What Way for the Stimulus? Post-Industrial America vs. Neo-Industrial America


As a result of the economic crisis, there is a broad consensus in favor of large-scale public investment in infrastructure in the U.S., both as part of a temporary stimulus program and to promote long-term modernization of America’s transportation, energy, telecom and water utility grids. But this momentary consensus masks the continuing disagreement on whether the U.S. government can legitimately promote American industries, and, if so, which industries. This is a problem for infrastructure policy, because different national infrastructures correspond to different national economic strategies.

Consider the antebellum U.S. in Henry Clay’s American System: federal infrastructure investment in canals and later railroads (“internal improvements”) was part of a package that included import-substitution tariffs to protect infant U.S. industries from British competition. For Clay and his Whig allies and followers, including future Republicans such as Abraham Lincoln, internal improvements and tariffs were not ends in themselves. They were instruments to be used in the pursuit of the Whig-Republican vision of a decentralized, mixed industrial and agricultural economy where business owners, mostly small, and free workers, mostly prosperous, could realize the utopia of Clay’s “self-made man.”

From Thomas Jefferson to Jefferson Davis, the Southern planters who opposed such ambitious schemes had no objection to infrastructure as such. They favored infrastructure tailored to suit the needs of their semi-colonial slave plantation economy, based on exports of cotton and other commodities to British and Western European factories. Local wharves and harbors that facilitated the shipment of crops to industrial Britain were acceptable to the planters. They opposed infrastructure that would encourage industrialization in the South or the U.S. as a whole, out of fear that urbanization and industrialization would threaten their local dominance over both black slaves and poor white yeoman farmers. They also feared they would be marginalized in national politics – as they indeed were – by industrialists, merchants and financiers.

Today, the rivalry is not between the champions of an industrial America and an agrarian America. Rather, it is a rivalry between the champions of a neo-industrial America, which includes world-class industrial agriculture, and a post-industrial America, in which most if not all manufacturing and even agriculture will be outsourced. In this formulation, post-industrial America emerges as a consumerist paradise populated by investors, executives of multinational companies, rentiers, realtors, government and nonprofit bureaucrats, and a supporting cast of service sector proletarians including nursing aides, nannies, gardeners, security guards and restaurant and hotel workers.

Just as there was one logical infrastructure for the industrializing North and one for the anti-industrial plantation South in the nineteenth century, so in the twenty-first century a different infrastructure would be appropriate, depending on whether the goal is a post-industrial America or a neo-industrial America.

A post-industrial infrastructure can be simple, local and substantially foreign.

The post-industrial infrastructure can be simple since it involves little more than the roads and harbors needed to bring in high-value-added imports from abroad and ship out low-value-added American commodities. Adequate harbors are necessary, as are adequate highways to help ship U.S. soybeans and timber to industrial Asia while bringing Chinese, Japanese and Korean goods to Wal-Marts for distribution.

The post-industrial infrastructure can also be local. Just as the Southern planters were indifferent or hostile to regional or national infrastructure projects, so the elites of the service sector are interested chiefly in the infrastructure needs of the half dozen or so coastal megalopolitan areas where they live. Many favor high-speed rail to connect nearby big cities on the coasts, while denouncing federal investment in non-metropolitan areas as boondoggles. The FIRE (Finance, Insurance, Real Estate) economy of post-industrial America could function reasonably well as long as a handful of colossal city-states – Boswash, Northern California, Greater LA, the Texas Triangle – had state-of-the-art local telecom and transportation and energy grids. So what if the rest of the continent decayed?

Finally, the post-industrial infrastructure can be largely foreign. Most of the urban service sector elite favors both outsourcing American industry and importing a new metropolitan immigrant proletariat willing to work for lower wages and fewer benefits than native Americans. To be sure, someone must build the components of the metro infrastructure and put them in place. But steel can be shipped in from Asia and assembled in New York, San Francisco, Atlanta, Chicago and Houston by immigrants, legal or illegal. Better yet, the metro-supportive infrastructure can be leased or permanently sold to foreign consortiums and even foreign sovereign wealth funds, in order to avoid the need to raise taxes to pay for upfront costs or repay bonds over the long term. The “leakage” of federal stimulus spending to benefit Chinese factories, law-breaking Latin American illegal immigrants and petrostate sovereign wealth funds will not bother elites who are not only post-industrial but to a large extent too sophisticated to worry about narrow patriotism.

