More Than Decline

The Covid-19 pandemic highlighted a wide range of social problems, from the slow deaths of American communities to cultural hypochondriasis to the damage that can be done by a too-powerful government bureaucracy.

One subject given surprisingly short shrift was the dawning realization that America can’t make things anymore. Be it computer chips or cheap masks, American consumers—living in what was once the most powerful industrial behemoth in the world—couldn’t get access to what they needed, or were charged exorbitantly more for the privilege.

How could this be? And what could be done to fix it? One theory on the latter, the “Abundance Agenda,” posits that what’s needed is a return of capacity. The central thesis, articulated in the Atlantic by Derek Thompson, is that what we need to solve all of America’s challenges is to focus on providing more of everything.

“Abundance” is getting at something critically important. America has lost the capacity to make things, and this creates both the risk and reality of shortages and vulnerability.

But what we should worry about are the shortages that impact everyday Americans, and the attendant problems of an economy that doesn’t serve them. Abundance, as presently articulated in the pages of the Atlantic and elsewhere, over-indexes on the concerns of the laptop class—the lack of things like green energy or affordable colleges. It should be no wonder, then, that so many of the policies that have spun out of the agenda have been progressive. And we need to wrestle with the constraints of an American state already $35 trillion in debt: We simply can’t afford an expansive wish list of policy formulations.

But we shouldn’t write off abundance—and the thinking that undergirds it—as some type of liberal utopianism or grab-bag of handouts; there’s a compelling reason why so many people, left, right, and center, are looking at it.

What we need are thriving, productive markets that support stable families, national security, and American industry. Call it the “Efficacy Agenda,” one tied to optimal outcomes, not just more.

But to grasp why the American economy is in need of a reorientation to begin with, we need to understand how we got here.

What Went Wrong

It may seem like the types of shortages and challenges that beset America during the pandemic are natural, or at least long-standing. But many of them track to specific political decisions and general views about what the American economy should look like. Starting in the 1980s, the United States pursued free trade agreements with the rest of the world that contributed to our own economic decline. 

We’d buy products once made here for cheaper from poorer countries—China, Indonesia, and the rest of the developing world. The theory was that this tradeoff would promote specialization, helping economies best situated to produce, say, grain to produce grain, and allow those with rich oil reserves to export oil. These countries could then trade—either in goods or in cash—and the various inter-country balances would inevitably level out as countries pursued their own self-interest. The market would settle up, the world happily in harmony and a rising tide lifting all boats.

These were the convictions of the chairmen of the president’s council of economic advisors from Reagan through to Obama. It led to the proliferation of free trade agreements—the North American Free Trade Agreement (NAFTA), welcoming China into the WTO with Permanent Normal Trade Relations (PNTR) status where it was treated no differently than allies like France or the U.K., and more, quickly becoming economic dogma across the political spectrum.

The problem was that the understanding of what economists call “comparative advantage” bore no resemblance to the real-world geopolitics of trade. The reality is more complicated, as American Compass chief economist Oren Cass explains: 

Economists have long understood that the basic [comparative advantage] model describes poorly the modern international economy. For example, one crucial driver of comparative advantage is scale. The things which one makes a lot of, one is likely to make more efficiently. Thus, rather than a nation focusing where it has comparative advantage, it has comparative advantage where it focuses. In technical terms, the advantage is endogenous—it emerges from the behavior of the participants. …

Likewise, a nation’s public policies exert a strong influence on its place in the global marketplace. Does its legal system provide for the predictable rule of law and enforceable contract and property rights? Does its education system produce a large supply of high-quality engineers? Does its labor regulation allow workers to exert power or leave them ripe for exploitation? Does its trade policy make domestic production a condition of access to its consumer market? Does it offer generous subsidies to producers? Answers to these questions—not any traditional, discovered comparative advantage—best explain the decisions of the international financiers and multinational corporations whose very visible hands move capital around the globe.

That misunderstanding, matched to a blind faith among the neoliberal order of the day in free trade as it was misunderstood, set in motion the decline we see today. Cass again:

US exports and imports were roughly balanced in 1992; in 2022 the trade deficit exceeded $900 billion for the first time. Even in advanced technology products, the same 30-year period saw the United States swing from a $60 billion surplus to a nearly $250 billion deficit. Economic growth and business investment slowed, with the 2000s and 2010s turning in the worst and second-worst decades of the post-war period. In manufacturing, productivity growth turned negative—American factories needed more labor in 2022 than in 2012 to produce the same output. 

