Death of Manufacturing
By Patrick J. Buchanan
The American Conservative, 2003-08-11

After Mass at St. Mary’s, a retired FBI agent who had worked as a boy in the great steel plant in Weirton, W.Va., whose father had died in an accident at the mill, handed me the Weirton Daily Times. “Where Do We Go From Here?” read the May 20 banner. The front page was devoted to the bankruptcy filing of Weirton Steel, which had once employed 14,000 workers in a town of 23,000. Mark Glyptis, president of the Independent Steelworkers Union, said it didn’t have to happen. It was a poignant story. When I began my campaign of 2000 at the Weirton mill, Mark and his ISU endorsed me.

That same week, a friend e-mailed me. Timco, a lumber mill where we spent the last day of the New Hampshire campaign of 1996, had shut down. As Weirton Steel had been hammered by subsidized steel dumped in the U.S. market, Timco had to compete with subsidized lumber from Canada.

Across America the story is the same: steel and lumber mills going into bankruptcy; textile plants moving to the Caribbean, Mexico, Central America, and the Far East; auto plants closing and opening overseas; American mines being sealed and farms vanishing. Seven hundred thousand textile workers—many of them minorities and single women—have lost their jobs since NAFTA passed in 1993.

Thirty years have elapsed since our free-trade era began and 30 months since George W. Bush became president. It’s time to measure the promise of global free trade against the performance.

Undeniably, free trade has delivered for consumers. A trip to the mall, where the variety of suits, shoes, shirts, toys, gadgets, games, TVs, and appliances abounds, makes the case. But what has it cost our country?

Every month George Bush has been in office, America has lost manufacturing jobs. One in seven has vanished since his inauguration. In 1950, a third of our labor force was in manufacturing. Now, it is 12.5 percent. U.S. manufacturing is in a death spiral, and it is not a natural death. This is a homicide. Open-borders free trade is killing American manufacturing.

In 2002, we ran a trade deficit in goods of $484 billion. This May, it reached the level of $562 billion, nearly 6 percent of GDP. Evangelists of free trade tell us trade deficits do not matter. Michael Boskin, Chairman of the Council of Economic Advisers under Bush I, declared, “It does not make any difference whether a country makes computer chips or potato chips.”

History teaches otherwise. In 1860, Britain abandoned its Britain First trade policy for the free-trade faith of David Ricardo, John Stuart Mill, and Richard Cobden. By World War I, Britain, which produced twice what America did in 1860, produced less than half and had been surpassed by a Germany that did not even exist in 1860.

Free trade does to a nation what alcohol does to a man: saps him first of his vitality, then his energy, then his independence, then his life.

America today exhibits the symptoms of a nation passing into late middle age. We spend more than we earn. We consume more than we produce.

Why does it matter where our goods are produced? Because, as I wrote in The Great Betrayal:

Manufacturing is the key to national power.
Not only does it pay more than service industries, the rates of productivity growth are higher and the potential of new industries arising is far greater.
From radio came television, VCRs, and flat-panel screens. From adding machines came calculators and computers. From the electric typewriter came the word processors. Research and development follow manufacturing.



Intel Breaks Ground on Wafer Fabrication Facility in Dalian
Manufacturing Leadership, Cluster Effects to Accelerate Growth
for China’s IT Industry

www.intel.com Press Release, 2007-09-08

DALIAN, China, September 8, 2007 –

Intel today broke ground on its first 300mm wafer fabrication facility in Asia.
The new factory, named Fab 68,
will extend Intel’s manufacturing leadership,
while helping cultivate engineering talent,
accelerate the growth of China’s information technology (IT) ecosystem,
and bring Intel’s culture of environmental leadership to China.
The $2.5 billion project is set to begin construction immediately
and be operational in 2010.
Fab 68 will cover 163,000 square meters of factory space
and host a 15,000 square meter clean room.

“The scope and scale of our global manufacturing network
gives Intel the ability to provide customers with
leading-edge, energy-efficient products
in high volume,”
said Craig Barrett, Chairman, Intel Corporation.
“Fab 68 will have world-class infrastructure
and be an integral part of our global manufacturing network
while bringing us closer to our customers and partners in China.”

“Intel’s investment in Fab 68 comes at a time when
Dalian’s information technology industry
is aiming to compete globally
and become one of the top three IT clusters in China,”

said Dalian Mayor Xia Deren.
“Fab 68 is not just bringing advanced chipset manufacturing to Dalian,

Intel’s presence
will attract investment
from virtually every segment of the IC industry,
which in turn will have tremendous effect on
the region’s economy and industries.

It is estimated that
many suppliers are planning to follow Intel’s lead
and establish operations in Dalian.
The cluster will help revitalizing the industries in China’s Northeast region,
and make Dalian rise to be one of the IT hubs in China.”

Demonstrating its dedication to sustainable growth in Dalian,
Fab 68 will be designed and built to minimize impact on the environment.
“Intel has a long history of environmental leadership
in our products and operations
and we are applying the same world-class design and construction standards
in Fab 68 that we apply everywhere in the world,”
said Kirby Jefferson, General Manager of Fab 68.
“The design standards for Fab 68
meet Intel’s high standards for environmental performance
in all areas including water, energy and chemical waste management.”

