Floating China's Currency Will Not Bring Manufacturing Jobs Back to the U.S.A.

Many urbanists (myself included) lament the demise of manufacturing in the once great industrial cities across America. As such, urban planners have taken to proposing various solutions to revitalizing these decaying regions. Prior to the Great Recession, many of these solutions promoted the Silicon Valley mantra of information technology and knowledge work to lure what is known as the creative class. That idea failed to materialize, so now it seems urban policy wonks have thrown in the towel so to speak and shifted gears to discussing the best way to ‘shrink’ cities in post-industrial decline.

The dialogue regarding the death of manufacturing in America has been going on for at least a couple decades, perhaps beginning with Michael Moore’s 1989 documentary Roger & Me, where he examines the dire impact of General Motors assembly plant closures in his hometown of Flint, Michigan. Moore’s film incites a gloomy outlook for Flint’s future as he shows local leaders hopelessly vacillate over ways to replace lost jobs. More than 20 years later, Flint’s future doesn’t look any brighter than it did back then.

Flint is just one representative example of an American city in post-industrial decline. Among planners and urbanists, Detroit is the preferred charity case (Aaron Renn did a good summary of Detroit interventions in this NewGeography piece last year). Yet Detroit and Flint, which seem to get an inordinate amount of attention, are far from the only problem cases in the U.S.  As a matter of fact, the loss of manufacturing has affected the whole country in a way that is perhaps not fully grasped in the same way the physical manifestation of a derelict city is.

The reality is that development equals opportunity and America is currently severely lacking in both. This affects the national morale as people continue to be wary about their future prospects. Unfortunately, ‘development’ as it is traditionally conceived, is directly at odds with the green movement. When it comes to new and proposed regulations regarding carbon emissions, hardly anyone in America today would be in favor of a large-scale factory building campaign. Furthermore, industries such as single-family home construction have failed to become a model of long-term sustainable employment. Certainly, at the beginning of the Millennium the home-building industry employed everyone from construction workers to mortgage brokers to city planners, but in the end the results of the boom proved to be disastrous.

One only needs to visit a city in China like Chongqing or Dongguan (among dozens of others) to get a quick reality check about how the paradigm of opportunity has shifted eastward over the Pacific. It is not only the ‘cheap labor’ pool that has helped China rise to prominence, but the organizational structure of the top-down planning model. Surely, there are many other places around the world where one can find cheap labor but what has been China’s strength is the development of infrastructure, both physical and social, to allow growth to take place.

American companies have benefited tremendously from China’s global rise and low cost of doing business, so it is hypocritical for members of the U.S. Congress to criticize China over its ‘currency manipulation’. Rather than finding solutions, U.S. politicians are busy pointing fingers at the big red straw-man assuming that if China lets the value of its currency increase, manufacturing jobs will somehow magically come back to America. This is highly delusional thinking. China commentator Shaun Rein drives this point home in a February article for BusinessWeek when he states:

“China bashers are raising expectations too high with dubious assertions that if the yuan were revalued, manufacturing jobs would suddenly move back to the U.S. and the trade surplus would be reduced. If manufacturers found costs were too high in China, they wouldn't return to the U.S. They would just move to countries such as Vietnam and export back to the U.S. from even lower-cost production centers.”

So, in essence, America’s manufacturing demise is not a ‘China problem’ but rather an American one. Until politicians start focusing inward, opportunity and upward mobility for America’s future generations look bleak. There are always the techno geeks who believe that America’s future of opportunity lies solely in knowledge work. Realistically though, not every American is going to become a computer software engineer designing the latest ‘killer app’ for the iPhone.  Even more unnerving is the prospect of knowledge work being outsourced, which is already happening as ever more Asians master the language of computer programming.

Where does this leave America? Well, there appears to be no easy solution as global competition continues to grow. Government regulation preventing U.S. companies from outsourcing overseas does not seem to be in vogue, nor does trade protectionism make any sense in this day and age. Curiously enough, America’s strength lies in its cultural capital as the preeminent model for successful economic progress that is currently emulated by developing nations. Perhaps it is time America takes a cue from its own past glory and once again adopts an ambitious large-scale development program. Until this happens at a national level, America’s free fall will continue and urban planners will keep busy debating the best way to ‘shrink’ Detroit and possibly many more once-great American cities.