At the same time, America lost the distinction between productive and unproductive markets, or the recognition that not all economic activity is created equal. We started equating unproductive activity like financial engineering with productive uses, like building semiconductors.

These changes led to massive differences between the haves and have-nots in America, all under a banner of rising top-line economic numbers. Wealth grew for the well-off far more quickly than for everyone else, locking middle-class Americans out from rising asset values and ballooning income inequality. Our trade balance turned dramatically negative. Business investment fell with it. American industrial output declined as we lost our place at the cutting edge of innovation. Globalization, as American Compass explained in a 2022 report, was at the heart of it all:

The problem is not the economist’s oft-repeated disclaimer that trade creates both winners and losers. The problem is that the promised benefits never materialized, while costs dismissed as implausible have proved all too real. Of course, not every problem in the American economy has a connection to globalization, and in few cases is globalization solely to blame. But the era of globalization has coincided closely enough with the onset of precisely those problems that a clear-eyed analyst might have predicted and delivered outcomes sufficiently contrary to the ones its ideologues envisioned, that any jury would return a verdict of guilty beyond a reasonable doubt.

Supporting unrestricted free trade quickly became a tenant of a party in thrall to corporate interests and the donor class. The rest of us gained access to more cheap stuff than anyone in human history.

In exchange for that cheap stuff, we lost the ability to make things in the United States. From computer chips and cars to all the components therein, the technical knowledge flowed out to China, just like America’s money, jobs, and developmental leadership. American productivity across industries sputtered.

The changes set off a cascade of job losses, particularly in America’s heartland, where towns and cities built around factories were hollowed out as big businesses realized they could ship jobs overseas and rely on cheap foreign labor for their products. What was once the center of America’s industrial dominance turned into the Rust Belt, and has maintained that moniker ever since.

According to one study from the Federal Reserve Board, this development happened with “startling” speed. The first words of the review make it clear:

U.S. manufacturing employment fluctuated around 18 million workers between 1965 and 2000 before plunging 18 percent from March 2001 to March 2007. In this paper, we find a link between this sharp decline and the U.S. granting of Permanent Normal Trade Relations (PNTR) to China.

To make matters worse, these changes were joined by an explosion of governmental red tape: the number of regulations exploded, particularly environmental and health-related ones. This has only made efforts to build anything more difficult.

Perhaps no regulation is more deleterious than the permitting enforcement actions tied to the National Environmental Policy Act (NEPA), which requires broad evaluations about potential environmental harm for any proposed projects that 1) are on federal land 2) require passage across federal lands or 3) receive federal funding—so just about everything government touches.

The analyses are, by their nature, laborious. On average, these reviews add over four years to federally connected projects. And the most damaging aspect for would-be developers is often the ambiguous timeline. There’s no statutory cap on the length of the reviews; they can drag on endlessly.

This often leads to the weaponization of NEPA by environmental and climate advocates, as well as NIMBY interests. While the Act wasn’t intended to block development, it has become a standby for groups opposing any type of land-use progress—from apartments and roads to pipelines and powerplants.

As Eli Dourado, chief economist of the Abundance Institute, told me:

NEPA provides an enormous stumbling block to every aspect of American innovation and development—by design. Creating an economy that can produce an abundance of much of anything simply won’t be possible if every construction project has to live under the threat of endless court cases on the thinnest of merits.

While barriers to productive economic activity like building new factories increased, financial regulations went the opposite direction. While this helped open up an overregulated industry, it also meant that restrictions on things like stock buybacks and antitrust laws loosened, making it easier to invest in activities that may have created value for some but weren’t productive for the economy more broadly.

It all adds up to the hamstringing of a former industrial powerhouse. But we can—must—start digging out of the hole, and start building what will be necessary for a brighter alternative.

Abundance, Growth and the American Dream

What’s needed isn’t just more for more’s sake. A better understanding of abundance would recognize that production needs to be rediscovered, an acknowledgement that making things here matters. For decades, we’ve consumed much more than we’ve produced. While the neoliberalism of the past claimed this would be fine, the evidence to the contrary is all around us, from hollowed out communities and economic disparities to productivity declines and stagnating overall growth.

Restoration of that productive potential demands a certain set of core beliefs.

For one, it will require a serious look at cutting regulations that currently undermine production at every turn. As Thomas Hochman, policy manager at the Foundation for American Innovation (FAI), explained to me:

One of the most considerable challenges to America’s domestic production is that our developmental capacity has been undermined for decades by procedural, anti-growth policies mostly promoted by the Left. It’s created a sclerotic regulatory state that needs to be fixed if we want to have any hope to produce at a competitive level.

