Really worthwhile (but sparsely attended) panel on manufacturing yesterday. Left to right, the people pictured are Scott Paul, Alliance for American Manufacturing; Dave Johnson, Campaign for America’s Future; Beri Fox, a manufacturer; Rep. Jim McGovern (D, MA) and Jared Bernstein, who was with the Obama Administration but is now with the Center on Budget and Policy Priorities.
Bernstein began by putting manufacturing into perspective. He thinks the sector is under-appreciated in the US. Said compensation is higher in manufacturing than in service industries, especially considering 70% of the US workforce are not college-educated. He went on to say that manufacturing is a “jobs multiplier” in a way that service industries aren’t, with manufacturing creating 4 collateral jobs for every new manufacturing job, and that 70% of R and D comes out of manufacturing. This is why he believes that an “innovation agenda” is a “manufacturing agenda”. Slides and numbers here. (pdf)
McGovern said for a long time in DC all he heard was “tech, tech, tech” but he thinks this singular tech focus ignores reality in places like Massachusetts, where there are 7,750 manufacturers. They are small businesses: 69% of those companies have 20 or fewer employees,. McGovern says it’s a myth that US manufacturing is composed of giant corporations.
Which brings me to Beri Fox, who runs Marble King in West Virginia. Marble King is her family business. They make marbles. She said that ten years ago 165,000 West Virginians were employed in manufacturing and now that is down to 50,000. She said she is not a protectionist, and that Marble King sells in 17 countries, but she cannot compete if countries like China subsidize and protect their manufacturing base and the US does not.
Fox was on Colbert’s show, and she was very emotional talking about the response to her appearance on the show. She got 11,000 emails from people telling her they supported US manufacturing and agreed with her on the need for government intervention, if only to re-negotiate bad trade deals. Colbert did the initial interview and then a follow-up, where he mentioned the 11,000 emails, and said that he had saved American manufacturing. Fox was so grateful that Colbert brought attention to the issue and gave her a forum to talk about it.
There is a company that once manufactured toys where I live. All of the toy production has been out-sourced to China, although the white-collar jobs remain in Ohio.
Local people say a machinist of German descent founded and built the company and his children went on to become engineers and run the company and then their children went to business school, and outsourced all the jobs.
That story always sounded inevitable to me, just an unstoppable evolutionary process, but Beri Fox says stories like that are the result of deliberate policy decisions made by nations and leaders, and are not inevitable at all.
kuvasz
Nobody is secure when a nation employs less than 10% of it work force in manufacturing. It is not sustainable to the health of the nation, or its people.
You have to make “things” You just can’t have a nation of paper shufflers.
Steeplejack
@Kay:
Too lazy this morning to hunt down a link, but recently I read a pretty good piece that made exactly this point, specifically with regard to Germany–that they have achieved something of a policy consensus to maintain their manufacturing base and not outsource everything overseas for short-term gain.
JPL
Kay, Thanks for attending NN this year and reporting on the forums that you attended. I just watched The Company Men and Kuvasz @ 1 is right. We are on a road to ruin.
JPL
Steeplejack @2 It’s because of Germany’s policies that the global crises didn’t affect them in the same way. During the downturn they subsidized workers pay to prevent layoffs. Asshat Rubin at the Post likes to mention Germany and their lack of stimulus during the down turn but she never mentions the safety nets that Germans are provided.
Villago Delenda Est
The German approach puts values other than profit in the forefront.
It is therefore SOSHULIST. For the love of Croesus, they put officials of unions on boards of directors!
That will never fly in this vile Mammon-worshiping society of ours, where we’ve done really smart things like outsource our rare earth extraction capability to China because it’s cheaper.
Never mind the Chinese can cut off our supply of these substances in a nanosecond, and then even our extravagant military is brought to its knees due to the military dilettants of our government not understanding why logistics is important.
Because it saved them some bucks in labor costs, dontcha know!
For want of a nail…because the fabrication of nails was outsourced…
Mr Furious
Reason number 547,953 that Business School is the worst thing that ever happened to education in America.
