Bad Money: Why Jim Cramer is Wrong About Manufacturing

Today there is a schism in the U.S. economic debate. On one side is the financial sector- epitomized by CNBC’s Jim Cramer fighting for stock yields and Manhattan’s Wall Street. On another side is the blue collar middle class, fighting for manufacturing and small town Main Street.

Cramer is an eccentric former hedge fund manager whose television show “Mad Money” is off the wall. Between shouts of phrases like “booyah” he dishes out advice to plump portfolio’s and give his general market appraisal.

Recently, while speaking on a different program, Cramer made several very ‘un-booyah’ worthy points that promoted the abandonment of much of the manufacturing left in America. Among them, asked if he saw a future where America had an auto industry, Cramer responded, “There is no real reason to make cars here (in America).”

Cramer needs to realize that an economy that can not produce is an economy that is unsustainable. A real economic appraisal goes far past risers and fallers and examines the decreased savings, stagnant wages and offshoring of industries that has made America vulnerable.

America today is living on imports and debt unable to produce for ourselves. Companies are off-shoring jobs and moving plants to low wage countries like Mexico and China.

Today’s industrial America is bankrupt of innovation. Our technological know-how that was once the pride of the world is now lagging, unable to compete with the capital-intensive industry of nations like Japan.

And the American public is being cheated. We have created an economic illusion of success, where a growing GDP (70% of which is due to consumer spending) becomes the only indicator of economic success.

Today we live in a societal debt epidemic. In 2005, the average American household had a negative .5 savings rate according to the U.S. Commerce Department's Bureau of Economic Analysis. That means we are spending more than we save, a trend that has not occurred since The Great Depression. Our government debt is approaching 9 trillion. And in 2006 we imported more products than we produced, to the tune of 765 billion.

One of our biggest exports right now may be the selling of our companies: through August this year, 785 companies have been purchased by foreign owned companies for $129 billion dollars. This is the fastest sell-off of domestic owned companies since 2000.

Our debts are increasing, while our ability to pay them off is diminishing due to America selling off our companies to foreign buyers.

Now the unsustainable nature of our economic practice is catching up with us. The dollar is hitting record lows against currencies across the world: recently the Canadian loony, a currency that in the has traditionally traded at 1.25 to 1, drew even with it. Stagnating middle class incomes have resulted in reduced savings, which coupled with faulty lending practices, has produced a large segment of the population unable to afford their mortgages.

Really, what is happening to our country?

In Jim Cramer’s world, and in the world of many financial hot-shots, lobbyists and politicians, these issues are minor. To them it is all about cheaper prices and higher stocks at the expense of whatever American jobs must be lost. They only raise an eyebrow when the occasional billion dollar hedge fund goes bust, rather than when the whole working class of middle America is told take a hike.

But this schism of thought between Wall Street and small town Main Street must be mended. This is not a middle class issue, it’s is an American issue that impacts us all.

Manufacturing competitively should not be given up on, it should be embraced. It is a necessity to provide jobs nationwide and dig ourselves out of personal and governmental debt. Everyone must urge their political leaders to take a stand now- to start the winds of change blowing in the direction of a re-industrialization of the American economy.

That kind of effort deserves a “booyah.”

Jim Baird is the managing editor at EconomyInCrisis.org. He is a journalist and commentator. Mr. Baird studied in the Honors Politics program at the University of Edinburgh and is a graduate of The Ohio State University where he studied political science and journalism.

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