Rebooting the American Dream

Back to the Future

I know no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion by education. This is the true corrective of abuses of constitutional power.

—Thomas Jefferson, letter to William

Charles Jarvis, September 28, 1820

ON APRIL 14, 1789, GEORGE WASHINGTON WAS OUT WALKING through the fields at Mount Vernon, his home in Virginia, when Charles Thomson, the secretary of the Continental Congress, rode up on horseback. Thomson had a letter for Washington from the president pro tempore of the new, constitutionally created United States Senate, telling Washington that he’d just been elected president and the inauguration was set for April 30 in the nation’s capital, New York City.1

This created two problems for Washington.

The first was saying goodbye to his 82-year-old mother, which the 57-year-old Washington did that night. She gave him her blessing and told him it was the last time he’d see her alive, as she was gravely ill; and, indeed, she died before he returned from New York.

The second problem was finding a suit of clothes made in America. For that he sent a courier to his old friend and fellow general from the American Revolutionary War, Henry Knox.

Washington couldn’t find a suit made in America because in the years prior to the American Revolution, the British East India Company (whose tea was thrown into Boston Harbor by outraged colonists after the Tea Act of 1773 gave the world’s largest transnational corporation a giant tax break) controlled the manufacture and the transportation of a whole range of goods, including fine clothing. Cotton and wool could be grown and sheared in the colonies, but it had to be sent to England to be turned into clothes.

This was a routine policy for England, and it is why until India achieved its independence in 1947 Mahatma Gandhi (who was assassinated a year later) sat with his spinning wheel for his lectures and spun daily in his own home. It was, like his Salt March, a protest against the colonial practices of England and an entreaty to his fellow Indians to make their own clothes to gain independence from British companies and institutions.

Fortunately for George Washington, an American clothing company had been established on April 28, 1783, in Hartford, Connecticut, by a man named Daniel Hinsdale, and it produced high-quality woolen and cotton clothing as well as items made from imported silk.2 It was to Hinsdale’s company that Knox turned, and he helped Washington get—in time for his inauguration two weeks later—a nice, but not excessively elegant, brown American-made suit. (He wore British black later for the celebrations and the most famous painting.)

When Washington became president in 1789, most of America’s personal and industrial products of any significance were manufactured in England or in its colonies. Washington asked his Treasury secretary, Alexander Hamilton, what could be done about that, and Hamilton came up with an 11-point plan to foster American manufacturing, which he presented to Congress in 1791. By 1793 most of its points had either been made into law by Congress or formulated into policy by either President Washington or the various states, which put the country on a path of developing its industrial base and generating the largest source of federal revenue for more than a hundred years.

Those strategic proposals built the greatest industrial power-house the world had ever seen and, after more than 200 successful years, were abandoned only during the administrations of Ronald Reagan, George H. W. Bush, and Bill Clinton (and remain abandoned to this day). Modern-day China, however, implemented most of Hamilton’s plan and has brought about a remarkable transformation of its nation in a single generation.

Hamilton’s 11-point plan for “American manufactures” is a primary inspiration for this book (see sidebar). It was part of a larger work titled Alexander Hamilton’s Report on the Subject of Manufactures: Made in His Capacity of Secretary of the Treasury.

Alexander Hamilton’s 11-point Plan for “American Manufactures”

A full view having now been taken of the inducements to the promotion of manufactures in the United States, accompanied with an examination of the principal objections which are commonly urged in opposition, it is proper, in the next place, to consider the means by which it may be effected.…

In order to a better judgment of the means proper to be resorted to by the United States, it will be of use to advert to those which have been employed with success in other countries. The principal of these are—

I. Protecting duties [import taxes, now called “tariffs”]—or duties on those foreign articles which are the rivals of the domestic ones intended to be encouraged.

Duties of this nature evidently amount to a virtual bounty on the domestic fabrics, since by enhancing the charges on foreign articles, they enable the national manufacturers to undersell all their foreign competitors.…[I]t has the additional recommendation of being a resource of revenue. Indeed, all the duties imposed on imported articles, though with an exclusive view to revenue, have the effect in contemplation; and, except where they fill on raw materials, wear a beneficent aspect towards the manufacturers of the country.