Alex S.
Maybe it’s one of the mechanisms that keep history going. People are poor, work hard, get prosperous, get used to prosperity, forget how to work hard and get poor again.
JPL
Let’s not forget Mitt’s background with Bain Capital.
Carol from CO
Got in on the middle of an NPR program this morning when I was walking the dog. I don’t know what the theme was exactly, but it was a BBC program and they were interviewing a woman who was an American, judging by her accent. She was explaining how her company (whatever it was)was raising the living standards of the poor all over the world and gave as an expample paying people in some area of India $1/day where that was a livable wage. It was important, she said, not to exploit people by paying them below what would be a livable wage where they live, but it was perfectly fine to pay very little as long as they could live on it. She saw it as bettering everyone.
superdestroyer
Villago Delenda Es,
First, you would have to show that there are economically viable ores in the U.S. that can be used to extract rare earth metals.
Second, you would be to show that a company can obtain the permits to extract the ores.
Third, you would need to show that a refinery could be built to extract the metals from the ores. Of course, the construction of the refinery would mean that EPA permits would need to be obtained and that a waste stream for the waste could be found.
And last, you would need to show that this can be done while competing in the world marketplace. The U.S. legal and regulatory mechanisms were develop with zero thought to how the rules and regulations affect businesses competing in a global marketplace. The result is that there is no reason to build a refinery, smelting plant, or heavy manufacturing plant in the U.S.
Villago Delenda Est
superdestroyer:
If you need the stuff to make your bombs, you need the stuff to make your bombs.
You accept that the costs are going to be high. Do you really need your bombs? Seriously? Or don’t you?
Then private profit becomes something that you do not worry about.
Stop doing business with Ferengi. They’re going to fuck you over.
arguingwithsignposts
Obviously, they didn’t stomp their feet, tear up enough posters of Obama and say he is worse than Bush to draw a crowd.
Poopyman
OT–ish:
Going to the 10:30 session “Cyberwar; Wikileaks, Stuxnet, and the Progressive Reaponse”.
Should be interesting….
superdestroyer
villago,
Unless the U.S. government is going to nationalize the mining industry, then the U.S. government has to worry about profits. If a private company cannot make a profit, it has zero reason to exist. Even a not-for-profit has to have years and quarters when income exceeds costs.
I have personnally heard too many government employees say that all of the regulations, rules, and guidelines are just the cost of doing business. But if the cost exceeds the price, then no domestic business will do it.
The biggest subsidy that China gives its extraction industries is not have an equivalent to the EPA or the ABA.
PeakVT
Argh! Is FYWP being more aggressive with moderashun because of some update? Not only is it eating my comments like it never has before, I no longer see the message that the comment is being held.
ETA: This one made it, but nonetheless: FYWP.
amk
Blog hits depend on poutrage peddling and the choi freakshow provided that. Of course, msm lapped up all that emo drama and the vicious circle goes on.
PeakVT
The biggest subsidy that China gives its extraction industries is not have an equivalent to the EPA or the ABA.
superdestroyer: objectively pro-lead poisoning.
Villago Delenda Est
@13 Superdestroyer:
Then if you REALLY need this stuff to make your bombs, you nationalize it.
You can’t have your cake and eat it to. You create a situation where you can get the stuff you need, and you pay the price for it that it costs. You don’t cost shift the consequences of the mining and refinement onto others…you accept those costs and carry on if you really, really, really need that stuff.
Outsourcing it to a potential adversary who then has a monopoly on it is, well, very stupid.
Or perhaps we really don’t need those bombs that much? Ya think? Perhaps?
It does come down to values, in the long run. I think our values in this society, based on short term profit alone, will be our doom.
David Fud
@superdestroyer, yes, because replicating the pollution in China in the United States is exactly what we need to become competitive. We should just choke on the externalized costs and suck it up. So, who has their accounting right, the Chinese who pollute everything, or the US, who has some restraints? Apparently tainted milk, killer smog and heavy metals everywhere are acceptable outcomes, just as long as we have crappy, low paying jobs like they have in China.