With its presence in Dalian,
Intel plans initiatives aimed at developing the local talent pool.
“Local talent development is a key component to our fab network strategy,”
said Wee Theng Tan,
Vice President of Corporate Affairs Group and President of Intel China.
“We’re partnering with
the Dalian University of Technology and the Dalian Municipal Government
to establish the Semiconductor Technology Institute
and donating a 200 mm wafer process line for training purposes.
In the future,
this Semiconductor Technology Institute will foster world-class talent
for the IT industry in China and around the globe.”

Intel investment in Fab 68 sets
its total investment in China to close to US$ 4 billion.
Intel has established two assembly and test plants in Shanghai and Chengdu,
along with R&D centers and labs in Beijing, Shanghai and elsewhere in China.


Rapid Declines in Manufacturing Spread Global Anxiety
New York Times, 2009-03-20

[An excerpt.]

In Europe, for example, where manufacturing accounts for nearly a fifth of gross domestic product, industrial production is down 12 percent from a year ago. In Brazil, it has fallen 15 percent; in Taiwan, a staggering 43 percent.

Even in China, which has become the workshop of the world, production growth has slowed, with exports falling more than 25 percent and millions of factory workers being laid off.

In the United States, until recently a relative bright spot for manufacturing despite the steady erosion of blue-collar jobs, industrial output fell 11 percent in February from a year ago, according to statistics released Monday by the Federal Reserve.

“Manufacturing has fallen off the cliff, and it’s certainly the biggest decline since the Second World War,” said Dirk Schumacher, senior European economist with Goldman Sachs in Frankfurt.

The pattern of manufacturing and trade ominously recalls how the financial crisis of 1929 grew into the Great Depression: tightening credit and consumer fear reduced demand for manufactured goods in one country after another, creating a downward spiral that reduced global trade.

“Plunging manufacturing suggests that as bad as things were in the fourth quarter, they are at least as bad now,” said Robert J. Barbera, chief economist at ITG, a New York research and trading business. “This is a classic adverse feedback loop. It won’t quickly correct itself.”

That means more workers can expect to lose their jobs around the world in coming months as manufacturers continue to cut production, especially as global trade contracts.

In fact, trade is shrinking even faster than production.
Germany’s exports down are 20 percent from a year ago,
Japan’s have plunged 46 percent,
and in the United States,
exports fell at an annualized rate of 23.6 percent in the fourth quarter of 2008.

Mr. Welcker says he has never seen anything like it.
For parallels, he has to hark back to the Great Depression and World War II,
when Schütte’s factory was destroyed.

After focusing on Germany and Europe in the decades after the war, Schütte thrived recently as globalization opened new markets in Eastern Europe and Asia. In the last five years, Schütte’s sales soared to about 100 million euros ($131 million) from 58 million.

The sudden reversal in global manufacturing suggests that Americans should not expect economic relief from abroad soon, despite a slightly more optimistic mood on Wall Street lately and President Obama’s call for more stimulus spending by foreign governments.

manufacturing equals about 14 percent of gross domestic product in the United States,
it totals 18 percent worldwide,
and accounts for 33 percent of G.D.P. in China,
according to the World Bank.

That means that China, Brazil, India and other fast-growing emerging market countries that have escaped the worst of the fallout from the credit crisis will increasingly suffer, dragging down demand in more advanced Western economies even as government-led stimulus packages kick in.

The damping effect works both ways.

Despite the misperception that America no longer makes anything, falling demand for goods made in the United States, including jet engines, locomotives, medical equipment, pharmaceuticals and some high-tech products, will hurt American growth prospects.

“Manufacturing makes up about two-thirds of U.S. exports,
and contributed more to G.D.P. growth over the last 20 years
than any other sector of the U.S. economy,”
said David Huether, chief economist for the National Association of Manufacturers in Washington.
“Our share of global manufacturing output has remained steady
at 20 to 23 percent over the past decade.”

Intel Shuttering Chip Manufacturing Plants, Job Cuts Could Follow
By Scott Ferguson
www.eweek.com, 2009-01-21

Intel announces that
it will close or stop production
at five of its manufacturing facilities,

including plants in Oregon and California.
The closings will take place in 2009
and could affect between 5,000 and 6,000 employees
once all of Intel’s plans are finalized.
Intel says these closings will not affect its production of
45-nanometer processors used in desktops and notebooks or
its upcoming line of 32-nm chips.

Intel is planning to close or halt chip production
at five of its manufacturing facilities,
including plants in Oregon and California,
within the next 11 months of 2009,
which could affect at least 5,000 Intel employees.

Intel, which remains the world’s largest semiconductor company,
announced the closings Jan. 21,
a little more than a week after it released its fourth-quarter financial numbers.
Although Intel made a profit during the quarter,
its revenues were below earlier expectations,
and CEO Paul Otellini said Intel has seen demand for its processors slow down
as consumers and business bought fewer PCs in the last few months of 2008.

In a statement,
Intel said it would close two assembly test facilities in Penang, Malaysia,
as well as one facility in Cavite, Philippines.

