America is in a situationship with industrial policy

Make Me Smart February 14, 2023, transcript

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Kai Ryssdal 

Let’s sit down and go. Hey, everybody, I’m Kai Ryssdal. Welcome back to Make Me Smart, where none of us is as smart as all of us.

Kimberly Adams 

And I’m Kimberly Adams, thank you for joining us on a deep dive Tuesday and Valentine’s Day. Happy Valentine’s Day to all. Today we are going to dig into the not so romantic topic of industrial policy, although I guess it depends on how you feel about it.

Kai Ryssdal 

For some people out there it might be just the perfect thing, that’s all I’m saying.

Kimberly Adams 

Yeah, to get your get your heart thumping, because it does kind of seem like it’s all the rage right now with the passage of the Inflation Reduction Act, the CHIPS act. And you know, of course, the Infrastructure Law, which you know, is a law. I still can’t believe it. Anyway, just take a listen to this part of President Biden’s State of the Union speech.

President Biden 

Tonight I’m announcing new standards require all construction materials used in federal miniature infrastructure projects to be made in America.

Kai Ryssdal 

Great political applause line. But is it all that? We’re gonna talk about industrial policy today with Derek Thompson. He’s a staff writer at The Atlantic also the host of The Ringer’s Plain English podcast. Derek, welcome back to the pod.

Derek Thompson 

Great to be here. Thank you so much.

Kai Ryssdal 

So look for those not as versed in in government policy at large as as you are. What is exactly industrial policy?

Derek Thompson 

I’m glad you asked. And I’m glad you asked on Valentine’s Day, because I think industrial policy is romantic. I think it’s you know. What is romance? Romance is about the development and growth of two, I guess for some people more than two people. That’s what industrial policy is all about. It’s about the development and growth of the economy, typically the manufacturing and construction parts of the economy. And just as there’s a bevy of philosophies about how to grow one’s personal relationship, there’s also a bevy of philosophies about how to grow an economy. Some people say that what we should have is free trade. We should simply bring down our borders, have no tariffs, buy from anywhere that makes the cheapest stuff, outsource all of our manufacturing to wherever makes the cheapest stuff. And to a certain extent, that has been the philosophy of the US government for the last 30,40 years. Sometimes this has been called free trade, sometimes open trade, sometimes neoliberalism. But a couple things have happened in the last few years that have made a lot of people in both Republican and Democratic Party question that philosophy. They’re starting to think, “Well, look, we can’t necessarily trust China the way that we thought we could as a political actor or as an economic actor.” And we also realize that we’re not making enough critical stuff here. We’re not making enough houses, we’re not building enough clean energy. We’re not making enough semiconductors, computer chips in the US. Maybe we should have a theory for an industrial policy to build stuff right here in America, right? Pull it into the relationship between the federal government and private manufacturers and construction companies. So industrial policy is romantic, and it’s particularly romantic in 2023.

Kai Ryssdal 

You’re just fast on your feet man. That was amazing. That was that was

Kimberly Adams 

And I’m gonna fully lean into this. So since we’re talking about relationships, and our relationships with other countries, when it comes to trade. Help me understand where this fits in compared to other fun political science terms like protectionism and isolationism.

Derek Thompson 

So isolationism is the idea that the US should not do any business with any other with any other country’s companies. To a certain extent, it’s it also sometimes is the way that we talk about foreign policy. So isolationism, meaning the US shouldn’t get involved in foreign wars. Protectionism is this idea that the US should fundamentally have, let’s call it an exclusive relationship with people that that manufacture stuff within the supply chain in the US. So for example, we need to build houses in the US. Well, what do you need for houses? You need lumber, you need plastic, and you just heard President Biden say, “we only want American companies to make that lumber.” We want an exclusive relationship between home builders and American lumber companies. So who’s against exclusivity in relationships? Well, I am to a certain extent, I hope my wife isn’t listening this part of the episode. Basically, the problem with exclusivity in trade is that if you’re a home builder, and you’re trying to build homes in a really expensive part of the country, Miami, New York, San Francisco. Houses are already expensive. And if you say that you can’t buy any lumber from a cheap lumber supplier in, let’s say, Canada, well, that means that the price of those homes is going up, which means that the price of those homes for say, middle class Americans that want to buy a place in San Francisco, their prices are now going up. So there’s all sorts of ways in which protectionism and buy American policies, tends to raise the price of that which is most critical to the US economy. And I don’t think that’s such a great outcome.

