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Wednesday, September 29, 2010

A pleasant dream

Here's an interesting idea: Let's start making stuff in America again.

Problems: The economy's been globalized. We've signed up as a nation for "free trade." Our workers demand too much. Our consumers want the cheapest deal. Our investors want the lowest costs.

But wouldn't it be lovely?

Comments (19)

One of Obama's highly publicized campaign promises was to extract some sort of penalty or create some financial reason not to export jobs out of the U.S.

Has that happened? I'm not aware of it.

And it's one campaign promise I hoped he would follow through on.

IMHO - here is the problem.

"We want to partner with the private sector," Mr. Bloom said. "We don't think government on its own can fix this. We don't think the private sector without government can fix it."

You want to fix it??? Get the flipping government OUT OF THE PICTURE. You want to get things moving, quit taking our money by the way of taxes and quit making careers out of telling us how to run our businesses and lives. The phrase lives on, "The government is NOT the solution, the government IS the problem."

The problem is distance has become irrelevent in today's economy.
Trying to reverse things from it's global form is as unlikley as trying to return to city or state isolation when the country became one economy back in earlier days. It's impossible to stuff the cat back in the bag when it has outgrown the bag.

Workers demand too much.

This an underlying perspective problem within the labor market that will have to work itself out (painfully for many people).

To jobseekers, jobs are a supply issue but for businesses the reverse is true: when they have a demand for more labor they view job applicants as the supply of labor.

It seems so simple but a lot of people do not acknowledge the basic market dynamic in labor.

With apologies to Will Rogers, there are two types of people who do this:

1) those who are not smart enough to grasp "supply and demand" on a conceptual level, or

2) those who disregard the concept because acknowledging it seems impolite (if not downright dehumanizing).

If you are 25 years old and you are in category #1 there may not be much hope for you ever being viewed as anything but a lower grade of labor in the supply.

If you are in category #2, you have more options than those in category #1, however if you readily admit this in job interviews you may find that demand for your labor is limited to the public sector, as a candidate for public office or in a few nonprofit organizations.

Distance is very relevant to anyone paying attention. As the price of energy increases, transportation costs will increase, and at some point that will drive local production more than anything else.

The other problem with exporting all of manufacturing is you also export the folks that know how to build things, and I am referring to consumer goods and not our friends the Architects and Developers. But when it comes to the hard core product developers and manufacturing expertise Globally but not in the US we are declining.

Number of engineers on rise...
Shruba Mukherjee New Delhi, Jan 10, DHNS

Despite industry leaders complaining about the shortage of quality engineers, a recent study has shown that India has surpassed China, Japan, South Korea, the US and the UK with an impressive 10.4 per cent increase in the number of graduate engineers.

While China recorded a 9.9 per cent increase in the number of graduate engineers, South Korea’s progress was 5.9 per cent. The UK trails far behind with 3.9 per cent and

the US with a negative growth of -1.0 per cent.

R&D by Multinational Corporations

R&D by affiliates of foreign companies located in the United States increased faster than overall U.S. industrial R&D.

* Affiliates of foreign companies located in the United States performed $29.9 billion in R&D expenditures in 2004, little changed from 2003. However, between 1999 and 2004, R&D by these affiliates increased faster than overall industrial R&D in the United States (2.1% on an annual average rate basis after adjusting for inflation, compared with 0.2%).

Major developed economies accounted for the majority of overseas R&D expenditures by U.S. multinational corporations (MNCs), although certain Asian emerging markets increased their share.

* Foreign affiliates of U.S. MNCs performed $27.5 billion in R&D abroad in 2004 after adjusting for inflation, up $4.7 billion, or 17.4%, from 2003. Affiliates located in Europe represented slightly more than two-thirds of the 2004 increase. Indeed, the share of this region rebounded from an all-time low of 61% in 2001 to 66% in 2004.
* Concurrently, foreign affiliates of U.S. MNCs have increasingly engaged in R&D activities in Asian emerging markets. Within the Asia-Pacific region, Japan's share decreased from 64% in 1994 to 35% in 2004, even though it remains the largest host of U.S.-owned R&D in the region. By contrast, the R&D shares of foreign affiliates located in China and Singapore increased over this period.
* R&D expenditures by affiliates located in India doubled from $81 million in 2003 to $163 million in 2004, pushing their share within this region to 3.3%.

swimmer - The Indian government pays part of the educational costs for engineers and IT students if they score above a certain number on a government pre-college test.

I agree 100%. Part of the reason I left the high-tech biz was the insistence on out-sourcing.

The big issue is going to be training our workers to have better skills since we are not going to get a lot of the high labor content jobs here, usually they are in dirty businesses.

However, if we can get workers to the state where their productivity exceeds that of some place like the PRC (which is very do-able), we could be very competitive.

Swimmer: The United States however is number one in the world turning out trial lawyers.


My Dad was an engineer and claimed there was a graph around that showed that if you graphed the growth of the economy it was directly proportional to the number of engineers per capita but inversely proportional to the number of lawyers, and he also suspected MBA's at the point he watched his established corporation went slowly into oblivion under the stewardship of the financial wizards, their corporate headquarters were in NYC. He was a leader in recycling, 50 years ago, and he did it with engineering. Scrap metal from the was thrown away, prior to his coming up with a bailing machine that compacted it and made it easy to ship and handle. He turned it into a positive cash flow. The thing that irritated him the most was their inventory control on spare parts for machinery that kept the factory rolling. They would want to save the "wasted capital" of spare parts and the factory would lose thousands for "want of a nail" in the famous lost the war poem. Old school plant managers like my Dad actually had spare parts hidden from the MBA's and a network of national plant engineers who would swap parts to keep things going.