By the way, the reason no refinery has been built in the US for a long time is very simple and requiress no handwaving at the EPA to account for it: the aggregate demand for fuel in the US is more or less flat, and has been for a long time. Small sample of data: http://moslereconomics.com/2009/03/11/us-gasoline-demand-chart/
Ohio Mom
Even more basic than bombs: food and medicine. For example, China now makes the majority of Vitamin C, which is used as a food preservative (ever see “ascorbic acid” on a food label?). But hey, what do we need a food supply for?
http://seattletimes.nwsource.com/html/nationworld/2003732744_vitamins03.html
Davis X. Machina
Perhaps true, perhaps not, but not automatically true.
Identical statements were made about farming, a century and a half ago….no one could imagine where in the economy the extra 30-40% of the working population who used to work on the farm, and over a generation ceased to do so, could possibly be absorbed.
If that 10% makes all the things you want or need, what then?
There are long-term, irreversible secular changes in societies and economies….
dmbeaster
superdestroyer:
An under appreciated fact is that China is the ideal world for those with the hard right corporate culture mentality. Crony capitalism, no pesky democracy getting in the way, no unions, no regulations that you object to — “in partnership with a friendly government.” (Hyman Roth, Godfather II) It has also resulted in one of the more polluted countries on earth and workers who commit suicide on the job due to horrible working conditions. But it is the MBA’s dream come true of the suitable social background for maximizing profits. And some MBA type genius decided that the proper response to the suicides was to make the workers sign pledges not to commit suicide on the job.
Rune
Funny how this rare-earth issue generates so much commentary on so many different threads. Anyway, though I appreciate the bomb analogy, I would like to point out the obvious, namely, that rare-earth elements are involved in much more than warmongering. They are essential to many advanced technologies.
I am also surprised that not more of you have jumped on Superdestroyer, who seems to think that it is an acceptable (even desirable) tradeoff to forego environmental controls in order to incentivize mining. Aren’t environmental costs real costs that should be factored in to any feasability assessment?
Villago Delenda Est
Obviously unimportant, because you can’t use it readily for the obtaining of hookers and blow.
Cat Lady
Davis X. Machina
OECD average % of civilian population employed in ‘industry’ — separate figures for ‘manufacturing’ aren’t given — is 23%. In the US it is 18%. I’m guessing ‘manufacturing’ is about half that.
http://stats.oecd.org/index.aspx?queryid=451
Lotta bondage out there.
Villago Delenda Est
Bombs gets the attention of the people who cheer on the deaths of brown people. Because without them, fewer brown people die, and we have a sad panda problem with our cheering section.
Rune
Oh, by the way, uranium is not a rare-earth element. Just FYI.
Amir_Khalid
@dmbeaster:
Don’t forget the anti-suicide netting thoughtfully provided at the workers’ dorm buildings.
patrick II
And those business school graduates did not invent or optimize any new objects, tools, or change the manufacturing process. We pride ourselves on being the country of innovation, we say an American’s natural ability to create will always keep us rich. But people selling stuff made somewhere else aren’t inventing anything — the people who actually make and build things find new and better ways to build them. Most engineering jobs are now in China and India. Those are the people inventing the next generation of solar panels, computers, and the machines of the futures.
We aren’t just giving away our manufacturing jobs now, we are giving away our culture — the one that made things. We lead the world because Thomas Edison and Henry Ford lived here. Now we sell insurance.
Neldob
But then we invest and invent a way around the rare earth issue or create a way to mine them w/o the pollution problem. Which would be a great place for some stimulus dollars. Maybe we could do that with the savings from ending the oil subsidies.
But I think Beri Fox’s observation that the outsourcing of manufacturing is a result of how the system is set up and not a law of nature is not brought up often enough. Like when people complain about greedy bankers … it’s not the greedy bankers, the problem is the way the system is set up. It is the proper laws or lack of them or their enforcement, not a moral failing, that created the recent economic crisis.
