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Editorial See other Editorial Articles Title: U. S. must revive manufacturing An advanced nation means an industrialized nation, and an industrialized nation implies a nation that manufactures goods, possesses the highest technology and therefore has a highly skilled and industrious work force. We have been known as the most advanced nation. To be true to this status, we must produce almost all consumer goods, including sophisticated machinery. We should be ahead of the times in manufacturing technology, and our work force should be the envy of all other advanced and advancing societies. All this was true a decade or so ago — but no more. Now U. S. factories are closing every day and thousands of union and non-union workers are being laid off. We import most machinery from Canada, China, Japan, Mexico and Germany. In 2007, we had a trade deficit of $847 billion, eight times more than we had 10 years ago. In 1997, our trade deficit was $102 billion. In March, total employment fell by 80,000, the most in five years. The unemployment rate is forecast to rise to 5.5 percent by year’s end. This means a loss of 1.1 million jobs in 10 months. The real 2007 Gross Domestic Product, adjusted for inflation, dropped by half a percent. The 2007 GDP, at $13.8 trillion, grew at the rate of 2.2 percent against the 2007 inflation rate of 2.7 percent. At the same time, the GDPs of China and India have grown in the range of 10 percent. Among industry sectors, manufacturing has been declining sharply and steadily: • During the last nine years, employment in manufacturing dropped from 17.5 million to 13.8 million, a decrease of 3.7 million or 21 percent. • Manufacturing employed 13 percent of the total U. S. work force in 1998. In 2007, this fell to 9 percent. • Manufacturing employment fell by 48,000 in the month of March, and by 310,000 in the past 12 months. • Manufacturing output as a share of all industries’ gross output was 25 percent in 1996. It fell ILLUSTRATION B Y DANIEL ZAKROCZEMSKI / BUFFALO NEWS to 20 percent in 2006, a period of 10 years. Manufacturing is the lifeblood for economic growth. The most important means to increase value- added continual growth in our economy lies in manufacturing. Housing, agriculture and natural resources are other significant means for value-added economic growth, but manufacturing is an indicator of the level of industrial advancement of a society and leads the nation to prosperity in a number of ways. People are gainfully employed at all levels, from blue-collar jobs to white-collar jobs. Manufacturing adds value to our wealth through buying raw materials at low prices and selling finished goods at a high price. And unlike sales and service jobs, manufacturing jobs are more stable, and the wages and benefits grow steadily. Manufacturing also drives research, innovations and technological advancements and is an indicator of a nation’s place in the world. Creating or producing a real product grows a different kind of society superior to the society that depends on servicing or selling someone else’s products. Our GDP distribution by sector is currently estimated at 1 percent agriculture, 21 percent industry and 78 percent services. With 78 percent of GDP in services, we have become a service economy. But a service economy serves manufacturing and is thus dependent on manufacturing. Our elitist economists and our leaders have led us to nonvalueadding businesses such as casinos, lotteries, speculative investments and multiple, overlapping insurances. None of these adds a dime to our wealth; they transfer wealth. This transfer is widening the gap between the rich and poor, and is reducing the middle class. This trend must be stopped. Unfortunately, our economists, accountants and managers today have misguided notions regarding manufacturing and economic growth. They believe in cheaper imports rather than in manufacturing here. They have closed hundreds of factories and have put 3.7 million manufacturing workers out of jobs in the past nine years. And from now on, all the technological developments and advanced research will happen in the countries that have the manufacturing industries and not in the United States. What should we do? A manufacturing industry needs land, labor, capital and technology. We have more usable land than any advanced country in the world, and we have, at least for now, adequate capital to fund any manufacturing industry that will produce competitively, although we have not invested as much in plants and equipment for several years as some emerging countries. We have the technology, and we also have enough workers who can be educated and trained in our many schools and colleges. The problem now is that our labor is more highly priced compared with other countries. I have worked and/or lived in four other countries outside the United States. I worked in India for 11 years as a project engineer on the design and construction of roads, bridges and buildings. I worked in Tanzania on the construction of roads and an airport. I worked in Saudi Arabia as a professor of construction management and as a researcher, visiting