One problem is that a manufacturer has to pay higher wages here because Metro's nutty land use policies have doubled the cost of buying a house. And Portland wastes tax money on condo bunkers for millionaires, instead of letting productive companies keep their money to build the total value of our society.

Another is Oregon's abusive subcontractor rules.

Another is the just passed RETROACTIVE tax. That means that we all must now save up a lot of cash for a re-occurrence of this outrage. That is cash that could have gone to growth or pay increases.

In the 1980's our company successfully manufactured electronics right her in Portland and sold the same quantities as a major Japanese company in one particular product.

Of course Oregon has gotten more abusive since then.

Even today there is a company in Vancouver manufacturing electronics 100% here! I guess they will start having rough times as Washington follows Oregon's lead to oblivion.


Swimmer, your dad was a very smart man. I also agree the MBA types have put many coffin nails into this country's well being. In the 1950’s executive earned about ten times the wage of their company’s workers. Today a thousand times is the norm. We (the middle class) also are guilty of wanting to much. When I grew up in the 50’s our house was modest, under a thousand square feet, we only had one car, didn’t get a tv set until 1956 and my dad only had one suit and a couple of pairs of shoes which he wore every day to work. Saturday nights during the summer the family would go to the drive-in movie which cost a couple of bucks per car. We would bring our own treats. Our family care was bought used and was several years old. As kids we played outside, stick ball, kick the can and build things like forts and had the best times of our lives. We could walk down the street with our bb guns and wouldn’t raise an eyebrow, let alone the swat team showing up. We collected beer and pop bottles to buy packs of baseball cards. I mowed lawns for a buck a job. In my neighborhood everyone was in the same boat and life was good.

I don't know how you stuff that cat back in the bag. How much are you willing to pay for that new TV? Or your new car? Or even your kid's baseball glove, or the new lawnmower, or a new frying pan?

There used to be a quality argument for buy American, but auto manufacturers killed that in the 80s, and everyone else followed suit. The quality of foreign goods is quite often equal or superior -- and they're less expensive.

I think the only way we bring back American manufacturing in any substantial form is for people to voluntarily buy less (so they can pay more per item for fewer items), and for blue collar workers to accept a reduction in pay so the cost difference isn't quite as stark. Both of those things violate fundamental human nature, so seems unlikely to happen.

Look at all the sustainable movements. I think reasonable people would be very happy to give up useless stuff and live a much simpler life for less stress, job security and good health not having that new 54’ 3-D tv and a new Prius. If we made more, it had high quality and cost more but we have less, it would put the cat back in the bag. Look at all the magazines spring up out there like Backwoods Home, Small Farm Journal and a slew of others relating getting back to a more simple life. It sells and it makes sense.

Re: "I also agree the MBA types have put many coffin nails into this country's well being."

John Benton (and swimmer), you do recall that the only MBA US president was Bushleague '43? Will you also agree that the eight years of his regime proved disastrous for the US economy?

Swimmer, my dad was an engineer, too. He'd wanted to be an engineer since he was a kid, and he got to college just in time for a big push for new college students to change their degrees to mechanical engineering. He and I discovered decades later that this push was to flood the market and force existing engineers to take lower wages, and he graduated just in time to discover that the job market for engineers was insanely overloaded. Out of his entire class, he was one of the first to get a job in engineering after graduating, and that was still six years later.

His career started out that way, and it ended that way. He was pushed into retirement at his last position at Kimberly-Clark, after the company started emphasizing that all of its packaging engineers needed Masters degrees and then full Ph.Ds. Meanwhile, when it came to the innumerable MBAs the company hired, they demonstrated the old saw about how the MBA programs at most universities exist solely to let the party animals get something from eight years of keggers besides a coke habit and syphilis.

And then there's the real kicker. Since the market's flooded with MBAs (mostly people desperately seeking employment stability in a market that doesn't respect people who produce something besides coversheets for TPS reports), now the standard MBA is worthless. Instead of encouraging students to go into something for which they might have an aptitude, now the push is for "Executive MBA" programs that cost even more. Southern Methodist University and the University of Texas at Dallas are both at war over who's going to have the better executive MBA program, and judging by some of the free-range Soylent Green they're producing, the losers will be the employees of any company that hires these anacephalics. Even if they murder the company, they won't get laid off until the bankruptcy proceedings are finished, and they'll get hefty executive retention bonuses in the process.

No argument from me on that MBA either.

Don't forget the damage the city planners have done with their insane ideas. There were 200 of these parasites at Portland and Metro before the cut backs.

They are usually totally ignorant of economics and most of what they propose to do will have the opposite result to the outcome that they are promising.

I inadvertently said that last line while standing within earshot of a planner last week. He approached me and said that was why he left the "profession"!


MBA = Master of BS Artistry

Besides MBA wankers destroying companies, the bean counters (Finance types) have been pretty lethal too. They tend to be penny wise and pound foolish and far more short term focused than long term focused. That screws companies in many ways but it ultimately screws the shareholder/owners of companies in that the long term value of a corporation suffers from near term paper profit maximization.

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