And that’s probably a good thing. For reasons that only became clear in retrospect, HTWW wandered a long way from its early day obsessions, when I was looking for connections between all kinds of disparate phenomena and attempting to weave them into one reasonably coherent narrative. But one thing led to another. My background in China studies encouraged me to keep a close eye on the economic relationship between China and the U.S. When I realized during the housing boom that that relationship could basically be described as Americans pulling cash out of their homes to buy stuff from China, I started wondering what would happen to the global economy if there was a housing bust. And not too long after I started worrying about the state of the U.S. housing market, it started to crash. Right place, right time, I guess.

When the economy became the big story of the 2008 presidential campaign, Washington politics and economic policy became my beat, and I’ve never been able to get away since. How the World Works eventually became How Washington Doesn’t Work.

Was the experiment a success? I’d give it a mixed grade. Traffic grew steadily throughout the blog’s tenure (and peaked, actually, during the recent debt ceiling nuttiness), but there are definite limitations to how deeply you can report or think or how much you can craft your prose when you are attempting to post three times or more per day. When I was learning new things, the pace was fine — invigorating, even — but when I found myself simply reacting to news events with insta-analysis, and repeating myself over and over again, it became considerably less satisfying.

I’m sure I’ll still be doing plenty of quick response items, however — the Internet rewards a good rant, delivered in a timely fashion, and I do like getting my dander up. But nonetheless, it’s time for a reboot! How the World Works is done.

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.”

Most controversially, the NLRB has also brought a complaint against Boeing, claiming that the airplane manufacturer’s decision to locate a plant in South Carolina represented an illegal reprisal against its unionized workforce in Washington. The decision precipitated a storm of outrage from the right, and even inspired befuddlement and sharp criticism from commentators not normally associated with the crowd that automatically sees socialism in Obama’s every eyebrow twitch.

Joe Nocera, a business columnist for the New York Times went on the rampage in late August:

Seriously, when has a government agency ever tried to dictate where a company makes its products? I can’t ever remember it happening. Neither can Boeing, which is fighting the complaint. J. Michael Luttig, Boeing’s general counsel, has described the action as “unprecedented.” He has also said that it was a disservice to a country that is “in desperate need of economic growth and the concomitant job creation.” He’s right….

It is a mind-boggling stretch to describe Boeing’s strategy as “retaliation.” Companies have often moved to right-to-work states to avoid strikes; it is part of the calculus every big manufacturer makes.

Let’s reserve judgment on the correctness of Luttig’s overall analysis. But one thing is certainly true. For many decades, the federal government has declined to make any effort whatsoever to stop the steady flow of jobs away from states with strong unions to right-to-work states. It is quite the shock, at this late date, to witness a challenge to such a well-established status quo.

But on this Labor Day weekend, is it really too crazy to wonder if maybe the federal government should have been a little more proactive in protecting the interests of working men and women? The migration of high-paying, benefi- rich union jobs to right-to-work states like South Carolina has been a critical factor in the decline of organized labor in the United States. It’s also not at all beyond the pale to connect the decline of union power to growing income inequality, middle class wage stagnation, and, ultimately, the hollowing out of American manufacturing capacity — as low-wage emerging nations like China do to the entire U.S. exactly what the South did to the Rust Belt.

Just because Joe Nocera can’t remember anything like this ever happening before doesn’t necessarily mean it should be considered anathema. Unthinkable things happen all the time. For the historically minded, the hornet’s nest stirred up by NRLB’s Boeing action might recall another epochal event involving the White House and organized labor: Ronald Reagan’s successful crusade to crush PATCO — the air traffic controller’s union — almost 30 years ago. The president of the United States declared war on organized labor — and history says pretty conclusively that he won.

At least so far. Again, it’s Labor Day weekend, so let’s indulge in some worker-friendly fantasy. Is it even remotely possible that future labor historians might one day look back at the NLRB’s complaint against Boeing and consider it the catalyst for a pendulum swing in the opposite direction? Income inequality can’t continue to grow, and massive unemployment fester, forever, right?

Of course, to even make such a comparison would require that the NLRB was successful in bringing its complaint, and that’s hardly assured. There will be years of legal squabbling before the Boeing case is resolved, and the entire complaint could be dropped if Republicans take over the White House next November.