several construction sites. And I visited several construction sites in Germany, where I interacted with several project managers and workers. I also worked as a home builder here. Based on my observations of the work ethics, skills and productivity of the workers in the five countries, I can very confidently say that a U. S. worker is second to none. Given a well-paid and stable job, the U. S. worker works harder and takes pride in his work. Our labor productivity is continually rising; so far in this decade, labor productivity growth — the increase in output per labor hour — has averaged 2.5 percent. Most of the manufacturing job losses can be attributed to increases in imports of cheaper foreign goods. This is unacceptable. We need to work on a pragmatic economic policy. All governments — federal, state and local — should team with manufacturing companies and workers to achieve the goal of reviving 100 percent manufacturing. I suggest the following actions as a minimum: • Provide every legal resident appropriate basic medical and preventive health care. This should include catastrophic illnesses, and cover all citizens with pre-existing conditions. People may then buy supplemental insurance for special care on top of the basic health care provided by the government. This federally funded program should be managed by private companies or by a newly created federal department. The money could be raised by a dedicated income tax, and/or by a special health care tax on some products such as tobacco and alcohol. This will substantially reduce the cost of labor to manufacturing. • Control the cost of environmental regulations. Since 1970, when our Environmental Protection Agency was created, the U. S. Congress has legislated several regulations to keep the environment clean, but these regulations have not all been tested for their optimal levels of effectiveness. Now is the time for such testing, when factories are closing and workers are losing jobs. The EPA should establish a commission to examine the cost of each regulation, then decide on a cost-effective level of each of the regulations without compromising the quality of our environment and the health of the workers. • Fix disparities in the dollar currency rate vis-a-vis other world currencies. If a U. S. worker can provide the same or better productivity per hour as other competing countries, but if the hourly salary of a U. S. worker is higher, the only factor that will keep the price of our products competitive is the currency exchange rate vis-a-vis the country making a similar product. We should fix the value of the U. S. dollar with competing currencies in such a way that our products are competitive. We will have to prudently calculate, and devalue our dollar. That will not effect the U. S. population at all. It will discourage imports and encourage exports. • Study the labor union factor. Over the years, our unions have priced themselves out of the market. Because of the high cost of union labor, factories are closing. History tells us that the economies of some countries have collapsed because of union wages and strikes, but our unions are much smarter, and given proper direction, will cooperate in achieving what is best for the whole nation. A local audit concluded that union workers are paid 58 percent more than other private sector workers. This difference is irrational and unfair; equal pay for equal work is the minimum a fair society should aim at. The federal government should pass an act reducing this difference to 5 percent for covering union expenses on training, pension and health care management. • Level the playing field. The government should get the economic fundamentals right, and create a level playing field for U. S. industry to survive and grow in today’s global market place. Ideally, for a free trade, all competing countries should have a level playing field in terms of the same environmental regulations, same human rights and labor laws, and similar salary levels. We know that these similarities don’t exist. The only way to level this uneven playing field is either to subsidize our products or impose tariffs on foreign goods that we can manufacture here. Manufacturing companies and workers have roles to play. People tell me that we are on a slippery slope; nothing will stop us from going downhill. I don’t believe in that hopelessness. We are a giant economy that cannot be consumed in a short time. Let us rise and get back to work without any further loss of time. We should get back to the factory floors, develop more and better engineers, and motivate workers to produce more at less cost. Profit-sharing by workers could help. Several professional corporations offer their employees partnership in their companies after two to three years of satisfactorily working. A similar model should be applied to manufacturing workers. Let us redefine our corporate structure to include workers as business partners, and let us revive our declining manufacturing base on this definition. Workers should be on a profit-sharing plan in which every worker, three years after joining a company, will be given the opportunity to join the company as a partner