If the infrastructure of a post-industrial America would be simple, local and largely foreign, the infrastructure of a neo-industrial America should be complex, national and predominantly American.

A neo-industrial infrastructure necessarily must be complex, because the purpose of a neo-industrial infrastructure would be onshoring – arresting and in some cases reversing the transfer of high-value-added manufacturing and services to other countries. This requires something more than freight rail bringing Chinese imports to Wal-Mart and airports helping to deliver Amazon.com boxes to urban apartments. It requires an infrastructure tailored to the needs of an entire complex ecosystem of factories, design offices, and their suppliers and contractors. And that infrastructure not only must be rebuilt in existing industrial areas like Detroit but also built from scratch in areas such as the Great Plains. It would aim to put many of tomorrow’s factories and research parks in today’s depopulating rural areas and derelict inner cities.

A neo-industrial infrastructure must be national and inclusive in scope. Its goal resonates with the aspiration of Henry Clay Whigs, Lincoln Republicans and William Jennings Bryan Populists – a decentralized, prosperous middle-class society of small and medium-sized towns as opposed to a country where half a billion people are crammed into a few plutocratic megacities and forced to live in dense apartment blocks.

Such decentralization – contrary to the claims of some urbanists and greens – need not mean excessive “sprawl.” This is still a very large country with lots of land, as anyone who spends time away from the coasts recognizes.

But more important, there can only be an independent middle-class majority in a United States with 400 or 500 million people in 2050 if most Americans live and work in relatively low-density areas where homes are affordable and small business rents are not crippling. That means building new towns and new industrial centers away from the existing ones, to spread out the population and accommodate tens of millions of new immigrants with desirable skills. The rich, who will remain concentrated in a few metro areas, where they can socialize, compete and conspire with one another, must be taxed by the federal government to subsidize the infrastructure of the entire continental U.S., not just their own cities, metro areas and states.

Last but not least, a neo-industrial infrastructure must be predominantly national with respect to its components and its workforce. It would be self-defeating to design an infrastructure friendly to American industries and workers and then hire foreign industries and foreign workers to build it. Most or all federal infrastructure spending should be reserved for corporations and suppliers whose high-value-added production takes place on American soil. And all jobs directly or indirectly related to infrastructure construction should be reserved for citizens or legal immigrants. Law-abiding American citizens should not be taxed to subsidize law-breaking illegal immigrant workers and the unpatriotic, criminal contractors who employ them. This is not “nativism.” The right kind of legal immigration would be an important part of any neo-industrial strategy, as would taking advantage of foreign direct investment by foreign companies and sovereign wealth funds in mutually beneficial ways.

The debate about infrastructure, then, is also a debate about the future industrial profile of America. Will America in the twenty-first century be neo-industrial or post-industrial? This debate, in turn, may well determine whether the U.S. will become a decentralized, continental middle-class society or a collection of plutocratic, hierarchical city-states. The stakes could not be higher.

Michael Lind is Whitehead Senior Fellow at the New America Foundation and Director of the American Infrastructure Initiative.

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Waste Balers are fantastic

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A fundamental dilemma

I'm glad you articulated this fundamental dilemma, because it is touched on in many of the articles on this site but not fully explored until now. Obviously, post-industrial is the way our economy has been headed, and many question whether it's the right way to go, but I also wonder if it's part of a natural evolution. Who can tell? There was no precedent for the Industrial Revolution or the Agricultural Revolution, either.

However, no economic model completely displaces what came before. We still have agriculture in America, and we still have manufacturing. But neither employs as many people or is as diverse as it used to be. We have outsourced most of these functions elsewhere. Has the American economy fundamentally changed, or are we just sitting atop a global supply chain? I suspect that it's the latter, and we are highly vulnerable as a result. Cheap energy makes our global supply chains possible, and when it's no longer cheap to outsource, what's the point of outsourcing? At that point, we may as well grow and make our products here.