In addition, Intel plans to stop production at Fab 20 in Hillsboro, Ore.,
which is an older 200-millimeter wafer facility.
The company also plans to stop wafer production
at D2, located in Santa Clara, Calif., near Intel’s corporate headquarters.

the closing could eliminate between 5,000 and 6,000 jobs within the company,
which now has more than 83,000 employees worldwide.
Some of those workers will be offered positions
at those facilities that remain open,
said Chuck Mulloy, an Intel spokesperson.

Intel could possibly save millions of dollars in 2009
by closing these facilities, according to at least one analyst.
Intel’s statement and its spokesperson did not say
exactly how much the company would save by closing these plants.

While Intel routinely checks its worldwide manufacturing network
to see which facilities it can close or repurpose for other tasks,
Mulloy said the tough economic situation meant that
Intel had to accelerate that process
in order to bring its manufacturing capacity in line with current chip demand.

“In that environment,
we accelerated much longer-term plans to take these factories offline,”
Mulloy said.
“They would have come off the factory network at some time
but this just accelerates it.”

Of the five facilities that Intel is closing,
most were plants using older 200-mm technology.
For example, the Oregon facility has been in existence since 1988.
Most of Intel’s microprocessors are now built using 300-mm silicon wafers,
although some of the company’s NAND flash chips and other products
use older 200-mm technology.

In an interview, Mulloy said the closing will not stop Intel
from continuing to make its new 45-nanometer microprocessors.
Intel also plans to switch to 32-nm chip manufacturing later in 2009.

Right now, those 32-nm processors, code-named Westmere,
are being developed at another facility in Oregon,
and when those chips are ready for full production,
Intel intends to manufacture them at one or more facilities throughout the world.
Mulloy said the plants that are being considered for 32-nm production
include facilities in Oregon, New Mexico, Arizona, Ireland and Israel.

John Spooner, an analyst with Technology Business Research,
said Intel is in a unique position since
it has many more chip manufacturing facilities, or fabs,
than other semiconductor companies do.
In order to reduce costs
at a time when demand for PCs, server systems and other hardware has slowed,
closing or halting production makes solid financial sense for the company.

“The bottom line is that Intel has more capacity than it can handle right now,”
Spooner said.
“I think part of that has to do with the market and Intel’s customers
telling the company that
they are going to hold off orders right now and into the next quarter or so.
In turn, Intel has to scale back production
so it doesn’t have a large amount of inventory on hand.
One way to scale back production is to close older facilities,
which are also not that efficient.”


China Leading Global Race to Make Clean Energy
New York Times, 2010-01-31

Trading Away Productivity
New York Times Op-Ed, 2010-03-06



FOR a quarter-century,
American economic policy has assumed that
the keys to durable national prosperity are
  • deregulation,
  • free trade and
  • a swift transition to a post-industrial, services-dominated future.

Such policies, advocates say, drive innovation,
which leads to enormous labor productivity and wage gains —
more than enough, supposedly, to make up for
the labor disruptions that accompany free trade and de-industrialization.

In reality, though, wage gains for the average worker
have lagged behind productivity since the early 1980s,
a situation that free-traders usually attribute to
workers failing to retrain themselves
after seeing their jobs outsourced.

But what if wages lag
because productivity itself is being grossly overstated,
especially in the nation’s manufacturing sector?
Then, suddenly, a cornerstone of American economic policy
would begin to crumble.

Productivity measures how many worker hours are needed
for a given unit of output during a given time period;
when hours fall relative to output, labor productivity increases.
In 2009, the data show,
Americans needed 40 percent fewer hours to produce
the same unit of output as in 1980.

But there’s a problem:
labor productivity figures, which are calculated by the Labor Department,
count only worker hours in America,
even though American-owned factories and labs
have been steadily transplanted overseas,
and foreign workers have contributed significantly to
the final products counted in productivity measures.

[This problem was discussed at length in

The result is an apparent drop in
the number of worker hours required to produce goods —
and thus increased productivity.
But actually, the total number of worker hours does not necessarily change.

This oversight is no secret:
as Labor Department officials acknowledged at a 2004 conference,
their statistical methods deem any reduction in
the work that goes into creating a specific unit of output, whatever the cause,
to be a productivity gain.

This continuing mismeasurement
leads economists and all those who rely on them
to assume that
recorded productivity gains always signify greater efficiency,
rather than simple offshoring-generated cost cuts —
leaving the rest of us scratching our heads over stagnating wages.

Of course, just because productivity is mismeasured
doesn’t mean that genuine innovations can’t improve living standards.
It does mean, however, that Americans are flying blind
when it comes to their economy’s strengths and weaknesses,
and consequently drawing the wrong policy lessons.

Above all,
if offshoring has been driving much of our supposed productivity gains,
then the case for complete free trade begins to erode.
If often such policies simply increase corporate profits
at the expense of American workers,
with no gains in true productivity,
then they don’t necessarily strengthen the national economy.

In this regard,
the case for free trade as a stimulus for innovation weakens, too.
Because productivity gains in part reflect job offshoring,
not just the benefits of technology or better business practices,
then the American economy has been
much less innovative than widely assumed.