II. Prohibitions of rival articles, or duties equivalent to prohibitions.

This is another and an efficacious mean of encouraging national manufactures;…Of duties equivalent to prohibitions, there are examples in the laws of the United States…but they are not numerous.…[I]t might almost be said, by the principles of distributive justice; certainly by the duty of endeavoring to secure to their own citizens a reciprocity of advantages.

III. Prohibitions of the exportation of the materials of manufactures.

The desire of securing a cheap and plentiful supply for the national workmen, and, where the article is either peculiar to the country, or of peculiar quality there, the jealousy of enabling foreign workmen to rival those of the nation with its own materials, are the leading motives to this species of regulation.…It is seen at once, that its immediate operation is to abridge the demand and keep down the price of the produce of some other branch of industry, generally speaking, of agriculture, to the prejudice of those who carry it on; and though if it be really essential to the prosperity of any very important national manufacture, it may happen that those who are injured in the first instance, may be eventually indemnified, by the superior steadiness of an extensive domestic market depending on that prosperity: yet in a matter, in which there is so much room for nice and difficult combinations, in which such opposite considerations combat each other, prudence seems to dictate, that the expedient in question ought to be indulged with a sparing hand.

IV. Pecuniary bounties.

This has been found one of the most efficacious means of encouraging manufactures, and it is in some views the best; though it has not yet been practised upon by the government of the United States, (unless the allowance on the exportion of dried and pickled fish and salted meat, could be considered as a bounty,) and though it is less favoured by public opinion than some other modes, its advantages are these—

1. It is a species of encouragement more positive and direct than any other, and for that very reason, has a more immediate tendency to stimulate and uphold new enterprises, increasing the chances of profit, and diminishing the risks of loss, in the first attempts.

2. It avoids the inconvenience of a temporary augmentation of price, which is incident to some other modes, or it produces it to a less degree; either by making no addition to the charges on the rival foreign article, as in the case of protecting duties, or by making a smaller addition. The first happens when the fund for the bounty is derived from a different object (which may or may not increase the price of some other article, according to the nature of that object); the second when the fund is derived from the same or a similar object of foreign manufacture. One per cent duty on the foreign article converted into a bounty on the domestic, will have an equal effect with a duty of two per cent exclusive of such bounty; and the price of the foreign commodity is liable to be raised, in the one case, in the proportion of one per cent; in the other, in that of two per cent. Indeed, the bounty, when drawn from another source, is calculated to promote a reduction of price; because, without laying any new charge on the foreign article, it serves to introduce a competition with it, and to increase the total quantity of the article in the market.

3. Bounties have not, like high protecting duties, a tendency to produce scarcity.…

4. Bounties are sometimes not only the best, but the only proper expedient, for uniting the encouragement of a new object.…

The true way to conciliate these two interests, is to lay a duty on foreign manufactures, of the material, the growth of which is desired to be encouraged, and to apply the produce of that duty by way of bounty, either upon the production of the material itself, or upon its manufacture at home, or upon both.…

[P]ecuniary bounties are in most cases indispensable to the introduction of a new branch.…Bounties are especially essential, in regard to articles, upon which those foreigners who have been accustomed to supply a country, are in the practice of granting them.

The continuance of bounties on manufactures long established, must almost always be of questionable policy; because a presumption would arise in every such case, that there were natural and inherent impediments to success But in new undertakings, they are as justifiable, as they are oftentimes necessary.…

V. Premiums.

These are of a nature allied to bounties, though distinguishable from them in some important features.

Bounties are applicable to the whole quantity of an article produced or manufactured, or exported, and involve a correspondent expense—Premiums serve to reward some particular excellence or superiority, some extraordinary exertion or skill, and are dispensed only in a small number of cases. But their effect is to stimulate general effort.…

VI. The exemption of the [raw] materials of manufactures from duty.

The policy of that exemption, as a general rule, particularly in reference to new establishments, is obvious.…Of a nature, bearing some affinity to that policy, is the regulation which exempts from duty the tools and implements, as well as the books, clothes, and household furniture of foreign artists, who come to reside in the United States; an advantage already secured to them by the laws of the Union, and which it is, in every view, proper to continue.