Kai Ryssdal 

All right, I don’t have it in me to continue with the whole relationship thing. I’m just I’m not I’m not swift enough for that. So I’m just gonna, I’m gonna throw this out there, Derek, and I want to get your thought. Yes, we need industrial policy. And yes, in theory buy America might be a fine idea. But in reality, it’s just a cheap, political sop that presidents for 40 years have been using.

Derek Thompson 

Yeah, it is a cheap political sop, I would actually flip it. I would say it’s an expensive strap. It’s a cheap political sop in terms of political capital. It’s it doesn’t cost a lot of political capital to say, “well, you know, we want to help American jobs, want to help American companies.” That’s great. I want to help American jobs and American companies. The question is, how do we best do it? So you think about something like baby formula. Right? I think a lot of people listening and maybe both of you remember last year, we had a very critical baby formula shortage after there was a bacteria outbreak at a Michigan plants. Well, how did the US have a shortage of something as critical as baby formula? The short answer is that we have a protectionist buy America policy when it comes to infant formula. We don’t allow American parents who for whatever reason, are into you know, Danish baby formula, or Netherlands baby formula to buy stuff from Europe. So if there is a critical crisis at a node in the US supply chain, like for example, in Michigan, and that node is blown out, that means that suddenly we don’t have a resilient supply of this incredibly important thing, baby formula. This is one of the reasons why I think something like friendshoring, that is creating supply chains among your allies among competent countries that you can trust, is a much better way to create a resilient network of supplying that which is most important to a country.

Kimberly Adams 

You know Kai was just talking about how its political sop and it’s been going on forever and ever. You know, when I was listening to that clip, it reminded me of from President Biden’s State of the Union, it reminded me of a speech which I just looked up of President Trump who was candidate Trump at the time, in June of 2016, giving a speech on his jobs plan. And here’s what he said, “it will be American steel that will fortify America’s crumbling bridges, it will be American steel that sends our skyscrapers soaring into the sky. It will be American steel that rebuilds our inner cities.” Everybody says this. What’s different this time, if at all.

Derek Thompson 

Those are beautiful words, but it’s important to go back to 2017,18,19 and look at what actually happened to the global steel market. What happened is that President Trump imposed tariffs to protect manufacturing workers who not only build washing machines, but also made stuff like steel and aluminum. And he did this in part, or Republicans said they did this in part, to help people who worked in these companies and help people who were disproportionately in Republican leaning counties. But what happened? Well, the policy actually backfired. We raised tariffs for steel, that means that other countries had retaliatory tariffs for steel. That meant that American companies who made steel and used to profitably export their steel to other countries, suddenly they face these high tariffs, and it hurt their business. So a policy that was designed to help businesses and workers, heavily concentrated in GOP leaning counties, ended up hurting those very same firms and employees. That’s one of the many ways in which I think protectionism and buy American policies can flip around on us, can boomerang around on us, and hurt the very people we are trying to protect.

Kai Ryssdal 

Let me let me take this global here for a second. And you talked about this a little bit. But I want to go to the last line of your piece in The Atlantic, which I recommend everybody and which we’ll put on the show page. You talk about what we want out of industrial policy, which is a growing economy and that’s growing wellbeing for everybody and you say “to win an abundance of wellbeing American needs abundant help.” And yet, in things like the Inflation Reduction Act, where we put in policies that just for instance, will incentivize electric car manufacturing in this country and some other things, we did in that and then the Europeans got incredibly pissed off at us and they’re still angry at us. And I guess my question is, how do we build domestically while at the same time not annoying our international partners or would be international partners?