How can we actually increase innovation and real productivity?
Manufacturing, long slighted by free-market extremists,
needs to be promoted, not pushed offshore,
since it has historically accounted for
the bulk of research and development spending
and employs the bulk of American science and technology workers —
who in turn spur further innovation and real productivity.

Promoting manufacturing will require
major changes in tax and trade policies
that currently foster offshoring,

including implementing provisions to
punish currency manipulation by countries like China
and help American producers harmed by
discriminatory foreign value-added tax systems.
It also means
revitalizing government and corporate research and development,
which has languished since its heyday in the 1960s.

Much of government policy and business strategy
rides on false assumptions about innovation,
and although the Obama administration acknowledges the problem,
it has done nothing to correct it.
With the economy still in need of government life support
and the future of American manufacturing in doubt,
relying on faulty productivity data is a formula for disaster.

Alan Tonelson, a fellow at the United States Business and Industry Council,
is the author of “The Race to the Bottom.”
Kevin L. Kearns is the president of the council,
which is an association of small manufacturers.

New Democratic strategy for creating jobs
focuses on a boost in manufacturing

By Lori Montgomery and Brady Dennis
Washington Post, 2010-08-03

President Obama and congressional Democrats --
out of options for another quick shot of stimulus spending
to revive the sluggish economy --
are shifting toward a longer-term strategy
that promises to tackle persistently high unemployment
by engineering a renaissance in American manufacturing.

That approach ... is still evolving and so far focuses primarily on
raising taxes on multinational corporations
that Democrats accuse of shipping jobs overseas.


U.S. manufacturing jobs have been disappearing since 1979,
in part because of the heightened productivity of American workers
but also because of cheaper labor abroad.
Over the past decade, the sector lost a third of its workers,
falling from 17.3 million people in 1999 to 11.7 million last year,
according to the most recent figures from the Bureau of Labor Statistics.

Ron Bloom Is Obama’s Manufacturing Emissary
New York Times, 2010-09-10

[This is an important article, with many revealing remarks.

Mr. Bloom ... replies that
manufacturing strategy in the Obama administration, modest as it is,
is nevertheless “huge” in comparison with previous administrations,
which generally accepted the proposition that
manufacturing’s decline was inevitable
in a mature, service-oriented economy.

[Note the assumptions there, assumptions which I reject:
First, that a service-oriented economy is a “mature” one.
Second, that a service-oriented economy is even feasible.
How will the nation which has such
pay the bills for the manufactured goods it desires?
Has there ever been an example of such?
Third, that the people (as opposed to the thoroughly Jewified pseudo-elite)
desires such.
Has a poll ever been taken on the subject of what type of economy is desired?
Just who made the decision that
the economy should be a service-oriented one,
and who did the feasibility study on this subject?

Germany seizes on big business in China
By Anthony Faiola
Washington Post, 2010-09-18

[Note the scale gradation on the upper graphs is years,
on the lower graphs months.
From the article:]

Last year,
Germany's trade volume with China was $115 billion,
while the U.S. trade volume with China was more than $370 billion.


“Why is Germany doing better than the U.S.?
The answer is not so difficult.
Our industrial base is simply much higher now than yours.
Look at the state of machinery manufacturing in your country.
There are nearly no important American makers left anymore,
and most of the ones you have now are German subsidiaries.
And then, look at cars.
Go ask the Chinese if they want to buy a BMW or a Ford.”

said Hans-Jochen Beilke, chief executive of Ebm-Papst,
the German ventilation company
now dominating the Chinese market in refrigeration technology.


Is Manufacturing Falling Off the Radar?
New York Times Business, 2011-09-11


MANUFACTURING’S muscle helped make the United States a world power, but its contribution to national income is dwindling. And while corporate leaders like Mr. Liveris and Jeffrey R. Immelt of General Electric — who is chairman of the President’s Council on Jobs and Competitiveness — are beginning to express concern over manufacturing’s relative decline, the multinationals they command have contributed to the problem by gradually shifting production abroad. About half of Dow Chemical’s $58 billion in revenue last year came from overseas operations.

A tipping point may already have been reached. Manufacturing’s contribution to gross domestic product — roughly equivalent to national income — has declined to just 11.7 percent last year from as much as 28 percent in the 1950s, according to the Bureau of Economic Analysis. In this century, the 20-percent-or-more club draws its members mainly from Asia and Europe.

It isn’t that fewer autos or plastics or steel products or electronics are coming out of American factories. Quite the contrary: output continues to rise, reaching $1.95 trillion last year. But other sectors of the economy have grown faster in recent decades, and that dynamic has reduced manufacturing’s share.

In particular, the finance, insurance and real estate sectors — driven especially by investment banking and home sales — rose from less than 12 percent of G.D.P. in the mid-1950s to more than 20 percent before the onset of the financial crisis, and even now remain nearly that high. In China, in sharp contrast, manufacturing’s share of national output is more than 25 percent. While the United States has a far larger economy — $14 trillion in G.D.P. versus China’s $6 trillion — it has less factory production.