Therefore, I tend to agree that we should invest in infrastructure for a neoindustrial economy. But the call to "decentralize" and build new towns strikes a flat note with me. Our existing settlements are the original products of the agricultural and industrial economies; for the most part, the post-industrial economy just expanded on them and re-envisioned some aspects of them. If we revitalize the agricultural and industrial sectors, why can't we reuse (and expand as needed) those same settlements? Further, 85% of the population already lives in metro areas. What's the point of dispersing people to rural areas? If people are needed to fill new jobs in rural areas, there will be no shortage of people willing to go there, given our romantic notions of country and small town life. No particular stimulus is required. I smell a whiff of Jeffersonian bias against cities in the "decentralization" idea, and it's high time we accepted metro areas as being neither bad nor good. They are what we make of them (and no one is suggesting that they be made into vast apartment blocks).

Lind needs to check his personal prejudices at the door

Matt, like you, I sympathize with some of the points that Lind is trying to convey. Clearly our economic model - overly dependent on the FIRE industries - was unsustainable However, he goes way over the top in attacking various ideological boogeymen - urbanites, "elites", finance professionals, greens, etc. That shtick is fine if your goal is to get invited on Lou Dobbs but bringing that dog to the fight isn't at all helpful or even relevant to a discussion of transportation policy. Our industrial economy was most successful when we had vibrant, bustling cities that served as transportation and logistics hubs for their respective regions. So if we want to get serious about rebuilding our industrial capacity, it seems to me that the last thing we would want to do is decentralize further. He seems to spend a lot of time contrasting the "simple" transportation infrastructure that his boogeymen are apparently to be arguing for (although he presents no evidence that the John Thain's of the world actually are) with the "complex" infrastructure that would exist in his rural Jeffersonian utopia (where the noble townsfolk are free from their decadent city-state dwelling overlords). But what does simple and complex mean in this context? I presume it means that we need to develop our freight rail, light rail, passenger rail, bus, air, waterway, and subway infrastructures in conjunction with just adding more highway . But guess what? The only way that becomes economically viable is if we have more centralized, denser settlements. Some of this will come from transforming suburbs and exurbs into more transit-friendly towns, but as you point out a lot of it will have to come from strengthening our cities. My guess is that Lind is intentionally vague here, since explaining himself would make it obvious how incongruous is personal biases are with the topic he is trying to write intelligently about. There's an article in the current Washington Monthly that talks about the promise of freight rail as an alternative to long-haul trucking. It is an excellent example of how you can have a good discussion about policy when you don't rely almost exclusively on generalizations, value judgements, and straw men. Mr. Lind should read it.

Lind's duality: too simple

Agree with some of epar's points, above. Suburbanites aren't opposed to density per se; the most desirable suburbs (Birmingham in metro Detroit, CT suburbs of NYC, North Shore in Chicago) invariably have a downtown core and access to decent commuter rail service. There's no reason that we can't provide commuter rail service from most of the nation's larger suburban nodes.

Also, the duality that Lind sets up falls apart when one looks at the providers of the IT backbone and semiconductors, who manufacture, and design, all over the US. Companies like Cisco, Intel, TI etc are not "post-industrial;" they have much more in common with GM or Ford than they do with Goldman Sachs.

In particular, high end chips, the ones that really matter for the business and that drive most of the profit ie wealth creation, are manufactured in Arizona and New Mexico, not "Boswash, Silicon Valley, TX triangle". Software development is of course decentralized and will only decentralize further as California lurches toward bankruptcy, raises marginal tax rates still higher, withholds refunds etc.

Let's not overanalyze the demise of hyperactive financial engineering. It was a freak in our (and the world's) economic history, and its passing doesn't say anything about the right approach to technology or other infrastructure investment approaches.

manufacturing and infrastructure

Governments should use taxation and other means to encourage manufacturing and infrastructure development in our country. I discuss manufacturing on my profile and website http://www.myspace.com/kennethstremsky

I hope local governments will stop spending money on sports stadiums and other entertainment for adults. If local governments want them to be built, local governments should encourage businesses to sell stock, bonds, and other things dealing with them. Local governments should be spending money from property taxes, rooms and meals taxes, and user fees on improving infrastructure, schools, libraries, public transportation, and other essential services. If local governments waste rooms and meals tax revenues on entertainment for adults, the local governments may have a hard time providing essential services during recessions. If governments decide to waste money on sports stadiums and other entertainment for adults, I hope they will be smart enough to tax ticket sales, merchandise sales, and other sales that take place in the sports stadiums and other entertainment for adults.

I hope people will read

"Sports Mania Is a Poor Substitute for Economic Success

There's a reason so many Steeler fans have left Pittsburgh." by Jerry Bowyer



Ken Stremsky