Villago Delenda Est
The moral failing (profit is everything) led to the dismantling of laws designed to prevent the very economic crisis we’re experiencing.
We’ve been through this before, we found solutions…then, we forgot them, because of rapacious greed.
patrick II
@Neldbob
The deference to the “invisible hand” is the most pernicious aspect of libertarian and conservative economic thought. It is the bedrock of their philosophy of small government and no regulations. “Natural order” only happens when man steps away from the wheel. Of course in the meantime their puppetmasters are lobbying congress to the tune of billions of dollars a year to make sure that laws are passed so the “natural order” works in their favor.
urbanmeemaw
Thank you, Kay, for attendng and reporting on these sessions. Also, as a fellow Buckeye, thanks so much for all you do for the citizens of this state. I admire your intelligence and commitment.
Amir_Khalid
Refining rare-earth elements creates at least as great an environmental problem as mining them. The construction of a rare-earth refining plant in Pahang state is on hold pending an environmental evaluation by the IAEA. One in Perak state, owned by Mitsubishi Corp of Japan, was closed in 1993 after being blamed for severe pollution and increased birth defects among people living nearby.
Villago Delenda Est
It’s also an utterly fallacious interpretation of Smith, who, if you bother to read him, makes it very, very clear that the “invisible hand” is a social construct, created over countless centuries of social evolution.
Social constructs can be, and are, manipulated for personal advantage. He cites this over and over and over again in The Wealth of Nations. He gives numerous, detailed examples. The “free market” or the “invisible hand” is NOT a force of nature. It is no more “natural” than a railroad, a house, a castle, or an interstate. It is shaped by conscious thought. It requires maintenance and monitoring if it is to work in the most friction-free state it can, because if it is not, it will destroy itself. Every single time.
Starfish
Kay, did anyone ask if regulation like CPSIA affected Marble King?
Until recently, I did not realize the amount of regulation involved in items that children use. I think that CPSIA was modified so that small manufacturers were not driven out of business. At first, when the regulation seemed to apply to everyone, it seemed like a person who would make a handful of toys to sell on Etsy could potentially get driven out of business for not being able to afford to do testing that would be prohibitively expensive.
KRK
Thanks for your reports from NN, Kay. I really appreciate your work for all of us at BJ. It’s a big task.
Kay
Kay, did anyone ask if regulation like CPSIA affected Marble King?
superdestroyer
Neldob,
Rare earths are used because they can do things that cannot be done with other types of materials or do it much more efficently. Fields like optics, switching, generators, medical equipment does not function without them.
Saying that if one works hard enough that one can get something for nothing has never worked. To get the rare earths requires refining the ores and that requires chemistry and physics.
The question concerning the EPA is not whether there should be one but whether it should be consistent with reasonable regulations based on reasonable risks. Currently, the EPA is forbidden from considering the health consequences of being unemployed or relocated due to economic collapse. Also, when the EPA got away with ex post facto regulation under CERCLA, then there is no way that any business can manage such risk
dmbeaster
Rare-earths aren’t all that rare, and there are abundant deposits in the US (and other places other than China). The primary mine in the US, at Mountain Pass, California (off the I-15 near the Nevada line), is currently being re-opened.
China has come to dominate the market by dumping the product at a very cheap price and at a loss to themselves, but driving other producers out. As the price rises, other producers will re-enter the market. It cannot control the market unless it continues a practice of selling way below cost. The current situation has nothing to do with the EPA.
superdestroyer:
This isn’t strictly true, but thank god that for the most part the EPA doesn’t factor that in. We don’t keep nuclear power plants open that pollute by offsetting the health risk against potential job losses. We don’t allow DDT usage even though it costs jobs to ban it. Every polluting industry has always argued that it should not be regulated because of potential lost jobs. There are countless types of business operations that are no longer possible because the harm offsets the benefit of the industry.
And you are also partially wrong. The EPA clearly allows some forms of workplace environmental harm to continue in order to balance the benefit of the industry against worker health. Every polluting industry in existence has one standard for exposure to the general public, and a much higher standard for exposure to workers.