Exactly when China took the lead, ousting the United States from a position held for more than a century, isn’t easy to pin down. The bureau says it may have come in 2009, when Chinese manufacturers generated $1.7 trillion of “value added,” versus America’s $1.6 trillion. (When a $100 sheet of steel, for example, is shaped into a $125 auto fender, the value added is $25.)

Relying on World Bank figures, some economists suggest that China moved into first place in manufacturing last year. Others say that based on measurements of actual purchasing power, the moment has not yet arrived but will come soon.

It may seem remarkable that America’s fall — or impending fall — from first place in manufacturing isn’t generating all that many headlines, certainly not when compared with the controversies over the national debt or persistent unemployment. One reason may be that the nation’s political leaders don’t see manufacturing as a problem. Put another way, they don’t necessarily regard making an engine, a computer or even a pair of scissors as having as much value as investment banking or retailing or a useful Web site.

“You have a culture within the elites of both political parties that says manufacturing does not matter, and industrial policy will do more harm than good,” says Ronil Hira, an assistant professor of public policy at the Rochester Institute of Technology.

But the stark reality of manufacturing’s shrinking share of national output is beginning to force these questions: Does manufacturing matter? And is the financial sector, which rose as manufacturing declined, an adequate substitute? The financial crisis may have answered that last question with an emphatic no. Certainly, many experts maintain that manufacturing’s contribution to the national health is significantly underappreciated.

Recovery from the recession, they say, would not be so sluggish if there were still enough manufacturers to jump-start an upturn by revving up production and rehiring en masse at the first signs of better times. What’s more, each new manufacturing job generates five others in the economy. Shrinking the relative size of manufacturing has undermined that multiplier effect.

The damage doesn’t end there. The intractable trade deficit is attributable in part to manufacturing’s shaken status. And in many areas, craftsmanship in America has been eroding. Forty percent of the nation’s engineers work in manufacturing, for example, and that profession’s numbers have been declining. That is a particular problem because innovation often originates in manufacturing, frequently in research centers near factories, which aid in the creation of products and the tweaking of them on assembly lines.

As multinationals place factories abroad, they are putting research centers near them, with as-yet-undetermined consequences. At the very least, this trend challenges the view that the United States has the best scientists and research centers and is thus the research-and-development pacesetter.

“If you let manufacturing go, over time that will have a negative gravitational pull on innovation,” says Ron Bloom, who served as the administration’s senior counselor for manufacturing. He resigned in August and has not yet been replaced.

In fact, as American multinationals become ever more global, they are placing sophisticated research centers near their overseas factories, partly to keep R.& D. close to assembly lines and partly because of enticing government incentives.

From China, Dow Chemical now exports products invented at its research center near Shanghai. “Overseas,” Mr. Liveris said, “I get tax incentives, and I get incentives to go to certain locations where they offer us utilities, infrastructure and land. I get access to human capital. I get all sorts of support to help train that human capital.”

Against that backdrop, he and a few other top executives of multinationals exhort the Obama administration and Congress to grant incentives and subsidies intended to halt the 60-year decline in manufacturing’s contribution to national income. Mr. Liveris recently published a book on the subject.

He says vigorous government support, like the subsidies that Dow receives for its solar roof shingle operation and the electric battery factory, might eventually halt manufacturing’s slide. But he adds that his company and others will not embark on a reverse migration, a significant “in-shoring” of what has already moved abroad. Too many consumers are concentrated today in Asia and Europe.

“We put things overseas,” Mr. Liveris says, “because markets were growing there and we wanted to be close to them, and that will never change.”


Factory Field Trip
New York Times Op-Ed, 2011-09-27


Reliance on imports leaves U.S. vulnerable to disasters, report says
By Peter Whoriskey
Washington Post, 2012-07-25

An increasing reliance on imports, combined with
the fraying of the nation’s power grid, highways and rail lines,
leaves the United States more vulnerable
to the damage of natural disasters and terrorist attacks,
according to a report to be released Wednesday
by former homeland security secretary Tom Ridge.

The report, which Ridge shared with homeland security officials Tuesday morning, warns that

the offshoring of U.S. factories means that
rebounding from a catastrophe will be more difficult
because so many critical supplies would have to come from overseas.

“We are a country at risk because
we’ve ignored the gradual erosion of our manufacturing basis,”

he said in an interview.
“We’ve ignored the need to rebuild the nation’s infrastructure.”

Citing the aftermath of disasters
such [as] Hurricane Katrina and the Sept. 11, 2001, attacks,
the report adds to the long-running debate over
whether the offshoring of U.S. manufacturing has harmed the nation.

“At a time when the frequency of large-scale disasters seems to be increasing,
the U.S. seems to be at an all-time low in terms of
being able to supply our own critical needs,”
said Scott Paul, director of the Alliance for American Manufacturing,
which sponsored the report by Ridge and Robert B. Stephan,
who was an assistant secretary of homeland security from 2005 to 2008.

Paul said, for example, that half of the world’s steel comes from China.

Among other things, Ridge and Stephan call for
using “buy America” provisions for federal spending and for
the greater enforcement of trade laws to support U.S. manufacturers.

The United States already applies “Buy America” provisions
to some federal spending,
particularly in defense and highways and trains.
In addition, the Buy America act requires federal agencies to report
the amount of acquisitions from businesses that manufacture outside the United States.