Instead, government efforts should be directed at supporting critical industries, which can also be strengthened by unburdening the economy from wasteful regulations.

That’ll be particularly important because a conservative, more abundant economic vision requires a serious rethinking of global trade. Our regime of “free trade,” which is neither free nor fair, must end, and be replaced by the adoption of corrections to those abuses.  

For another, it will require an admission that the topline economic growth following the implementation of free trade hasn’t translated into the type of real-world economic benefits that everyday Americans want. A look at how people think today about the “American Dream” puts a fine point on it.

Traditional notions of that dream often conjure images of boundless potential and economic opportunity, American Compass polling found that Americans don’t necessarily see things that way. They are as likely to define the term as a promise of dignified work, the kind that can support a family and build a decent life. And when it comes to what people want out of the economy, respondents overwhelmingly prefer messages about rootedness and security amid the anxieties of America’s economy today.

Free trade has given them an abundance of cheap stuff, but a deficit of economic security. Building the economy that everyday people want will require an America that can build again and an abundance of productive industries that provide jobs that can support middle-class families.

It will also require a recognition that American workers aren’t mere widgets that corporations can swap out for cheaper foreign labor—either by taking business abroad or through low-wage immigration here at home—to chase a profit.

The influx of cheap stuff came by way of a race to the bottom on wages. “Labor shortages”—much bemoaned by economists and corporate interests—are a reflection of tighter labor markets, and should inspire businesses to increase wages or working conditions or both to attract workers. Instead, by expanding the potential labor market around the globe, American workers had to compete with slave labor from China. 

To ensure that American workers don’t have to suffer through the conditions of the poorest workers in the developing world, and can instead enjoy the dignity and security of a middle-class life, they need guardrails and protections. One such protection is against unlimited low-skilled immigration.

While many proponents of the abundance agenda promote increased immigration as a supposed solution to scarcity, conservatives should recognize that this conviction has the problem backwards. Despite the rhetoric about there being too many jobs that Americans supposedly won’t do, the problem is that too many of the jobs on offer from American employers don’t match the desired skills with desirable wages. To cover the shortfall, businesses rely on the importation of foreign labor willing to accept destitute wages. What’s needed instead is a tight labor market that forces businesses to provide better jobs. As Cass outlines in “Jobs Americans Would Do”:

Immigration has provided the margin between a labor market in which employers would feel constant pressure to find and retain workers—especially lower-wage ones—and the labor market as it has operated, in which they can offer the same low wages and poor conditions for decades on end.

And any proposals for new government-supported investment need to reckon with the reality that the United States faces $35 trillion in debt. That isn’t some far-off problem for our children and grandchildren: We spend more per-year on interest to maintain that debt than we do on national defense.

We can’t simply spend our way out of what ails us. New investments should be viewed as exactly that: productive money that will reap more in return than is outlayed upfront.

But there are some encouraging signs. Even at a time of considerable political upheaval, Americans of all political stripes display an enormous preference for buying American products, and even amid a time of economic anxiety, are often willing to pay more to do so. But their options are often limited, and prices are higher than they would be but for burdensome regulations and an amnesia around many of the facets of production.

Finally, there’s a growing, bipartisan recognition that unfettered globalization and financialization have been harmful, and policy measures have been effectively advanced to remedy that. The CHIPS and Sciences Act of 2022 provided much-needed support for expanding domestic production of semiconductors. As Chris Griswold, American Compass’s policy director, explains, this effort is already paying dividends:

In total, investment in construction of manufacturing facilities for computing and electronic devices has increased 15-fold, according to American Enterprise Institute scholar Chris Miller. Semiconductor companies and related suppliers have announced over $300 billion in investment over the next decade. U.S. manufacturing construction is skyrocketing, driven almost entirely by investment in this sector, which has in turn been partially driven by the CHIPS Act—even before it became law, as industry anticipated its enactment.” 

But much more work remains to be done.

Trump’s Efficacious Potential

The United States can’t simply podcast our way into remembering how to make things here and why doing so matters; solutions to our decline will require serious policymaking energy.

Luckily, the incoming Trump-Vance administration is highly aware of America’s productivity decline, and committed to doing something about it.

