Jennifer Granholm, the former governor of Michigan, has a story she likes to tell about the Chinese. Granholm visited China in March. At one meet-and-greet, a Chinese official buttonholed her and asked when the U.S. was going to implement a national energy policy. By her own account, Granholm hemmed and hawed, mentioning the rise of the Tea Party and the inability of the current Congress "to get its act together."
Granholm and I are sitting in a corner office of a building on the University of California at Berkeley campus, where Granholm is spending a year of "sabbatical." She leans over her desk, looks me in the eye, and demonstrates how the the Chinese official rubbed his hands together like a kid unable to contain his glee right before unwrapping Christmas presents. "'Take your time,' he tells me," says Granholm. "'Take your time.'"
She shakes her head as if in disbelief at how short-sighted the American political establishment has become. Her point is obvious, and oft-repeated during the course of our interview: In a globalized world, the U.S. economy will not thrive unless we get serious about targeting strategically important sectors of the economy. The rest of the world is playing the economic development game for keeps, while the U.S. seems willing to abandon the board all together.
"We operate as though we are not in a global economy," says Granholm. "In theory, free markets and laissez faire make perfect sense, but in practice, our competitors are eating us for lunch."
Granholm should know. As governor of Michigan from 2002 to 2010, she presided over a state that can lay as good a claim as any to the unhappy title "Most Beaten Up by Globalization." In her new book, "A Governor's Story: The Fight for Jobs and America's Economic Future," a sprightly political memoir co-written with her husband, Dan Mulhern, she tells a foreboding story of constant crisis and economic disaster. Hardly a day goes by, it seems, without another company announcing it is moving its operations to Mexico or China or some other country where the labor is cheap and the government stands ready to help. No matter how hard she works, Granholm finds herself more or less powerless to resist the changing tide.
Michigan never really recovered from the 2001-02 recession, says Granholm, who is currently spending a year teaching at the U.C. Berkeley School of Law while regrouping from her travails. Governor of Michigan was a tough gig, a job that gives her a lot of "empathy" for what President Obama is currently going through at the federal level. As unemployment steadily ticked up through the 2000s, state tax revenues correspondingly fell, a victim of the economy and a staggered set of tax cuts bequeathed to her by her predecessor. Every year of her tenure brought with it another huge budget fight with a Republican-dominated state Legislature. The result: Government shrank even as the state's economic circumstances worsened. Finally, the Great Recession slammed in, pushing the auto industry to the brink of complete destruction and forcing the unemployment rate up to a miserable 14.1 percent by August 2009.
It's a grim story, but Granholm does her best to conclude her narrative on a hopeful note. After the 2008 presidential election, reinforcements arrived. The Obama administration saved the auto industry and the stimulus package resulted in at least a dozen new high-technology, green-energy-related start-ups; lithium-ion battery factories sprouted up in Michigan like bamboo shoots after a spring rain.
Michigan's unemployment rate proceeded to fall "six times faster" than the national average, boasts Granholm. Without the federal help, she believes Michigan's unemployment would currently be over 20 percent.
There's a lesson there, she is convinced: Activist government can make a difference:
"I want my experience at Michigan," she says, "to be the empirical evidence of what works and what doesn't work."
Granholm sports the easy confidence and bonhomie of a practiced politician, joking about how nice it is to relax in jeans and tennis shoes, and interspersing her comments with a barking laugh and sardonic "whatever's." But even for the most skilled politician, making the case that Michigan's example is a model for the rest of the nation is more than a little strained. Michigan's unemployment rate is still 11.2 percent, the third highest of any state in the country, and it's been ticking up for four straight months. After Granholm was forced out of the governor's office by term limits in 2010, a Republican landslide increased GOP state legislative majorities and brought in a conservative governor.
Nationally speaking, the general public appears to view further stimulus with skepticism and Republicans have already declared the president's new jobs plan dead on arrival. Less than two years removed from aggressive government intervention in the Michigan economy, Granholm's prescription for more of the same on a nationwide level already seems a non-starter. In fact, I tell the governor that after covering how the political process and economic policy have intersected in the U.S. over the last five years, I am increasingly convinced that our political system simply isn't capable of smart, sustained industrial policy. China pulls it off because it's a one-party, essentially totalitarian state. But if we've learned anything about the U.S. over the last five years, it's that Congress is effectively incapable of efficient government.
"Well, then, we will just continue to lose jobs," says Granholm. "An unemployment rate of 10 percent and higher will be a norm for us."
One of Granholm's critical points is that states simply don't have the resources to compete against other countries. What they end up doing is simply stealing jobs from each other -- a zero-sum game for the nation as a whole in which everyone races to the bottom trying to create favorable investment climates. Even worse, while American workers will inevitably have to accept lower salaries and benefits in a globalized world, the U.S. will never be able to offer a labor supply that comes as cheaply as what's available on the global market. The best bet, Granholm is convinced, is to leverage American skills in targeted sectors that make strategic sense.
But what about the Rick Perry prescription, I ask the governor. Low taxes, small government, low regulation and weak unions? Texas created a lot of jobs in the last 10 years, while Michigan was hemorrhaging. Given that reality, how can Granholm make the case that she has the best answer for how to boost job creation?
Granholm leans her head back and laughs. "That's just bull!" she explodes, unable to restrain her mirth. Michigan's experiment with tax cuts and smaller government was a resounding failure, she declares.
"I listed the bill numbers of all the tax cuts I signed as governor in the book for a reason. Ninety-nine of them! Big ones, small ones, targeted -- whatever! If you think that small government and tax cuts are the way you are going to grow the economy, Michigan's unemployment rate should be the lowest in the country, because I cut more than any state in the nation by far! We also cut more government employees than any state in the country. Our corporate tax burden dropped the greatest of any state in the country."
"Rick Perry, interestingly enough, took all of his stimulus money and invested it and grew the public sector in Texas. Texas' public sector actually grew the most during the past decade and Michigan's got cut the most during the past decade. And Texas has the best job creation and Michigan had the worst. What does that tell you?"
Voters are unhappy, she concedes, because unemployment is high. But the best way to address their unhappiness, she believes, is to do exactly what President Obama is doing "right now."
"He is going to the people and he is providing them with a contrast. His effort to get compromise has not worked with this crop of Republicans, but this current Jobs Act has elements that Republicans themselves have proposed. When citizens see that Congress is not willing to support even those solutions that they have previously signed off on or endorsed then he will be able to make the contrast very clear."
Granholm sees a potential parallel to her own reelection in 2006, when unemployment was rising and Michigan voters were convinced that the state's economy was on the wrong track. She faced a rich businessman, Dick DeVos, who styled himself as a turnaround specialist -- much like Mitt Romney, "only richer." But after Granholm succeeded in drawing a stark contrast between herself and DeVos, she ended up winning by 14 points.
I observe that Granholm appears to be assuming Romney will be the nominee. What about Rick Perry, currently on top of almost every poll?
Eyes sparkling, Granholm rubs her hands with gusto, imitating herself imitating the Chinese official so gleeful at America's failure to target renewable energy. "From your mouth to god's ears," she says.
"Obviously I am biased," she says, "but Perry is just so far out of the mainstream in terms of Michigan and the industrial Midwest. I don't see how that works."
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