Middle America: Picked to lose

Discussions of American decline and what to about frequently end with a repetition of the mantra that "government can’t pick winners and losers" or "we don’t want an industrial policy because we don’t want the government picking winners and losers."

This implicitly assumes that the U.S. government policy has been and is neutral as between promoting or discouraging different industry sectors. That this assumption is false is extremely well illustrated by the letter below that I received earlier today.

Dear Mr. Prestowitz,

I read "The Betrayal of American Prosperity" this past weekend and found it to be the most insightful book I have read regarding our current economic position and trade policies. I feel compelled to send a copy to the president and every member of congress. It is unfathomable to me that your messages are not getting more attention in Washington.

I own a printed circuit manufacturer. In 1978, at age 18, I went to work for Continental Circuits Corp, which eventually became one of the larger PCB manufacturers in the US. I was a CNC drill operator and made $3.00 per hour. I worked my way up through the company and learned all aspects of the business. In 1988 I started my own company manufacturing PCBs. By 2002, I owned three PCB manufacturing facilities, two in Phoenix and one in Atlanta, and had combined revenues of over $12 million per year. I am now down to one facility in Phoenix and $4 million per year in revenues and it has become difficult to find enough business to keep it going. Still, I consider myself fortunate; there were over 2000 PCB manufacturers in the U.S. in 2000 and at least I am one of the barely 200 remaining.

Despite my best efforts to remain competitive, it is difficult to predict how much longer the business will remain viable. My bank canceled my credit lines, even though in the three-year relationship I had with them I never missed a payment. I have not been able to obtain capital or financing for the equipment I need to enhance my capabilities. While everyone from the mayor of Phoenix to the mresident of the United States is telling me that small business will drive the economic recovery, there has been no assistance available and in fact, I have had a number of areas of government working against me. For example, I have a generally accommodating and cooperative attitude towards regulators however when I questioned a Phoenix Fire Department inspector’s interpretation of the fire code on a few issues that came up during an inspection, he responded in a remarkably uncooperative manner by saying he was "mandating compliance" or he would turn the matter over to the city attorney’s office. His interpretation eventually was proven to be incorrect however he retaliated anyway by abusing his authority and bringing in ADEQ and OSHA for inspections without cause. My cooperation was returned with what was clearly harassment.

From the time I was a child I was taught how great America was and what an incredible land of opportunity I was fortunate enough to be born into. I was taught respect and loyalty to my country; I was taught patriotism. I also learned that throughout our history, our success was at times a direct result of the actions of individuals. I have never been politically active but I am sickened by the course our country is taking and feel compelled to take whatever action I can to help bring about change. It seems that the timing is critical with the elections coming next year. Any direction or recommendations you could provide about organizations that I could become involved in that are geared towards creating awareness of the issues covered in your book and making them political priorities would be greatly appreciated.

I have a son due in the next week or two. I want him to have the same opportunities that I have had.

Thank you,

Jim Keaton

CEO

Avanti Circuits, Inc.

So here’s a guy who is just what we say we want. He works hard, is entrepreneurial, does start-ups, and plays by the rules. He didn’t mention currency or trade policy directly in this letter, but the 90 percent decline of the U.S. printed circuit board industry (an industry without which there are no electronic products) over the past ten years is in significant part due to currency manipulation and U.S. trade policies that accepted the practice by some Asian governments of conditioning access to their markets on transfer of production and technology from the United States while the U.S. market was completely open to their products. On top of that, the U.S. policy program to save the banks has worked in such a way that producers like Avanti are deprived of bank loans even when they have spotless credit records.

The truth is that the U.S. government’s policy IS to pick winners and losers. For winners it picks Wall Street and Asian producers and for losers it picks Main Street and middle America.