VII. Drawbacks of the duties which are imposed on the materials of manufactures.…

[S]uch drawbacks are familiar in countries which systematically pursue the business of manufactures; which furnishes an argument for the observance of a similar policy in the United States; and the idea has been adopted by the laws of the Union, in the instances of salt and molasses. It is believed that it will be found advantageous to extend it to some other articles.

VIII. The encouragement of new inventions and discoveries, at home, and of the introduction into the United States of such as may have been made in other countries; particularly, those which relate to machinery.

This is among the most useful and unexceptionable of the aids which can be given to manufactures. The usual means of that encouragement are pecuniary rewards, and, for a time, exclusive privileges. The first must be employed, according to the occasion, and the utility of the invention, or discovery. For the last, so far as respects “authors and inventors,” provision has been made by law.…

It is customary with manufacturing nations to prohibit, under severe penalties, the exportation of implements and machines, which they have either invented or improved.…As far as prohibitions tend to prevent foreign competitors from deriving the benefit of the improvements made at home, they tend to increase the advantages of those by whom they may have been introduced; and operate as an encouragement to exertion.

IX. Judicious regulations for the inspection of manufactured commodities.

This is not among the least important of the means by which the prosperity of manufactures may be promoted. It is, indeed, in many cases one of the most essential. Contributing to prevent frauds upon consumers at home, and exporters to foreign countries—to improve the quality and preserve the character of the national manufactures…

X. The facilitating of pecuniary remittances from place to place—

Is a point of considerable moment to trade in general, and to manufactures in particular; by rendering more easy the purchase of raw materials and provisions, and the payment for manufactured supplies. A general circulation of bank paper, which is to be expected from the institution lately established, will be a most valuable mean to this end.

XI. The facilitating of the transportation of commodities.

Improvements favouring this object intimately concern all the domestic interests of a community; but they may without impropriety be mentioned as having an important relation to manufactures. There is perhaps scarcely any thing, which has been better calculated to assist the manufacturers of Great Britain, than the meliorations of the public roads of that kingdom, and the great progress which has been of late made in opening canals. Of the former, the United States stand much in need…

These examples, it is to be hoped, will stimulate the exertions of the government and citizens of every state. There can certainly be no object, more worthy of the cares of the local administrations; and it were to be wished, that there was no doubt of the power of the national government to lend its direct aid, on a comprehensive plan. This is one of those improvements, which could be prosecuted with more efficacy by the whole, than by any part or parts of the Union.…

The following remarks are sufficiently judicious and pertinent to deserve a literal quotation: “Good roads, canals, and navigable rivers, by diminishing the expense of carriage, put the remote parts of a country more nearly upon a level with those in the neighborhood of a town. They are upon that account, the greatest of all improvements.”…

It may confidently be affirmed, that there is scarcely any thing, which has been devised, better calculated to excite a general spirit of improvement, than the institutions of this nature. They are truly invaluable.

In countries where there is great private wealth, much may be effected by the voluntary contributions of patriotic individuals; but in a community situated like that of the United States, the public purse must supply the deficiency of private resource. In what can it be so useful as in prompting and improving the efforts of industry?

All which is humbly submitted.

Alexander Hamilton
Secretary of the Treasury

Note: This excerpt has been edited for length by the author, eliminating Hamilton’s debate with Jefferson over an industry- versus agriculture-based economy. The italics are Hamilton’s.

Source: http://www.archive.org/details/alexanderhamilt00caregoog

Hamilton looked at the nation and determined what needed to be done to rebuild the country after the Revolutionary War had devastated it and subservience to England’s Tudor Plan “free trade” policies had left Americans without any significant domestic industrial base.

In the same tradition, this book goes through 11 steps we can take today to rebuild our country in the wake of the devastation of 30 years of Reaganomics and how we can recover the industrial base we’ve lost to the “free trade/flat earth” idiocy of the Reagan-Bush-Clinton-Bush era.