Derek Thompson 

It’s a wonderful question. And it’s a question that doesn’t have an easy answer but I have a hypothesis that I’ll throw out. I don’t like buy American policies, I don’t like rules that say that companies have to buy their parts from specific companies. I don’t like that at all. What I do like, are subsidies for both businesses, and consumers. So for example, the US has a subsidy for anyone who wants to buy an electric car, I think that’s a neat idea. The US can also subsidize the development of geothermal energy production, and new nuclear fusion technology, and new cheaper ways to build really efficient solar panels and wind turbines. I think that’s fantastic. That’s pushing technology forward. That’s encouraging innovation. Buy America policies sometimes do the exact opposite, the discourage innovation, because if there’s a really, really innovative company, in, let’s say, France, that’s building, you know, really cheap, sensational, biodegradable plastics, and you’re telling American home builders, that they are not allowed to buy this sensational product from Paris. That’s not pushing global technology forward, that’s hindering progress. So I, the way that I fall in industrial policy is subsidies for consumers, cool subsidies for businesses, often very useful. Buy American policies, get out of here.

Kimberly Adams 

So and I have to say, Kai, you really missed an opportunity on that, you know, American partners thing, earlier.

Kai Ryssdal 

Oh yeah, I guess I did. See I don’t have that I don’t have that gene. And that’s why my wife hates Valentine’s Day, because I just I don’t deliver. But that’s a whole different podcast.

Kimberly Adams 

Oh, boy. Derek so then, if these are the things that you like, and don’t like, when it comes to these policies, where does the Biden administration plan fit in terms of advantages, disadvantages, what you think it’s going to work, what they’re actually doing, that might not work?

Derek Thompson 

I’m a cheerleader for so much of this new industrial policy. One of the pieces that I wrote last year that got the biggest and best response was this piece, where I called for what I call “an abundance agenda.” In so many of the problems that America faces are problems of scarcity. We don’t build enough homes, we have fewer physicians per capita, fewer general practitioners per capita than almost any country in the OECD, we have a shortage of housing, a shortage of access to medicine, we have a shortage of construction in the green economy to decarbonize our grid. We need fresh thinking for how to create an abundance of that which is most critical for a productive American life. And I do think the Biden administration is doing that. I do think they have an abundance approach. But as I say, at the end of this piece, and Kai read the conclusion already, but I’ll repeat it “to win an abundance of well being, we need an abundance of help.” We need to remember that there are a ton of other countries that are working on manufacturing stuff in clever, fantastic ways. And we need to give our companies access to those markets, just as we hope our companies have access to their markets. It’s good to be able to trade, it’s good to be able to build comparative advantage. I just don’t want us to put up these kinds of walls that say, you know, “Company X, you have to buy from, you know, one of a small handful of suppliers that might not be very good at doing what they’re doing.” That doesn’t seem to be that doesn’t seem to me to be a path toward abundance.

Kimberly Adams 

Derek Thompson is a staff writer at The Atlantic and host of The Ringer’s Plain English podcast. Thank you so much.

Kai Ryssdal 

Derek great to have you on. Thanks so much.

Derek Thompson 

Thank you.

Kai Ryssdal 

Thanks so much.

Derek Thompson 

Thank you.

Kimberly Adams 

Yeah, listening to that Biden clip really did bring back some of these Trump’s speeches. I was just like, “This sounds so familiar over and over and over again.”

Kai Ryssdal 

Look, politicians love this. Right? And and they should, because that’s their job, but I’m not sure they’re doing the thing that’s best for the American economy as Derek said, I completely agree with every word he said.

Kimberly Adams 

Well, I would be curious as to whether the folks listening agree with everything that Derek says or what Kai says

Kai Ryssdal 

No, he said it. I’m just I’m just tagging along. I’m I’m aligning myself with his remarks. What is it that they say. I like to I? What is it? I identify myself with his remarks? What are they saying Congress? Come on you’re in Washington.

Kimberly Adams 

I try not to listen to them as much as well at all possibly. Anyway. But in St. Louis, we say we’re co-signing. All right, but what do you all think of an industrial policy come back. You can send us your thoughts. Our number is 508-827-6278, also known as 508-U-B-SMART. You can also have email us those thoughts and feelings especially if you can make a nice little plenty reference to relationships in there at makemesmart@marketplace.org. And we will be right back.

Kai Ryssdal 

News! Kimberly, go.

