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.