Last year, of $374 billion in defense spending, $24 billion, or 6.4 percent,
went to foreign entities,
according to the department’s report to Congress in May.
More than half of the $24 billion, however,
was spent on fuel, construction and subsistence —
not manufactured goods.

“The future vitality of our national and economic security
goes hand-in-hand with that of our ­domestic manufacturing base,”

Ridge and Stephan wrote.

Free-trade advocates question the idea of limiting foreign goods as a means of bolstering U.S. security, however, in part because it is difficult to anticipate what catastrophes might be forthcoming, and, therefore, what kinds of manufacturing to protect.

“These discussions play out in an amorphous sense of danger as opposed to specific attacks — that is the problem,” said University of Virginia professor Philip Levy, who was a senior trade economist at the Council of Economic Advisers during the George W. Bush admnistration.

Levy said that although it might seem logical to protect “important” industries, it is difficult to select just what sectors are most important. Should agriculture be protected for food? What about the textile industry, to make sure there are enough clothes?

“It’s quite tricky to figure out what is unimportant,” Levy said.

New Report: U.S. Too Dependent on Foreign Suppliers in Crises
americanmanufacturing.org, 2012-07-25

Revitalizing American Manufacturing called “Urgent National Priority.”

New report by former Homeland Security Secretary Tom Ridge
and former Assistant Secretary for Homeland Security Robert B. Stephan
sees the U.S. as too dependent on foreign suppliers in crises.



In Pursuit of Nissan, a Jobs Lesson for the Tech Industry?
New York Times, 2012-08-05

[This is a large article,
which generally seems reasonably unbiased,
with the exception of the following paragraph,
which is all too typical of how the MSM totally biases economic news:]

Protectionism is bad policy in today’s globalized world,
many economists argue.
Countries benefit most when they concentrate on what they do best,
and trade barriers harm consumers by driving up prices
and undermine a nation’s competitiveness
by shielding industries from market forces that spur innovation.
[What has harmed U.S. competitiveness
is not a lack of innovation,
but a broad range of policies that have destroyed it.]

The United States needs to create new jobs, economists say,
but it should not chase low-paid electronics assembly work
that at some point may be replaced by robots.
Instead, it should focus on higher-paying jobs.

[For a view I feel is more accurate and more favorable to the general American prospect,
see Eamonn Fingleton's In Praise of Hard Industries.]

Skilled Work, Without the Worker
by John Markoff
New York Times, 2012-08-19

Regulations a rising economic burden to manufacturers, report says
By Peter Whoriskey
Washington Post, 2012-08-21

The economic burden of federal regulation in the United States
has risen dramatically over the past 20 years,
particularly affecting the nation’s manufacturers,
according to a report by an industry group to be released Tuesday.

The average number of major federal regulations —
those expected to have an economic impact in excess of $100 million —
that have been finalized each year has risen with each recent administration,
according to the report.

Under President Bill Clinton it was 27 per year.
The number rose to 35 under George W. Bush and
stands at 44 per year between 2009 and 2011 under President Obama.

“The increasing number of regulations
has harmed the manufacturing sector’s production,”
the report said.
All aspects of manufacturing
“are impacted negatively by the myriad regulations.”

David Montgomery,
the principal investigator on the report for NERA Consulting,
which was commissioned by the
Manufacturers Alliance for Productivity and Innovation,
added that
“the cost of regulation has been growing substantially faster than
industry output.”


Siemens plant in Charlotte offers lessons as Obama, Romney talk job creation
By Lori Montgomery
Washington Post, 2012-09-04


[Michelin North America Chairman Pete] Selleck said the firm’s French parent likes the [North Carolina]’s network of technical schools and the proximity to seaports in Charleston and Savannah, Ga.

Selleck said the most important thing Washington could do to improve the economy is “get its fiscal house in order” by adopting a debt-reduction plan that would cut spending and overhaul the tax code to raise more money. But he said he would also like to see more funds plowed into preparing ports for the super-ships expected to begin traversing a newly expanded Panama Canal in 2014.

Smaller firms are desperate for workforce development. Optimax, a company just outside Rochester, N.Y., that made lenses for the Mars rover Curiosity, has 25 open positions. President Mike Mandina said Optimax’s growth has been “absolutely limited” by the number of skilled workers emerging from local schools.

“Any region committed to developing a highly skilled workforce is going to excel,” Mandina said, “whether they’re milking cows or making precision optics.”

None of the executives interviewed cited the level of taxation as an overriding issue, though they agreed that the United States should simplify its code and bring the corporate rate — now the highest in the developed world, at 35 percent — in line with other countries. Both candidates have proposed to do so, with Obama calling for a corporate rate of 28 percent and Romney proposing 25 percent.

Meanwhile, [Eric Spiegel, president and chief executive of Siemens’s U.S. subsidiary] and others criticized the recent push by both parties to create tax breaks explicitly tied to hiring.

“You don’t hire people just because there’s a tax credit there,” he said. “You hire people if there is demand . . . to produce more.”

Demand, of course, is the most fundamental factor in a company’s decision to create jobs.