Kimberly Adams 

Yeah, I’ve been trying to channel Nancy Marshall-Genzer there all day with the puns because for those of you who don’t have the pleasure of knowing her in real life, she is a big puns person. But anyway, so first I’ll go with my related to Valentine’s Day story, because I’m clearly on theme today. And you know, I love a good theme. But a negative one, unfortunately, which is about romance scammers. The Federal Trade Commission, usually around this time of year puts out sort of a warning about romance scams and all the people who prey on folks via dating apps, via social media sites, all sorts of other things. Last year, sorry. In 2022, nearly 70,000 people reported a romance scam and reported losses hit a staggering $1.3 billion. The median reported loss was $4,400. And just you know, be careful out there. The FTC list their “favorite lies” by the numbers, as in the lies most often reported when people are reporting these scams. And I should say that these scams are often vastly underreported because people are embarrassed, you know, they don’t want to say that they’ve been scammed or believe that they’ve been scammed. But it’s stuff like “I or someone close to me is sick or hurt or in jail, and I need money to help you know, deal with it.” Other apparently 18% of the scammers say that they’re going to teach you how to invest. Another 18%. And this is a classic, “I’m in the military far away”, or “I need help with an important delivery.” “We’ve never met but let’s talk about marriage,” you know, all these other things. You know, it sounds funny, but you know, there are a lot of folks who are really struggling with with loneliness and you know, when you’re spending a lot of time alone and and maybe don’t have the sort of social and community support that would provide a a check, and the healthy skepticism on stuff like that. It can it can be easy to fall prey to things like that. So that’s, that’s piece number one. Piece number two, completely unrelated. Nikki Haley, has announced her 2024 White House run. So the first official challenger to Donald Trump and the Republican primary, which you know, for my interests means the first official money challenger for the Republican Party. Because one of the very interesting things about Trump is that he has had the Republican donor base, especially small donors, on lock pretty much since he came into the presidency and won the primary. And this has been so hard for the Republicans to sort of pull rank and file Republicans away from him when it comes to sort of small dollar donations. Although the bigger donors seem to be moving away and are very annoyed with Trump for making them lose the presidency and you know, the Congress and all the other things. One of the interesting thing because I watched her promotional video for announcing her run. one of the very interesting things I thought was that she’s using a Democratic talking point in her own campaign, which is that Republicans have lost the popular vote in seven of the last eight presidential elections. Like she says it out loud, and she was like, “we have to change that.” And, you know, she’s using that to say that the establishment Republicans are not enough and she leans into South Carolina. Really targeted attacks, on issues of race and things like that. And it’s going to be fascinating, because this is, I mean, obviously, we expect Pence to join on the Republican side. But it would be so fascinating if the first woman president ended up being a Republican given their record recently on women’s issues.

Kai Ryssdal 

It would indeed, it would, indeed. Okay, just super quick for me, just sort of as the flip side of the coin about industrial policy that Derek and Kimberly and I were talking about. You can have government industrial policy and you can have corporate policy. There is another part of the industrial equation in this economy, though, and that is labor, the workers. And I note today that Tesla workers at a Tesla plant in Buffalo are going public with their campaign to form a union, specifically, about 800 people who develop, and this is from the New York Times, “the driver system software for Tesla cars.” And here’s the line of the day from one of the members of the group its calling is Tesla Workers United is what they’re calling themselves. Here’s the quote, “we are only asking for a seat in the car that we helped build.” Which is really smart, really clever. But also they’ve got a point, right? Tesla workers, for years now have had challenges with the conditions with overt racism in their factories. And it’s been a really challenging place to work. And I think it says something that they are now going to try to unionize in this moment where as we’ve talked about on this podcast, unions do have some public support behind them. There you go.

Kimberly Adams 

Indeed, and I will point folks back to our show on recent union efforts, which helped me have a much better understanding of where we sit and all that. Okay, that’s it for the news fix. Let’s do the mailbag.

Mailbag 

Hi Kai and Kimberly. This is Godfrey from San Francisco. Jessie from Charleston, South Carolina. And I have a follow up question. It has me thinking and feeling a lot of things.

Kimberly Adams 

Okay, after our recent conversation on tiddlywinks, we were left with some questions and Heather sent us this

Heather Anne 

That was exactly it. Thank you! Good morning. My name is Heather Anne, and I’m calling from San Mateo California. And to answer Kimberly’s question, the show she was trying to think of is Lois and Bram. And the song you were trying to remember that tiddlywinks reminded you of is ‘skidamarinky dinky dink skinamarinky doo. I love you.’ Anyway hope that helps. Thanks for making us smart.

Kai Ryssdal 

Wow. I had no idea about that. Fascinating.

