From blankets to wind farms

If you want to understand US trade and manufacturing policy, start with the history of textiles. No, really:


If you know your history of the Civil War, you're aware that the South produced raw cotton while Northern textile mills converted that cotton into finished goods. Textiles remained a major industry in the Northeast for many generations. As profit margins came under pressure from demand for labor in other parts of the economy, the textile mills struggled to survive -- and even went so far as to put their workers at risk. You might recall, for instance, the 1911 Triangle Shirtwaist fire, which killed 146 workers. Many of them were young immigrant women -- the kinds of workers who were vulnerable because they had few skills and little clout to improve their conditions.

While textile and chemical companies tried to sustain profitability by developing new synthetic materials like polyester, Rayon, and nylon, eventually the Northern factories went out of business. While lower labor costs in the South permitted it to become the primary region for textile manufacturing in the US after the industry left the Northeast, ultimately most textile manufacturing moved out of the country. 

Yet even as profitability was in decline, some textile companies made the transition into other markets. That's why Berkshire Hathaway is today an insurance giant and industrial conglomerate, even though it once was a lowly manufacturer of suit linings. And it's why Textron doesn't make yarn anymore, but builds Cessnas and helicopters instead.

Companies (like individuals and societies) have to evolve to survive and thrive. Textron and Berkshire Hathaway are two excellent case studies -- and it's instructive that two highly successful companies eventually emerged from the same dying industry and are today far better off doing much different things than what they started.

Are we better off today because Berkshire Hathaway stopped selling suit linings and today builds wind farms all over Iowa? I would argue, emphatically, "Yes". The forces that pushed it out of the old industry were insurmountable, so we're better off that they followed a path of evolution into something better. That's a lesson we should and must apply to our thinking on issues of trade and industrial policy today. 

Brian Gongol

Brian Gongol

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