Sorry, Trump, America Can’t Be Great Again
Our economy can no longer deliver the fast growth the candidates are promising.
But that hasn’t stopped the demagoguery.

By Michael Lind
Politico Magazine, 2016-03-02


[W]hen it comes to the kinds of economic promises we’re hearing these days,
even the serious presidential candidates are in danger of wandering into Vermin Supreme territory.
On both the right and left ends of the spectrum
this has become the season of the fiery populists,
with their ability to play to people’s frustrations.
Donald Trump offers a restoration, Bernie Sanders a revolution,
but both candidates suggest a return to a far better place in America.
The majority of economic wisdom out there suggests these are false hopes:
The most we can expect for the foreseeable future is incremental change,
and we ought to get used to it—
starting with a reality check on the campaign trail.


[C]an we make individual American workers more productive by means of universal college education or K-12 math and science education? Candidates love to cite more education as a miracle cure that will grow the economy and increase wages all at once. But this is more hype.

The vast majority of new jobs will not require the skills associated with workers in the lucrative but small high-tech sector. It would have been absurd in the 1930s to teach all American schoolchildren the essentials of electric wiring, on the theory that the nation had entered the Age of Electricity and most Americans would soon be electricians. It is equally absurd to say that success in the information age for most American children—and not just those who grow up to join the small segment of the workforce in the tech sector—will depend on their ability to write code or take part in a tech startup.

We have a good idea of what the real “jobs of the future” are—and very few of them are tech sector jobs that require STEM (Science, Technology, Engineering and Math) education. According to the Bureau of Labor Statistics, the occupations with the greatest job growth between 2014 and 2024 will be personal care aides, registered nurses, home health aides, combined food-preparation and serving workers (including fast food), retail salespersons, nursing assistants, customer service representatives, cooks (restaurant), general and operations managers, and construction laborers. There is not a conventional tech job in the Top 10 list, though one can be found if you go down to No. 14—software developers (applications).

Of the top 10 jobs of the next decade, only registered nurses and general and operations managers require education beyond high school and limited training. And with the exception of registered nurses, with a median annual wage of $66,640, and general and operations managers, with a median annual wage in 2014 of $97,270, the other occupations with the most job openings pay between $18,410 a year (combined food preparation and serving workers) and $31,200 a year (customer service representatives).

The most recent job creation data confirms the predictions of the BLS. Between January 2015 and January 2016, here are the sectors that added the most jobs: education and health (620,000); professional services, defined as accounting, engineering and entertainment (620,000); hotels, restaurants and entertainment (458,000); and construction (264,000). In contrast with these sectors, the manufacturing sector beloved by populists and labor liberals alike added few jobs (45,000)—while the information (telecom, publishing) sector added even fewer (28,000). The financial services sector enjoys a disproportionate share of income, but created only 149,000 jobs in 2015. Government created only 78,000 jobs, giving the lie to conservatives and libertarians who claim that public sector employment is exploding and crowding out private enterprise. All of these sectors—manufacturing, information, financial services, and government—combined added fewer jobs than retail alone (301,000).

For nostalgic populists and old-fashioned labor liberals who dream of restoring great numbers of well-paid assembly-line manufacturing jobs, these numbers are scandalous. Surely there is something wrong with an economy in which there are vastly more job openings for home health aides and mall workers than for factory workers!

A strong case can be made for preserving and strengthening the U.S. manufacturing base, if necessary by retaliating against the mercantilist trade policies of state capitalist countries like China. The positive spillover effects from manufacturing to the rest of the national economy are significant and U.S. national security depends in large part on a dual-use civilian-military manufacturing base. But even a renaissance of manufacturing in America would not bring back the number or kinds of well-paid factory worker jobs that existed half a century ago.
Even in China, Japan and Germany, which have made manufacturing a priority,
manufacturing jobs as a share of the workforce are in decline, thanks mainly to labor-saving automation.
[So he acknowledges that the U.S. has not given manufacturing the priority that those other nations did.]
Today, the two most common large employers in the 50 American states are Wal-Mart and the local state university system.

To be sure, this is not necessarily a tragedy for the country. As heretical as it may sound, perhaps it’s not so terrible that most Americans in the future will be neither factory workers nor tech nerds but rather health aides or baristas.

Rather than trying to restore the glory days of the midcentury American factory worker, or, alternatively, treating Silicon Valley as the model for the U.S. as a whole, we Americans—like our counterparts in other developed nations—need to accept a future with lower long-term GDP growth and the predominance of domestic service sector jobs that require little or no higher education. Does this mean lowering our expectations? The answer is no, if we accept that even modest rates of productivity growth will tend to raise living standards cumulatively over time. But the answer is yes, if our expectations were unrealistic to begin with. The next step in the sequence from horse to automobile was never the flying car or the personal spaceship; it has turned out to be a combination of iphones and better health care.

The mass production of ever-cheaper goods will continue, with fewer and fewer workers involved, thanks to labor-saving technology. But in the labor market we will continue to see a shift from the mass production of goods to the mass provision of services. Some of them will be business and professional services that require advanced education, but most of them will be personal services that do not.

