Factories do not simply 'move' offshore
Another is built elsewhere and the original wastefully shuts down. How could local and state officials submit to deindustrialization for all those years?
In 2022, in an attempt to win the Senate seat up for contest in Ohio, Democrat Tim Ryan came out swinging against China. He proclaimed, “China’s winning. Workers are losing,” and put the loss of US jobs squarely on Communist China. He did not win. Republican J.D. Vance won.
Some accused Ryan of sinophobia, of Yellow Peril rhetoric, and of scapegoating, but the aspersions he cast against the Chinese government contrasted the US capitalist system with Chinese Communism. You see, the devious Chinese Communists lured US capitalists to China to build factories there. Classic Communist ruse!
In 2007, I had a chance to see Joe Biden speak in Jeffersonville, Indiana. A prominent toothpaste factory, Colgate, had a clock that towered over the river, and Joe Biden made frequent reference to the defunct plant. The plant had ‘moved’ to Mexico. Yet the clock was still there. In fact, the same year of Ryan’s China-baiting Senate campaign, Clarksville, Indiana sought to exercise eminent domain to save and preserve the Colgate plant’s clock overlooking the Ohio River.
The Clarksville, IN Colgate Clock
Joe Biden expressed more nuance than Tim Ryan, perhaps because a lot of factories have ‘moved’ to Mexico, due in part to an act of bipartisanship, the North American Free Trade Agreement. Nonetheless, he inveighed mightily against greedy companies seeking cheaper labor and lax regulatory pastures.
Tim Ryan, Joe Biden, and other centrist Democrats may raise some rancor during campaign season, but they do precious little else, particularly when it counts. In September, 2000, Senator Joe Biden voted in favor of granting China Permanent Normal Trade Relations status (fka Most Favored Nation status). This pivotal vote permitted China to join the WTO, which had a massive impact on employment.
US workers have faced real pressure resulting from policy having drifted towards offshoring. An EPI study concluded that from entry through 2017, China’s accession to the WTO cost 3.4 million U.S. jobs, hitting manufacturing hardest and across every state and congressional district. Ten states experienced significant job losses, exceeding 2.5% total of state employment (NH, OR, CA, MN, NC, RI, MA, VT, WI, TX). China’s entry into the WTO, of course, provided benefits, including increased demand for US exports, market liberalization in China, and heightened competition itself (supposedly a good thing in capitalist systems). Very optimistic predictions, most notably that China would embrace genuine democratic political reforms, have certainly not panned out.
NAFTA’s passage or China’s pick up of PNTR/MFN status can lead to a ranging debate triggering assessments that may juggle lots of moving parts. Accepting that protectionism may have opposed the spirit of the times overly much, nevertheless politicians and Congress sat on their hands as oligarchs and corporate boards closed factories in the United States as they opened factories in China, Mexico, and throughout Southeast Asia.
Too often, in the debate, these separate and distinct operations became twinned; the closure of the factory in the US depicted as a natural and inevitable consequence of opening a factory abroad. Sometimes the two operations even became one, as factories became described as ‘moving’ from the US to China or Mexico.
Politicians found this framing convenient. Even as international trade supposedly benefited both sides, ‘moving’ manufacturing created an enemy ‘other’ to blame for discouraged plant workers. Instead of the capital class choosing to deindustrialize, US workers faced competition within the global market. Capitalism was innocent, at least as politicans such as Tim Ryan depicted it. Foreign workers were the true enemy!
Of course, nobody could force capitalists to keep these manufacturing plants open stateside. They remained free to sell off their older plants. Nonetheless, why did state politicians sit on their hands while major communities lost their primary or secondary employer? It is baffling in part because politicans in Midwestern or Southern states will spend hundreds of millions in subsidies to attract companies to open new factories in their states. South Carolina under Nikki Haley spent $900m to bring Boeing to Charleston, which included $399m in state-issued bonds.
Why did politicians so rarely issue bonds to put operational factories into the hands of local industrialists, or even the workers themselves? It surely would have been cheaper to keep existing factories, even upgrade them, rather than attracting another fresh mass employer.
Workers could have bought those factories, with the aid of an advance from the state. Capitalist support could have been made redundant through the establishment of worker cooperatives.
Unlike ESOPs and EOTs, worker cooperatives often require employees to buy their share in the business as a lump sum or through a series of paycheck deductions.
As with EOTs, worker-owned cooperatives distribute profits at the end of a set period, typically yearly. Each employee’s profit share depends on working hours, among other factors.
Understandably, capitalists would have been unlikely to elect to liquidate their holdings, at least under normal conditions, in favor of allowing workers to purchase their capital investment and their primary source of revenue and earnings. But deindustrialization may strike us as decidedly abnormal. Nations do not passively permit the debasement and degeneration of its manufacturing capability as a normal course of strategy.
The Great Offshoring appears to us today as a mistake even if we accept Tim Ryan’s reading. For those of us who go further than Ryan, we should regard the period as an utter disaster. The worker-cooperative alternative to shuttering factories would have represented outright human progress; the factory workers upgraded to factory owners. Manufacturing, but for the workers and their communities, without any intermediaries. Instead, US politicians submitted to rot and ruin.
Make no mistake, the Rust Belt represents political negligence and poverty of the public imagination. As US politicans blame China for pressuring companies into intellectual property transfer agreements, we may wonder why they allowed capitalists to depart the US with that IP in the first place. Behind every politician’s accusation against China, a former ideological rival that bent towards US-style capitalism, or against Mexico, a peaceful neighbor with which the US shares close economic ties, lies the failure and culpability of politicans to plan ahead for the active shifts and dynamic transitions that trade agreements and PNTR/MFN statuses opened. And to some degree, the US Midwestern or Southern voter has to confront their own passivity in the face of attacks on their livelihood. Its not sufficient to show up on time, trust in the boss, and vote in every election. You must take the two or three evenings out of the month to actively organize. Its your community, and its not going anywhere unless you move it forward with your neighbors.