11 Ways

Chapter 1, “Bring My Job Home!” covers how economies work and why we need to heed Alexander Hamilton’s advice. It points out that simply moving money around or creating a service economy (“Do you want fries with that?”) doesn’t produce long-lasting wealth in a country; only manufacturing does. Political economist Adam Smith pointed out that it’s the application of human labor to raw materials—his example was turning a tree branch into an axe handle—that fuels a growing economy. We’ve gone from more than 20 percent of our economy being based on manufacturing before Reagan to around 11 percent now. This has left us in the precarious position of being unable to make a missile or an aircraft carrier that we may need if we have to defend Taiwan from China without parts from the communist dictatorship of China. These “free trade/flat earth” policies are stupid on national security grounds as much as anything else, but their major impact has been to dismantle the American middle class and consequently put our democracy itself at risk.

Chapter 2, “Roll Back the Reagan Tax Cuts,” points out how when top income-tax rates on millionaires and billionaires are above 50 percent, not only does the gap between the very rich and the working poor shrink but the nation’s economy stabilizes and grows. One of the most interesting features of this chapter is a little-known study done by the chairman of the libertarian Cato Institute, which found that Ronald Reagan’s and George W. Bush’s tax cuts actually stimulated the growth of the size of government, whereas the higher taxes that had preceded Reagan and the increased taxes under Clinton (passed into law without a single Republican vote) actually shrank the size of government.

Chapter 3, “Stop Them from Eating My Town,” covers the ground of monopoly- and crony-capitalism, an economic system born and bred when Reagan stopped enforcing the Sherman Antitrust Act of 1890. From too-big-to-fail to too-big-to-allow-competition, oligarchic corporations have come to dominate virtually every major sector of the American economy; the result has been the devastation of local economies and the prevention of new entrepreneurial small ventures. In the 200 years before Reagan, the downtowns and the business districts of every city in this nation were unique—and locally owned and operated. There was a certain inefficiency associated with it, but that inefficiency guaranteed healthy local businesses and communities. Only when we roll back Reagan’s hands-off policies on Big Business and re-embrace the “trust-busting” practices of Republican Theodore Roosevelt will we see a revitalization of Main Streets across America.

Chapter 4, “An Informed and Educated Electorate,” begins by showing how badly our news media has deteriorated, how it caters only to what people want and not to what they need, and how important it is that we take our media back from the profit-hungry monopolies that have abandoned the public-service mission of media. This chapter also tells the story of Thomas Jefferson’s dream—made explicit when he founded the University of Virginia as this nation’s first free college—that every American, regardless of birth or station, should be able to get an education from primary school through postgraduate university programs—at no cost. Spending on the education of young people pays back handsomely when they go on to make the society richer and, because of their higher incomes, provide higher income-tax revenues. When Reagan took a budgetary axe to the University of California and ended its free admissions policy, he handed to the countries of Europe and Asia the opportunity to overtake us in everything from patent applications to doctor-to-patient ratios to excellence in engineering and invention. And they’ve taken that opportunity. We need to take it back.

Chapter 5, “Medicare ‘Part E’—for Everybody,” points out how a nation that liberates its citizens from worrying about getting proper medical care is a nation of entrepreneurs, innovators, and stress-free families. It’s also a nation that can successfully compete internationally for manufacturing work, when companies are free of health insurance burdens. Instead of handing off trillions of dollars to for-profit health insurance companies—which are forbidden by law in every other industrialized nation on earth from providing basic health insurance—we have attached giant corporate leeches to our own backs. The salt we need to pour on them is a national single-payer health insurance system—simply by expanding Medicare to include all Americans and plugging the loopholes in it that have been drilled by corporate lobbyists and their wholly-owned prostitutes…er…politicians.