The shift from a focus on the quantity of goods to the quality of life, predicted for generations by economists like JohnStuart Mill and John Maynard Keynes, is taking place before our eyes in the U.S. and other advanced capitalist nations. If owning a car and a house defined middle-class status in the 20th century, in the 21st century middle-class status may be defined by having access to state-of-the-art health, education and recreational services provided by other people—services that by their nature are shared by numerous consumers, whether they are provided by the private sector, the public sector or the nonprofit sector.

[This is, in the large, a familiar argument,
one stated in 1973 by Daniel Bell in The Coming of Post-Industrial Society.
But it omits, to my mind, a key fact:
You can desire all the services you want,
but most people are still going to demand, and even need,
a large variety of tangible goods,
from homes to automobiles to clothing to electronic goodies.
Not to mention the nation's infrastructure, which has been shamefully neglected.
Why should we be running trade deficits in high quality goods with Asia and Germany?
Why can't we make the high quality goods that people desire right here in the USA?

There are two answers to that, at least with respect to Asia.
1. The fact that Wall Street, for no good reason in my opinion,
has encouraged, even demanded in some cases,
that companies expand their manufacturing and even R&D presence in Asia vice the U.S.
2. The simply higher cost of doing business in the US,
due in large part to the variety of burdens that what is called by some "progressivism"
has heaped on American business.
Take, for example, family leave.
Any good "progressive" says family leave is wonderful, a right that any "progressive" society will give,
as part of enabling women to cast off their old patriarchal-society fetters
and "actualize themselves" in the work force
and gain independence from the bad old dependence they used to have on their husbands.
Well, it may do all that,
but the hard-headed among us also note that it raises the cost of doing business.
And this matters if you want to compete, as a nation, in productivity
with nations that don't have to pay their workers
while they tend to their babies
rather than producing for the company.]


Peter J. A. Wright on industrialization
by Peter J. A. Wright
a comment in Patrick Lang's blog Sic Semper Tyrannis, 2016-04-19

[I have no idea who Peter J. A. Wright is
(other than the fact that his comments suggest he is English),
but the thoughts he expresses in this comment are some that I wholeheartedly agree with,
so I am reproducing most of them here.]


I spoke recently to a specialist welder who, at 63, was the youngest in his line of work that he knew of. Hadn’t seen an apprentice in years, literate or not. There are plenty of similar examples. We are rapidly losing skills without which, even in this age of automation, re-industrialisation would be far more difficult. Hence the urgency of making a start now.

The current orthodoxy is that we don’t need to bother with re-industrialisation since high tech, IT and the like can take up the slack. That’s essentially a racist economic orthodoxy deriving from the 19th century. We Europeans, and at the very start we English, were the only ones up to making railway engines and the rest of the world, properly supervised, could do the easy stuff like extracting raw materials or growing bananas. Translated into modern terms, we do high tech and the rest of the world can concentrate on basic industrial goods. So rooted is this orthodoxy that we’ve been calling ourselves a “post industrial society”, ignoring the fact that at no time in history has there been a greater demand for industrial goods of all sorts. The trouble is that the rest of the world isn’t working to racist economic orthodoxy. They are quite capable of doing high tech too and as they develop in this field, and in IT and Financial Services and the rest, we are left with producing less and less of the goods and services that they can buy only from us.

We may add to this the disparity in the cost of labour that Donald Trump is at present drawing our attention to when he talks of offshoring. Currency imbalances, radically different costs of living and equally radical differences in expectation mean that “Free Trade” is no longer to our advantage, or rather it is no longer to the advantage of most of us. Add unequal regulatory and compliance costs and it’s a wonder that we can do more than niche marketing. We do, of course, and very much more than that but it’s becoming an increasingly difficult act to keep up, particularly in this country. Look at our balance of trade.

Eventually we will be forced to re-industrialise. The rest of the world is beginning to realise that there’s not much point in sending us stuff if we don’t send back stuff in return. There’s no reason why they should support us indefinitely. We can postpone that moment of truth by issuing increasingly suspect promises to send stuff at some future time. We can also hang on to America’s coat tails as America attempts to resolve its similarly intractable problems by military means. But our promises to pay aren’t what they were and the American Imperium isn’t what it was. Eventually, if we want to get hold of manhole covers or buy a washing machine we’re going to have to make them ourselves because no one else is going to give us them for free.

I see few signs that any of this is getting much attention in this country. The Americans, as usual, are well ahead of us and the politicians there are starting to worry about the problem. Let’s hope it’s catching. It would be far better if we re-industrialised now, when we still have the ability to do so, than if we waited until we are forced to. By then that ability will be decayed and the process of re-industrialisation more difficult.

(In answer to Castellio.) Hoping that we will rebuild now is admittedly a long shot. We probably will indeed wait until we’re forced to and it’ll be a mess. But just maybe we’ll realise that keeping a skilled work force on the dole or under-employed, while we buy on tick from abroad stuff that we are quite capable of making for ourselves, isn’t that sensible a long term bet. If that ‘just maybe’ were to come off then it is quite clear we’d have to be outside the EU. The EU couldn’t allow the trade agreements we’d need for rebuilding to work.

Peter J A Wright

19 April 2016 at 03:31 PM

Labels: ,