As promised, here are a few thoughts on industrial policy, parochialism, Apple, and what they have to do with nationalism. As America’s economy continues to struggle, our country is rightly obsessed with jobs and employment. While some people believe that our national debt and lack of fiscal austerity are our greatest economic threats (I have argued in support of that on this blog), I believe that job creation should be our immediate, overriding concern. There are too many people who have been out of work for too long, and we can’t fix any long term debt problems until we get people working again. Paul Krugman has argued this for some time, and I’m not afraid to agree with the liberal, Keynesian economist just this once. We simply have to get people working, even if it comes to a government intervention that postpones our needed journey to fiscal responsibility. But how do we do it?

Some people would argue that we need to lower taxes and regulations and that the free market will naturally sort out the problems. The entire Republican primary seems to be some version of this plan. Other people think we need to protect our workers from unfair competition in China and across the world, as well as from the superrich in our own country. This sentiment was clearly the basis of the recent State of the Union address. Many people don’t know exactly how to fix unemployment, but believe that somehow it all comes down to manufacturing – we need to have it “made it America” like the good ol’ days. All of these ideas have a little something to do with nationalism – the feeling that there is something inherently good about this nation that has somehow been stifled, and the slightly exaggerated version that thinks, “We’re better than everybody else and need to prove it.”

Apple is a great example to highlight this issue. Republicans and Democrats alike have both tried to convince us that their policy is how we can find the next generation’s Steve Jobs. Somehow Apple stood for the epitome of American innovation: creating advanced products that the rest of the world wanted to buy. Then the New York Times published an article reminding us that most of Apple’s manufacturing is done in those Chinese factories we love to hate, with people working in terrible conditions for less money than American workers will take. Now we’re devastated and confused and don’t know where to turn.
Thomas Friedman recently wrote a great article, Made in the World, that highlight’s the source of our confusion, it’s what I would call parochialism: being focused on a narrow set of interests while ignoring the bigger picture. Friedman explains:

“Politicians see the world as blocs of voters living in specific geographies — and they see their job as maximizing the economic benefits for the voters in their geography. Many C.E.O.’s, though, increasingly see the world as a place where their products can be made anywhere through global supply chains (often assembled with nonunion-protected labor) and sold everywhere.

These C.E.O.’s rarely talk about “outsourcing” these days. Their world is now so integrated that there is no “out” and no “in” anymore. In their businesses, every product and many services now are imagined, designed, marketed and built through global supply chains that seek to access the best quality talent at the lowest cost, wherever it exists. They see more and more of their products today as “Made in the World” not “Made in America.” Therein lies the tension. So many of “our” companies actually see themselves now as citizens of the world. But Obama is president of the United States.”

There’s absolutely nothing wrong with wanting America to be successful, and even wanting it to be more successful than everywhere else, but the problem begins when we think that success outside our nation is the source of our troubles. We need to stop seeing the economic world from the mercantilist view of, “they are taking our piece of the pie,” and instead focus on equipping ourselves to be part of the world marketplace. I’m not supporting the Republican or Democratic view on this – in my opinion they are both equally guilty of waving the nationalistic flag while ignoring the real work that needs to be done. Trying to insulate or protect ourselves from the outside world – what Democrats are focusing on – isn’t the answer. However, the government doing nothing (the Republican plan) while the rest of the world actively finds ways to engage in the world economy won’t get us anywhere either. Fareed Zakaria, who is typically very free market oriented, has recently argued that America needs a much more active industrial policy to ensure businesses create jobs in this country. While I disagree with the specifics of his plan (this may be the first and only time I will agree with a liberal Keynesian and disagree with a pragmatic internationalist), I think we can’t fully rely on the invisible hand to lead us through the dramatic changes that globalization is bringing.

What I take from Friedman’s article is that our focus can’t be on keeping companies in America, or even keeping manufacturing in America. There are a lot of jobs in every piece of the supply chain, and we just need to be part of it. So rather than penalize a company like Apple for doing some manufacturing in another country, we should encourage them to keep the high paying jobs here. Manufacturing, and specifically the labor intensive type that happens in low-wage China, is one piece of the economy; and maybe it is the piece we don’t even want anymore. There are also plenty of jobs in research, development, programming, design, marketing, engineering, and hi-tech robotic based manufacturing that we can compete for. The answer isn’t to bring back all the low wage, labor intense work just so we can stamp our cheap clothes and furniture “made in America,” it’s to equip ourselves for expansion in other sectors that exist due to globalization. Those high paying jobs will also support the less educated work force through local construction and retail that can’t be outsourced, but we can’t and shouldn’t want to keep the low cost manufacturing in this country. Making the necessary changes involves dropping trade barriers and removing labor protection, and the Democrats won’t like that; but it also involves significant involvement from the federal government,which the Republicans won’t like, to create an environment where we can adjust to the changes happening in the world and ensure that our laborers have a chance to transition to a new kind of economy. Most important, however, it involves us telling our elected leaders that we are okay with being citizens of the world, we’re okay with “made in the world.” Nationalism is about believing this country is great, but it doesn’t have to be great the same way it was last generation – in fact it can’t and won’t be great if we focus on how it used to be.