And that doesn’t even take into account far greater historical forces restraining the fortunes of labor than whatever the current predilections of the occupants of the White House might happen to be. Reagan didn’t overthrow organized labor all by himself — over the last three decades his efforts benefited from the help of billions of new entrants in the global labor pool and relentless advances in technology that have combined to brutalize the middle classes of developed nations. Reagan had the wind at his back. Obama is spitting into the storm.

Consider China. A brand new paper from M.I.T. economist David Autor, crunches the data on “rising Chinese import competition between 1990 and 2007 on local U.S. labor markets” and concludes that it may account for, “conservatively,” as much as “one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment.”

We find that increased exposure to low-income country imports is associated with rising unemployment, decreased labor-force participation, and increased use of disability and other transfer benefitts, as well as with lower wages, in affected local labor markets… The largest components of these transfers are federal disability, retirement and in-kind medical transfer payments. Unemployment insurance and income assistance programs play an important but secondary role.

Trade with China, in other words, not only boosts unemployment in the U.S., but also increases drag on the safety net.

Of course, there are scores of economists who will point out that trade with China results in lower prices for manufactured goods, and that overall, both China and the U.S. register net economic gains from increased trade. But the data on rising income inequality, at this point, seems pointless to dispute: the economic benefits from trade with China have not been evenly distributed. The working class is getting screwed.

The pressures exerted by globalization are reinforced by technological progress. Once upon a time, gains in labor productivity midwifed by technological advances went hand in hand with wage gains. But somewhere around 1980, the correlation snapped. Labor productivity continued to grow — employers got more bang for the buck from each worker, but workers stopped sharing the gains.

There are numerous explanations for what’s happened. The computerization of routine tasks has wiped out an entire class of jobs that once provided millions of workers with decent livings. The American educational system has failed to produce enough of the skilled graduates that can best thrive in this new world. Technology and globalization intersect: It’s easier than ever before to outsource and offshore jobs. But taken all together, the bottom line is fairly conclusive. If you’re not highly educated and you live in a developed nation, a good job is going to be hard to find.

Reversing this trend will require Herculean efforts beyond the scope of any single government agency. The only long run savior might be the full economic development of countries such as China and India, which would relax the competitive pressure on global wages and open up new markets for the U.S. and other developed nations.

But in the meantime, it’s going to be a tough haul. There’s no quick fix. These trends have been transforming labor markets for decades. And then, once the American worker’s back was against the wall, along came the Great Recession with a sucker punch hitting the most vulnerable where it hurts the most. Recovery will take decades — and that’s assuming future administrations don’t make policy decisions that exacerbate the problem, instead of ameliorating it.

And who, after watching what passes for government in Washington over the past couple of years, could possibly have any confidence in that?

Over the past 15 years, this country once defined by poverty and beaches has progressed politically and economically in ways rarely acknowledged by Americans debating immigration. Even far from the coasts or the manufacturing sector at the border, democracy is better established, incomes have generally risen and poverty has declined.

Here in Jalisco, a tequila boom that accelerated through the 1990s created new jobs for farmers cutting agave and for engineers at the stills. Other businesses followed. In 2003, when David Fitzgerald, a migration expert at the University of California, San Diego, came to Arandas, he found that the wage disparity with the United States had narrowed…

That gap has recently shrunk again. The recession cut into immigrant earnings in the United States, according to the Pew Hispanic Center, even as wages have risen in Mexico, according to World Bank figures. Jalisco’s quality of life has improved in other ways, too. About a decade ago, the cluster of the Orozco ranches on Agua Negra’s outskirts received electricity and running water. New census data shows a broad expansion of such services: water and trash collection, once unheard of outside cities, are now available to more than 90 percent of Jalisco’s homes. Dirt floors can now be found in only 3 percent of the state’s houses, down from 12 percent in 1990.

Educational opportunities in Mexico have also vastly improved. The importance of these changes cannot be overestimated. It doesn’t matter how high a wall the United States might ever manage to erect on the Mexican border. As long as the huge disparities in the standards of living available in the two countries remained so immense, the pressure pushing cheaper labor across the border was irresistible. But finally, that pressure is beginning to slack off.