Kimberly Adams 

Yeah, I think it’s, you know, it was it was a show like a kid show growing up and things. It was very cute. But yeah, that’s exactly what I was thinking of. And now I’m gonna have to go down a YouTube rabbit hole and find clips of it.

Kai Ryssdal 

Fair enough. All right. So we talked, I think a little bit about reducing household clutter, which was something that Kimberly Adams spent a good part of a recent vacation doing, which I don’t think is actually a vacation, but maybe that’s just me.

Kimberly Adams 

And still doing

Kai Ryssdal 

And yeah still doing. Anyway, here is one person’s response.

James 

Hi, make me Smarties. This is James from Oakland, California. I appreciated your Tuesday shout out to buying nothing for reducing household clutter. And I wanted to share one additional reason why it has worked so well for me. I had a sizable pile of personal slash heirloom items I felt emotionally attached to you that just kept using up storage space. I got to thinking about how many years of usefulness or happiness that someone else could have been getting out of them rather than collecting dust. Now when we send these items out into the world, I have a much better hope that someone else might carry forward the love for them. I still have a few items like my baby clothes that my daughter has sworn she wants to be able to use some day. But we’ve been able to reclaim a ton of storage space and I will be turning it into a home office and exercise space. Yay.

Kai Ryssdal 

Yay

Kimberly Adams 

Yay. Good for you.

Kai Ryssdal 

That’s very cool. That’s very cool.

Kimberly Adams 

Yeah, it’s been interesting, as I’ve been like, individually giving items away to people, often they’ll specifically tell me how they plan on using them. Like I had a microphone that my brother gave to me, because it, you know, is the sort of heavier duty microphone and he was like, “I’m not gonna use it but you use microphones.” And I’m like, “I actually have enough microphones.” And so yesterday, the guy was the guy who I gave it to, it’s just like, “I have a podcast and I’m gonna be using it for my podcast.” And I was like, “good for you.” Yeah, you know, it’s nice.

Kai Ryssdal 

Yeah, for sure.

Kimberly Adams 

All right. Before we go, we are going to leave you with this week’s answer to the make me smart question, which is “what is something you thought you knew, but later found out you were wrong about.” And we’re going to stay with the Valentine’s theme and get our answer this week from Michelle Jacoby a professional matchmaker and dating coach here in Washington, DC.

Michelle Jacoby 

What’s something I thought I knew but later found out I was wrong about …I used to think that finding love was all about romance and chemistry. Just follow your heart and you’ll find the right person and live happily ever after. Well, what I’ve learned over the years, it’s it’s not quite as easy as that. It’s really, really important when you’re looking to find your life partner, that you use your head, you’ve got to be more pragmatic. If you take the time to choose wisely, and really use both your heart and your head when you’re looking for love, you’ll choose a partner who you can love and enjoy for the rest of your life.

Kai Ryssdal 

I mean, I get it, but it does seem a little unromantic. Or am I being…

Kimberly Adams 

Oh no, I think that’s very romantic.

Kai Ryssdal 

Okay. All righty.

Kimberly Adams 

Did you not use your head at all?

Kai Ryssdal 

I don’t know. Yeah, I don’t know. I’m look, I’m a gut person to begin with. So

Kimberly Adams 

Oh really?

Kai Ryssdal 

Oh yeah. 100% 100% 100%

Kimberly Adams 

All right, well, the rest of you weigh in. I’m curious. Head or heart? What what should be the guiding, guiding force when it comes to love? Or you can also share if there’s something that you’ve been wrong about lately, we want to know. Send us your answer to the Make Me Smart Question. Our number is 508-827-6278 also known as 508-U-B-SMART.

Kai Ryssdal 

Make Me Smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter. Our intern is Antonio Barreras. Today’s program was engineered by Juan Carlos Torrado on the other side of the glass from me over there. Mingxin Qiguan is gonna to mix it down later.

Kimberly Adams 

Ben Tolliday and Daniel Ramirez composed our theme music. Our acting senior producer, who we love, is Marissa Cabrera.Bridget Bodnar is the director of podcasts. Francesca Levy is the executive director of Digital. And Marketplace’s Vice President and General Manager is Neal Scarbrough. We love everybody. All the hearts on Valentine’s Day.