or shareholder during his working period. Every worker will be given a reasonable salary, fixed such that the labor component stays competitive globally. Each worker would then also get company shares and/or a bonus at year’s end in proportion to the profits of the company. Partnering or profit-sharing by workers may not be acceptable to all corporations. Companies that are failing and are about to close may work on this concept first. Once the benefits of the process are known, more companies and workers would like to get into this concept. Production is not done on Wall Street or in board meetings. It is done on the factory floors by hard-working blue-collar workers guided by and in the company of engineers. Earlier, when the manufacturing industry was booming in our country, a company CEO in most cases was an engineer who started his/her career with the company, grew with the company, saw the weaknesses in production, had a rapport with the company’s blue-collar workers and had unwavering loyalty and dedication to the company. Highly successful and world-renowned companies had and have CEOs who had professional degrees in the field of the company’s product. Jack Welch of General Electric, Thomas Watson of IBM, Bill Gates of Microsoft, Steve Jobbs of Apple, Michael Dell of Dell Computers and Andy Grove of Intel are few examples. Let us repeat that success story. That is no longer the situation. A CEO is, in most cases, an MBA from a prestigious university, an accountant or an attorney. This CEO negotiates a very fat pay and benefits package with no relation to the profits of the company. In a typical contract, the CEO’s compensation includes company stock options, and therefore his main focus is to raise the value of the stock which, in the short run, is not tied to the quality or efficiency of production. Since any improvements in the company will be time consuming, and will show profits only after a few years, the CEO opts to import cheaper foreign products and begins downsizing the domestic factory. After a couple of years, when the declining future of the company is about to be known by the shareholders, he resigns with a pre-contracted fat severance package— a golden parachute. This is our sad story; to change it we must appoint CEOs who are experts in the field of the company’s products. Also, every worker should dream of being his/her company’s CEO one day, and every worker should share the company’s successes as well as failures. Our predecessors put us on the world map as the most advanced country through hard and honest work; it is now our responsibility to forward that stature. During and after World War II, we excelled in manufacturing. During this period we made advancements in technology, landed on the moon and made huge investments in opening research centers both in the public and private sectors. We were the most industrialized nation because we manufactured almost everything we needed, and more. The decline in manufacturing is real; this is not politics. The writing is on the wall, the numbers are speaking loud and clear. If we don’t revive 100 percent manufacturing in our country, we will hit the wall, our wealth will grow more slowly than that of other countries, our living standards will go down, we will no longer be an industrialized society and we will no longer be the most advanced nation in the world.
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#1. To: RickyJ (#0)
hear! hear! great pro America(n) article!
He lost me when he started pounding on the unions. The unions have already been busted. They never got any credit for giving workers, union and non-union alike, a living wage for generations on end until they were busted. The other thing that's ludicrous is his statement that devaluing the dollar (which has already been severely devalued during the Chimpministration) will not "effect" (sic) the people. His health care proposal is apparently stolen word-for-word from the Obama platform. So the anti-Obamans will have to reflexively oppose that. I'm sure, from their standpoint, McSame's ideas on that issue are automatically much better. I think this entire essay is wishing for something that's not going to occur, no matter who is in political control, because the global corporations control our government at all levels. Also left unmentioned is the huge albatross around our neck called the Pentagon, whose non-productive tentacles spread throughout the economy, wasting about a trillion dollars a year. Then there are those other trillions which "go missing" and only Dov Zakheim and his fellow dual loyalists would be able to even give us a clue where the money went. It's amazing the U.S. is not in even worse shape, but I have a feeling I won't be saying that by this time next year. Particularly if the Democrats take over in a landslide, the Ziocon media will suddenly be pointing out by May 2009 how much better things were under the Chimp as they jones for more wars on behalf of Israel.
“I would give no thought of what the world might say of me, if I could only transmit to posterity the reputation of an honest man.” - Sam Houston
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