Next up: China. The Financial Times reports that “an appetite for healthier living among the country’s fast-growing middle class has stoked demand for nuts, sending prices of cashews and other snacks to record levels.”

This is very good news for California’s farmers. California produces three-fourths of the world’s walnuts and around 80 percent of the world’s almonds. Business, largely due to Chinese demand, is booming:

In the case of walnuts, imports from California doubled from 42m pounds in 2009 to 98m last year … China has [also] become the biggest market for Californian almonds. Imports are up 30 per cent to date over last year, having risen 35 per cent the year before and 100 per cent the year before that.

The nutty news offers an encouraging hint as to what a burgeoning Chinese consumer sector could mean for American exports, even if exchanging roasted almonds for iPhones and San Francisco Bay Bridge components might not seem like a fair trade.

But let’s put these two stories together.

In the U.S. agricultural production is often crucially dependent on cheap labor — particularly when there are crops that need picking. That labor is frequently provided by illegal immigrants. Laws that crack down on illegal immigration can cause severe problems for farmers, as Georgia recently learned to its great dismay.

In the immigration domain, there is a fierce, heated ongoing debate over whether the labor shortage problems such as those currently faced by Georgia’s farmers can be solved by simply raising agricultural wages, or whether there are real shortages in the workers available who are (a) willing and (b) have the necessary skills to do the job. One thing’s for sure — agricultural production is a low-margin business. If farmers pay higher wages to pickers, Americans will pay higher prices for their food.

But when you combine what is going on in Mexico and China you have to think that the debate over whether legal American citizens are willing or able to pick strawberries is moot. If the supply of cheap labor is in decline while demand for agricultural produce is on the rise — on a global scale — then wages must rise for American agricultural workers. There’s just no way around it.

I have long been preaching in this blog/column that the best possible news for American workers is a thriving global economy. Even if, in some cases, the rise of China or India or Brazil or Mexico has been predicated on those countries exploiting their own cheap labor at the expense of the American worker, in the long run, the emergence of strong middle classes in those nations is a very, very positive sign.

The question has always been: How fast could this global transformation happen? Mexico’s example suggests it can happen pretty quickly.

Even more at odds with the conventional wisdom about trade is the fact that between a third and a half of all so-called international trade is “intra-firm” trade, in which components are shipped to and from a multinational corporation’s subsidiaries or partners in different countries. This is not trade, in the traditional sense. It is transnational production.

Transnational production is the successor to national production, which in turn was the successor to local and regional production. Before the industrial revolution, most goods like tools and clothing were made from local materials in or near the place where they were consumed. Steam-powered factory production, combined with distribution by steam locomotives and steamships, created national and imperial markets in the nineteenth century that could support giant corporations that relied on the telegraph for coordination. Successive innovations in energy and communications — the electric power plant, the telephone, the truck and automobile, jets, container ships, the internet and satellites — have made possible global production networks which are replacing earlier purely national production networks.

Empirical economists have long known that in industries with increasing returns to scale, like automobiles and aerospace, or with network effects, like telecommunications, small companies tend to be weeded out and replaced by a single giant firm (monopoly) or a few large firms (oligopoly). In 1900, there were dozens of small, start-up automobile companies in the U.S.; by the 1950s there were the Big Three. The same trend is taking place at the global level, and for the same reason—not sinister conspiracies, but the fact that in some industries a few giant producers are more efficient than many small ones.

Between the end of the Cold War and the crash of 2008, globalization resulted in the organization of one global industry after another as an oligopoly. Before the crash in 2008, two companies, U.S.-based Boeing and Europe’s Airbus, had 100 percent of the global market share in large jet airliners. Among their suppliers, the global market for jet engines was divided among three firms: GE, Pratt and Whitney and Rolls-Royce. Microsoft enjoyed 90 percent of the global market share for PC operating systems. Four firms divided 55 percent of the PC market among themselves, while three companies shared 65 percent of the market for mobile handset phones. Three firms dominated the world market in agricultural equipment (69 percent) and ten companies dominated the global pharmaceutical market (69 percent). 95 percent of microprocessors (“chips”) were made by four companies — Intel, Advanced Micro Devices, NEC, Motorola. Four automobile companies — GM, Ford, Toyota-Daihatsu, DaimlerChrysler — manufactured 50 percent of all cars, while three firms — Bridgestone, Goodyear and Michelin — made 60 percent of the tires. Owens-Illinois and Saint Gobin made two-thirds of all the glass bottles in the world. (The data come from Peter Nolan and Jin Zhang, “Global Capitalism After the Financial Crisis,” New Left Review 64, July/Aug 2010).

