Brad and Noah discuss the reindustrialization of America

In the latest episode of the podcast Hexapodia, hosts Brad DeLong and Noah discuss the pressing topic of reindustrializing America, a subject that DeLong has extensively explored in his writings. They identify three main motivations for enhancing American manufacturing: geopolitical and military concerns, economic growth, and promoting economic equality. The geopolitical aspect emphasizes the need for a self-reliant supply chain for defense and dual-use manufacturing, particularly in light of China's influence and potential threats. Economically, a robust manufacturing sector could contribute to national wealth through agglomeration effects, while the third reason focuses on creating high-paying blue-collar jobs to revitalize the middle class.

However, the discussion reveals a critical perspective on the third motivation, as both hosts agree that the traditional model of mass semi-skilled blue-collar employment is becoming obsolete due to advancements in AI and robotics. They argue that automation will significantly reduce the need for human labor in manufacturing, making it difficult for the U.S. to compete in this area using human workers. Nevertheless, they point out that manufacturing can still generate jobs, albeit of a different nature. The economic activity generated by automated factories could lead to local service job creation, driven by the "local multiplier" effect, which emphasizes the importance of factory owners spending their earnings within their communities.

The conversation then shifts to the geopolitical and security implications of reindustrialization, highlighting Ukraine as a unique example of successful reindustrialization. Under duress from the Russian invasion, Ukraine developed a strong drone and robotics industry, illustrating how necessity can drive innovation and industrial growth. This example, while not necessarily optimistic, serves as a crucial lesson for the U.S. in terms of resilience and adaptability in the face of external threats.

DeLong and Noah also identify two significant barriers to reindustrialization in America: land use and access to bank loans. They note that the current permitting bill in Congress aims to address land use issues, which are critical not only for manufacturing but for various sectors. Additionally, they express concern about the challenges American manufacturers face in securing financing compared to their international counterparts. DeLong proposes utilizing America's large banks as capital sources for reindustrialization by offering selective exemptions from the Dodd-Frank regulations imposed after the 2008 financial crisis.

In conclusion, the discussion underscores the complexities of reindustrializing America in a rapidly changing technological landscape. While the traditional model of manufacturing employment may be fading, the potential for new job creation through automation and local economic growth remains. The geopolitical imperative for self-sufficiency in manufacturing, coupled with the need for improved land use and financing mechanisms, forms the backbone of the conversation, pointing toward a multifaceted approach to revitalizing American industry.