America's struggling textile industry garnered wide attention fairly recently with the bankruptcy of Pillowtex Corp., which has resulted in the largest permanent layoff in North Carolina's history. The invisible hand of the free market has been wreaking havoc across America, breaking records like this one left and right. The free market certainly isn't invisible to the good people of North Carolina, who have been permanently freed from their jobs.
The mass layoffs at Pillowtex definitely aren't the end of the story. Several other smaller textile plants across North Carolina are closing as well, and the numbers could be collectively more than the Pillowtex layoffs alone. Thanks to the good people at WBTV in Charlotte, NC, I was able to visit a closing plant in Bowling Green, SC. Some of the machinery had already been shut off for good. The rest was soon to follow.
The story behind the closing of the Bowling Green plant, where 160 people will lose their jobs, isn't close to being about what free traders often make America's manufacturing plants seem to be all about. Free market advocates, the very kind that were ridiculed by our founding fathers, would have you believe manufacturing plant closings in America are usually about factories that don't become more efficient, and therefore deserve to close in exchange for more efficient plants overseas. Never mind that the machinery at the Bowling Green plant will be shipped overseas to be used by China or Pakistan to make goods once made here in America. So it's not really about efficiency, it's about cheap labor.
Daniel LaFar, the owner of the plant, told me that the Bowling Green Spinning Company spent $2 million in the last 12 months to make the plant more efficient and productive. It didn't matter. Circumstances beyond their control, including a spike in the price of cotton, forced the closing. Mr. LaFar also told me that many plants would probably have closed a long time ago, but LaFar's plant had a lot of history behind it, and has been in his family for generations. Bowling Green survived the Great Depression, but it can't survive circumstances beyond its control in an economy that is supposed to be on the rebound.
The future of some of the good people at the Bowling Green plant I had the pleasure of meeting is definitely uncertain, and the future of the town is uncertain as well. LaFar's plant paid nearly $100,000 in taxes last year. Not many opportunities for employing 160 people are evident in this small town where the Bowling Green Spinning Company resides. What will remain in addition to the Bowling Green Post Office across the street from the factory is unclear.
America routinely spends billions of dollars each year for the privilege of laying off good Americans like these. Last year Americans sacrificed $12 billion in tax dollars for the privilege of putting other Americans in other employment lines, forcing them to exchange paychecks for pink slips. They should be trained for the up and coming job winners in America, we are told. Manufacturing is in the past. Innovation industries are the future. But the fallacy of this argument is that there is no reason we can't do both, just as we did when we switched from an agrarian society to a more-industrial society. We didn't sacrifice the farm to embrace the factory then, and we shouldn't do anything similar to that now. The farm and the factory worked together, side by side. Today, innovation and manufacturing should work together, side by side.
Even free trade economists admit that the average worker that loses a job because of trade or technology earns an average 13% less at his or her new job, when they can find one. Close to one-fourth earn a whopping 30% less. And, of course, the wages lost while finding that new job at lower pay can never be recovered.
But today's winning industry could be tomorrow's losing industry. One need only remember the dot com crash to know that this is true. And with the time it takes for the gains of the supposedly appropriate policies forced down our throats by the free market to take hold, job winners may never have time to grow and mature into the true winners that they are supposed to be. How long have we been told to hold fast while the gains of free trade and unbridled free markets work their magic? The only magic I've seen are disappearing acts. That kind of magic isn't fun if you're without a job.
The good news is, however, that Washington is starting to listen. Who would have thought that Elizabeth Dole and Hillary Clinton would ever be talking up a bill that could put 27.5% tariffs on Chinese imports? Americans need to keep the pressure on Washington, and if they do long enough, Washington will not only listen but follow through on their increasingly populist rhetoric.
The issue is not whether or not we should compete. The issue is how we should compete when it is beneficial to do so. Abraham Lincoln once declared that trade should be used "where it is necessary" and avoided "where it is not." Chinese textile trade is not "necessary." It doesn't matter to me if you call this "protectionist." Our founding fathers didn't care that they were called protectionist, and neither do I. "Protectionist" has been made out to sound like a bad word, but I'm not concerned with how a term sounds, and neither should you. I'm far more interested in what protectionism can do for America. Forget how it sounds. Forget how it looks. "What does it do for me?" That's what we should be asking ourselves.
What protectionism will do, and what it has done in the past is protect American industries so that they can grow and operate at closer to 100% capacity, and therefore be more efficient. The average operating capacity of today's American manufacturing plants is closer to 60%. Free trade economists should know that as plants reach full capacity, they become more efficient and the cost per unit of production goes down, which can make the American export more price-competitive in overseas markets. This is how growth promotes trade. Free trade economists have it backwards in telling us that trade promotes growth.
The good people at the Bowling Green plant want to be efficient and productive. Owner Daniel LaFar pulled out all the stops to make it happen. America's manufacturers want to be seen as the potential contributors to America's prosperity that they are - not labor cost problems to be dealt with.