Are these emerging global oligopolies truly post-national enterprises, with no particular nation-state as a home? Populists of the left and right denounce rootless multinationals, and many CEOs claim to believe in a borderless world. In reality, however, most multinationals have national roots. The hundred largest multinationals in 2008 had only 57 percent of their total assets and only 58 percent of their total employment abroad, and foreign sales made up only 61 percent of their total sales. In other words, the typical multinational still had a distinct national identity, with around half of its assets, employment and sales within its home market. Few multinational corporations did an overwhelming majority of their business outside of their home countries. Those that did, such as Nestle and Ikea, tended to be based in small countries, so their markets were largely foreign. More typical were the large automobile companies, each of which assembled and sold a majority of its products in its home region, with a minority of its sales in other regions.

The rise of China as an export platform for multinational corporations based elsewhere obscures the continuing importance in manufacturing of Japan and Germany. According to the Asian Development Bank, much of the value added in the iPhone comes from components manufactured in Germany, Japan and South Korea, not in China, where they are merely assembled.

The domination of global commerce by corporations based in the U.S., Japan and Germany — the three most populous industrial democracies — proves that a large domestic market is still needed as a base for multinational sales and operations. Despite the celebration of global corporations by libertarians and their denunciation by leftists and populists, global companies turned out to have national identities after all during the crisis that began in 2008, when major banks and automobile companies turned to their home country governments for bailouts.

These are the facts that should provide the basis for an intelligent debate about globalization — that is, transnational production. A model for such a debate might be the one that took place in the U.S. a century ago. Old-fashioned agrarians opposed modern industry and large corporations altogether. In the name of the New Nationalism, Theodore Roosevelt argued that giant national corporations could be beneficial, as long as they were regulated in the public interest. In the name of the rival school of the New Freedom, Woodrow Wilson and Louis Brandeis argued for anti-trust policies to break up large corporations and special favors for small producers and distributors.

Today we might substitute the global economy for the U.S. national economy of 1900 and today’s sovereign countries for the American states of a century ago. The equivalent of the agrarians of the 1900s are today’s old-fashioned protectionists, who idealize what was a recent innovation in its day — the vertically-integrated national corporation of the mid-twentieth century. The neo-protectionists are no more likely to save purely national manufacturers than their agrarian predecessors were able to save local blacksmiths from competition with industrial manufacturing firms.

More realistic observers would accept a high degree of globalization but differ about how to respond. Here the analogy with the 1900s breaks down, because there is no global federal government to carry out either Rooseveltian or Wilsonian policies toward global corporations. Instead, a neo-Rooseveltian school of thought today might embrace global corporations, where they result from efficiency, but impose conditions on them in return for access to the market of the nation-state, including a degree of in-market production and in-market R&D.

A century ago, champions of the New Freedom sought to protect state and local businesses from national competition — for example, by means of laws against chain stores that threatened local grocers. A neo-Wilsonian or neo-Brandeisian school of thought about the global economy might be more hostile to global enterprises and supply chains, favoring instead government support for largely national corporations — “national champions.”

Other countries pursue different versions of these strategies already. China, for example, has followed what I am calling a neo-Rooseveltian or New Nationalist strategy — welcoming production in China by multinationals, as long as that results in jobs, training and technology transfer. Other countries or blocs pursue national champion strategies, when it comes to energy companies or airlines. Airbus, one of the world’s two major aircraft producers, is the European Union’s champion.

In-market production or national champions? This is the kind of debate we should be having — not the tired old debate between academic free traders and nostalgic protectionists. It is certain that transnational production, in some form, is here to stay — and it is just as certain that nation-states, democratic or otherwise, will use their power to shape the pattern of transitional production by global corporations to advance their own domestic and foreign policy goals, at the expense of the free market, if necessary.

This is the world we live in, and this is the world we should be talking about. The familiar debate about trade is irrelevant. It is time for the much more important debate about transnational production to begin.