You may not be 100% happy with the choices that the EPA has made in addressing various concerns, but the idea that it causes more harm than good is just laughingly wrong. I assume you prefer the Chinese pollution example as how polluting businesses should be regulated.
Commenting at Ballon Juice since 1937
It would be nice if progressives would start to discuss options to the status quo. ‘Capitalism’ as we know it needs to evolve into something that preserves communities and resources. Here’s a nice primer from the Nation. Companies like Gore-Tex Seventh Generation, and King Arthur Flour are manufacturers who already operate on different principles than the traditional ‘maximize profit for the share holder’ model. Why not work to pass local ordinances that express a vision of what the community expects from companies doing business there? – ‘B’ Corps, preferring a cooperative model of business, and ESOPs.
Commenting at Ballon Juice since 1937
There is an American Sustainable Business Council. Who knew? Nobody at NN apparently. Otherwise you would have someone from there on your panel.
Commenting at Ballon Juice since 1937
OMG! There’s more of them – Business Alliance for Local Living Economies
You would think a progressive conference would have actual progressive groups represented. We can bitch about the way things are (not FTW!) or we could engage disillusioned fellow citizens with new ideas. I think that things are shitty enough they may actually be willing to listen.
toledored
Love your writing. However, your photography.
Ben Wolf
As others have mentioned, Germany provides tax incentives to companies which retain manufacturing jobs in Germany. The United States provides tax breaks to companies which outsourcejobs. When the Germany has a workshare program which activates during economic hard times. Companies are rewarded for reducing everybody’s hours while not laying anyone off. The federal government steps in and pays those workers the difference until the economy rights itself.
Here in America, companies have zero incentive to retain workers. The worker doesn’t receive benefits unless they lose their job, whereas in Germany people are given benefits for actually working. Germany has a jobs policy. We don’t. We have a GDP policy, but as we’re now seeing, GDP growth is increasingly untethered to job creation.
superdestroyer
Ben Wolf,
Can you provide a cite that provides the actually provisions of the tax code that gives tax breaks specific to help companies off shore production.
I have heard the talking points many times that the U.S. government provides tax incentives to off shore jobs but have never seen any specifics.
Comrade Kevin
@superdestroyer: Unfortunately, it doesn’t cite the actual legislation, but there’s a Reuters article from last year describing a failed vote to change the tax code to remove the breaks.
Dollared
Superdestoyer, the solution is really damn simple. Tariffs. Just add 40% to the price of imported Chinese goods and use 50% of the funds for environmental remediationa, and 50% of the funds to subsidize competitive industries.
Letting China have a free ride on labor and environmental laws is OUR CHOICE. We can reverse it at any time that we begin to care about the United States and its citizens, rather than sucking off the Fortune 500 for all they pretend to do for us.
You seem to not understand the choice.
Dollared
Kay you said it all – not well attended. Progressives really miss that without economic security for the high school graduates, there will be no progress on labor, environmental, civil rights, health care, social equity, etcs. Highly stressed and scared people do not make good allies, and they are prone to believing demagogues and prone to scapegoating minorities.
It has been ever thus, but many progressives truly are elitists who hate the great uneducated masses. I’ll say a truth: we won’t win a fair and healthy society without the votes of homophobes and racists. It is what it is.
evinfuilt
@23 rune:
It’s become the American way to socialize costs, so of course superdestroyer thinks we the people should pay the ultimate costs in environmental damage instead of having safer extraction methods that only have a fiscal cost.
Tech industry needs those rare earth minerals, bur as long as our iPhone is $200 and it’s true costs are hidden in environmental and health issues in china, we’re fine.
superdestroyer
evinfuilt,
The current EPA regulations on clean makes everyone assume that civilization will collapse, everyone will become subsistence farmers and grow all of their own food, and that all of those subsistence farmers will live 70 years (the modern life expectancy. That means that corporations have to face a costs of million of dollars an acre to clean up land that is worth a few thousands of dollar an acre. No country can afford those costs and compete on the world marketplace.