001 the nail was beaten in the coffin of the American manufacturing industry, » says Sean Adams.

Since then, the US and China have changed place, says William Bonvillian. « First, the US accounted for around 35 percent of all products worldwide, and China was far behind. Now China produces 31 percent of all goods and the US 16 percent. »

According to Bonvillian, President Obama saw the problem. He established a series of economic institutions to stimulate the manufacturing industry. Biden also implemented laws to protect the American production sector – also for strategic reasons, not to depend on a foreign rival like China for vital sectors. He invested in the chip industry, in biotechnology and in infrastructure.

In 2016 Obama, as divorcing president the demand of a metal worker in Indiana. He asked: « I wonder: what is left for us? All our jobs have disappeared. » And Obama, in shirt sleeves, the hands in the pockets, replied: “In fact, there are more in my term of office Manufacturing Jobs than ever since the 90s. ” He had tried to negotiate with trading partners as a president to increase their wages.

Over the head of the worker, Obama turned to Trump, who as a candidate promised to reduce all those jobs. « How then, » said Obama. « Do you sometimes have a magic wand? » Trump’s answer: Yes, I have that. For him, the input tax is the magic wand.

There was little noticeable in Trumps first term (2017-2021). Even before the Coronapandemie struck a deep dent in employment – 1.3 million jobs in the manufacturing industry Foetsie from March to April 2020 – there was hardly any movement in employment in this sector, while in general the US economy went well.

Economist William Bonvillian is not pessimistic. « There is still a solid foundation under the American manufacturing industry, which accounts for 11 percent of the gross national product, for 20 percent of investments and 70 percent of business research & development. »

In An article from 2023 He lists ten steps to be taken to conduct a successful industrial policy, from direct government investments to education and the use of government institutions for technological development.

And Bonvillian says that a form of trading policy is indispensable for every possible remedy for the decline of the manufacturing industry. Does this mean that he sees President Trump’s import duties as a part of the solution? He sighs. « If you use import duties such as an operating lesson, certainly. In very specific sectors, aimed at very specific countries. Trump uses input taxes as a bat. Meaningless. »

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