Noah Smith and Brad DeLong: The U.S. Needs Land and Loans, Not Workers, for Reindustrialization
Economists Noah Smith and Brad DeLong argue in a podcast that AI-driven automation has ended the possibility of large-scale blue-collar manufacturing employment; the true driver of reindustrialization is geopolitical security rather than economic equality, with land approval and bank financing being the specific bottlenecks policy should target. Smith proposes releasing capital for manufacturing by granting selective Dodd-Frank exemptions to major U.S. banks.
Economist Noah Smith and University of California, Berkeley economics professor Brad DeLong discussed whether and how the United States should advance reindustrialization in the latest episode of the Hexapodia podcast. Their conclusion defied most expectations: the bottleneck lies not with workers, but with two institutional constraints—land use permitting and bank financing.
They first dismissed the path of economic equality among three common justifications for reindustrialization. Noah Smith and Brad DeLong argued that revitalizing the American middle class by creating high-paying blue-collar manufacturing jobs is unworkable because AI-driven robotics will make most manufacturing highly automated; competing with robot hands using human hands in factories is no longer viable. This means the era of mass semi-skilled blue-collar factory employment has definitively ended.
However, this does not mean manufacturing cannot create jobs. They pointed out that income generated by automated factories creates a multiplier effect locally, driving local service sector employment. This requires that the operators of these factories actually reside near the factories so they can spend their money locally.
With the path of economic equality ruled out, geopolitics and military security become the primary drivers of reindustrialization. They cited an example that is not necessarily optimistic but is significant: Ukraine is the only known country to have successfully achieved reindustrialization, having built a strong drone and robotics industry out of necessity to resist the Russian invasion.