A long-overdue component of that is for a second Trump term to take a blowtorch to the current regulatory regime. Hopefully the newly proposed Department of Government Efficiency (DOGE) will attack this problem with the seriousness and legal vigor it demands. Taking down the leviathan will require more than pithy comments and catchy memes. Groups like FAI have detailed roadmaps for where DOGE’s energy should be directed: eliminating waste and fraud, leaning on AI, empowering Congress and, critically, directing the department’s energy toward “eliminating and streamlining federal regulations to promote economic growth and address the rising cost of living.”

One good place to start is with, if not the elimination of, at least enormous reforms to NEPA: capping how long challenges can be extended, refocusing the evaluations to specific environmental necessities, and doing away with the redundancies and opportunities for weaponization built into the language. That same spirit should animate countless more regulatory cuts.

But not all industries are over-regulated. The under-regulation of many financial industries is a huge part of what created so many unproductive uses of resources in the first place. Those decisions have real consequences, as Griswold explains:

But Boeing’s DEI commitments were the wrong punching bag. The reason parts of their planes made a habit of falling out of the sky was rooted in the same misguided sense of market “efficiency” that Musk promotes. A focus on giving investors what they wanted in the short-term prompted Boing to systematically disgorge over $30 billion to shareholders via stock buybacks while developing the 737 Max, rather than invest it in higher production quality. Airbus, by contrast, made different investment choices, which is presumably why its planes fly just fine…

Reining in these practices and others—including credit card interest rates, as Trump has already indicated he wants to do—are critical in realigning the economy to support everyday Americans.

Trump also recognizes that the old consensus of unrestricted free trade has been a failure, one that has come at an exceptionally high cost to the forgotten men and women of America. To relevel the playing field, the incoming administration should aggressively implement its proposed new tariffs against China and more broadly, as part of a whole-of-government embrace of market realism, divorced from utopian, libertarian fantasies. That will mean reshoring domestic industries—especially critical ones for our national security.

The same can be said about Trump’s instincts on restricting immigration, particularly for low-skilled workers. 

The American middle-class life of yesteryear is impossible when low-skill jobs are filled by a flood of cheap labor from foreign countries. Instead, restricting immigration will help provide upward pressure forcing businesses to invest in the kinds of worker productivity that drives up wages. Mike Needham, American Compass’s chairman, recently explained, “Productivity increases won’t change the nature of every low-skill job. But in a higher-wage economy with greater income to pay for low-skill services, even the service sector sees its wages go up. That’s why it was possible 50 years ago for a bartender and a maid to own their own home, raise their children in a safe neighborhood, and, ultimately, retire with dignity.” 

Further limitations around who can enter the country—from building a wall to heightening enforcement to changes to our visa system—are rightly a priority for a second term. 

But these policies, while critical, won’t be enough on their own. Inextricable from a conservative understanding of abundance is a recognition that we need to invest in American industries. Such an idea may be controversial in sections of the right, but it certainly isn’t new. Prior to the party’s takeover by market fundamentalists, American statesmen from Alexander Hamilton to Ronald Reagan championed muscular industrial policies.

Now, as then, this industrial focus must be married to domestic investment to spur development in the U.S. Per Hochman,

Cutting regulations is critical, but insufficient. For industries with critical national security functions, tariffs are also critical, but insufficient. To have any hope of competing with China in areas like battery manufacturing and critical minerals, we’ll need some form of direct government investment. And upstream of that, it will require an understanding that investment is tablestakes for a global power in a multipolar world, and a necessary function of government.

The Trump-Vance administration should ensure that these investments provide returns to the American people. Companies need to be restricted from using these funds for things like stock buybacks or investing in China. These efforts need to flow from a goal of securing entire markets, not just individual corporations or parts of supply chains.

Many of these areas—like semiconductors—require major up-front investment. The United States should recognize that these capital-intensive sectors are critical for national security and our domestic economy, particularly in the wake of stronger trade and immigration policies. The incoming admin should be deliberate about adopting an industrial policy that both confronts China and positions the U.S. as the center of industrial production.

Adopting the type of industrial policy that can allow America to reindustrialize will need more people to work in the reshored industries. One of the many attendant problems with hollowing out the manufacturing base is that doing so pushed people away from the training required for these jobs, stripping them of both their numbers and their dignity.

That means training and supporting these professions. Efforts like the Workforce Training Act from Sen. Tom Cotton and others would help, but more will no doubt be needed.

Perhaps the most politically useful wisdom of the abundance agenda is that revitalizing America’s productive capacity, relearning and retraining how to make things, breaking China’s stranglehold over us, and kicking the rust off the Rust Belt will require a whole-of-government approach.

The specifics of the existing agenda won’t all make sense to keep. But the spirit shouldn’t be overlooked.

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