Chapter 6, “Make Members of Congress Wear NASCAR Patches,” tackles the problem of our private money–fueled electoral system and all the havoc it has wreaked. We need to fix—seal, really—the revolving door between government and industry; repair our monetary, investment, and banking systems; and change how we finance campaigns in this country. The idea of public financing of campaigns has recently been made very problematic by five Republicans on the U.S. Supreme Court, who ruled in 2010 that corporations are “persons” with full “free speech” rights under the First Amendment. This chapter offers some workarounds, and chapter 10 takes on the problem of the Court’s decision directly.

Chapter 7, “Cool Our Fever,” shows the incredible problems that arise from our own addiction to oil, especially in transportation, and it calls out the corporations and the billionaires who are making fortunes by pumping carbon into our atmosphere, putting all life on earth at risk—including us. The solutions include a carbon tax, but we must act soon.

Chapter 8, “They Will Steal It!” is based on one of the greatest foreign policy insights I’ve ever gotten, shared with me by activist and comedian Dick Gregory at around 3:00 A.M. as we were well into our third glass of wine and about five miles above the Atlantic Ocean on our way to Uganda. It is about how we cannot force other countries through military might to adopt our values of democracy and an open society—and how they will steal our ideas and our values if we engage them constructively so they can see how they can benefit from those ideals. It’s high time that America became less dependent on the military by cutting back the Pentagon, by bringing back the draft, and by returning to a functional democratic republic like our Founders envisioned and most of the developed countries of the world enjoy.

Chapter 9, “Put Lou Dobbs out to Pasture,” addresses the problem of what’s popularly referred to as “illegal immigration,” when, in reality, it is a problem of economics and illegal hiring by American companies. The problem started in 1986, when Reagan granted a blanket amnesty to millions of people who’d come into this country illegally, declared war on unions, and thus broke down the main barrier to entry to the workforce for people here without citizenship. The result has been more than 10 million noncitizens flowing across our borders (from countries all over the world—many come in on tourist or student visas and simply stay after their visa has expired), producing a massive dilution of the labor market. Add to that incendiary mixture a few right-wing racists pointing out the immigrants and telling frightened American workers, “Those brown people want your jobs!” and you have an explosive brew. We can fix all of this by cracking down on companies illegally hiring “undocumented workers” and by tightening the labor market to shore up wages for American workers.

Chapter 10, “Wal-Mart Is Not a Person,” tells the story of how back in the 1880s corporations—then the railroad corporations, the giants of the Robber Baron Era—turned to the U.S. Supreme Court to give them human rights under the Constitution. Although the Court didn’t actually do that, the court reporter wrote that they did, and for 130 years we’ve seen the creeping encroachment of the corporate form into rights our Founders fought and died for to give exclusively to humans. The pinnacle of this came in 2010 when the Supreme Court ruled that corporations are people and have political free-speech rights to spend millions, even billions, of dollars for or against political candidates and ballot initiatives. The result—if not fixed soon—will be the complete transformation of this country from a democracy into a corporate plutocracy. We need to block the Court in this superactivist behavior by amending the Constitution to say that only humans are “people.”

Chapter 11, “In the Shadow of the Dragon,” tells the story of a visit to the Mondragon Cooperative headquarters in the town of the same name in the Basque region of Spain in late 2009. We saw one of the world’s largest worker-owned businesses, with more than 90,000 employees turning over more than $14 billion a year worldwide. There are alternatives to the traditional top-down investor-owned corporate form, and people around the world are increasingly embracing these alternatives because they are better for local communities, better for the workforce, and better for the environment. The only losers are billionaires, particularly those who own most of our media and thus never tell you that every corporation in Germany, for example, must have at least 50 percent of its board of directors coming directly from the ranks of labor.

The conclusion, “Tag, You’re It!” is about tried-and-true methods—most that we’ve used before in this country and all that we’ve at least flirted with—that can bring back a strong middle class and restore America to stability and prosperity without endangering future generations. It’s straightforward, easily understood, and the only obstacle to implementing virtually every chapter’s suggestion is the power of vast wealth (usually corporate wealth). Past presidents—most famously Teddy and Franklin Roosevelt—have openly challenged that corporate power, and the time has come for the current or next president (and Congress) to do the same. But they won’t if We the People don’t demand it.

This book is an outline to lay down those demands. Good luck!