[ close ]


Bg1

Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles

American Manufacturing Can No Longer Compete

Published 10/03/09 Thomas Heffner - Print Article
E-mail - editor@economyincisis.org

Today there are fewer manufacturing employees than in 1955, and over the past 20 years 3.7 million manufacturing jobs has been lost. These figures are a grim reminder that America can no longer manufacture competitively.

How did this happen? Two causes stand out: low international wage rates in countries like China and Mexico that America will not and can not compete with, and America’s abandonment of capital and knowledge intensive industries.

American workers can not and should not have to compete with third world wage rates. Some Chinese manufacturers are paid 33 cents an hour according to a 2005 AFLCIO report. This cents-an-hour pay in many countries around the world has caused American companies and entire industries to move abroad (see the lost industry list here). It also lead Princeton economist Alan Blinder to estimate 42-56 million jobs could potentially be sent overseas.

Japan has successfully navigated the problem of China’s low wage rates. China is one of Japan’s biggest trading partners and yet Japan maintains a trade surplus with them. The labor in Japan is leveraged; one person operates equipment that can do the work of 100 ordinary laborers. America used to manufacture this way but now produces little by comparison and increasingly depends on imports at a net cost of $1.5 million per minute ($765 billion per year) to maintain our standards of living.

Auto and other manufacturing industries were once proud centers of American productivity, but have since seen their superiority usurped by technology based economies like that of Japan. The Japanese realized the gains of encouraging industrial growth and with hardly any natural resources turned their economy into an economic superpower that last year alone generated an $88 billion trade surplus with America and a $170 billion current account surplus with the rest of the world, the second largest next to China.

Meanwhile, the U.S. has resigned itself to live on increasing debts. Since 1987 home mortgages have gone from $1.8 trillion to $8.2 trillion, consumer debt from $2.7 trillion to $11 trillion and household debt has quadrupled. Add to that a national debt approaching $9 trillion and you do not have to be an economist to realize the economy may not be as rosy as America’s GDP rating system would deceptively lead you to believe.

Increasing debt, decreasing savings and selling off America’s principal assets, its wealth producing companies abroad. This is not a sustainable or responsible long-term economic policy.

America can, and must, do better. How do we get out of this debt-ridden rut? The solution is to copy Japan’s model. Taiwan, Korea and many other Asian countries have adopted the Japanese East Asian economic model and are extremely successful.

What if the economy had always operated as it does today with companies being sold abroad diverting wealth, jobs and production to other countries.

Imagine the consequences in WWII if Chrysler had been under its recent 9 year-long German ownership. Chrysler produced the main combat vehicle for troops on the ground the Sherman M-4 tank. German ownership would likely have forced production of tanks for the Axis rather than America. That one acquisition would have deprived America of one of its best on the ground assets and could have greatly changed the course of the war.

The World War II scenario is of course a hypothetical, but it illustrates the potential risk of continuing to sell our best companies from vital industries abroad. Investing in industry before WWII turned America into the most productive labor force and strongest country in the world. It’s time to make that investment again. If we don't our security and living conditions will not be as good for your children and grandchildren as you have experienced.

Thomas Heffner is a commentator for EconomyInCrisis.

Click here to contact your Representative in Congress.

Unless the above article is already copyrighted, this article is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License, EIC grants permission to use this article in whole or in part provided attribution is given, preferably in the form of a link back to EconomyInCrisis.org.

MORE OF TODAY'S NEWS | Comment on this Article | Read Comments


Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles

Register for newsletter

Bg2

Please Donate to EconomyinCrisis.org today



Please do your part, send a donation of $5, $10, $15 or any amount by PayPal or major credit card.

Bg2

Download our Podcast from iTunes

Itunes

Bg2



Bg2

Follow us on Twitter

Twitter


Download our Podcast from iTunes

Itunes

Bg2

Additional Recommended Articles from the Archives


Bg2

Follow us on Twitter

Twitter

Bg2

Donate Today


Bg2

Comment on this article

Subject

Comment



Bg2

Article Comments From Readers

gspencer says "Our Economic Future" on 08/24/09
The USA has almost entirely ceased to generate wealth for future US generations. Instead the USA has elected to sell or export title to US wealth including real estate, farms, agri-businesses, food supplies, dairies, forests, industries, breweries, hotels, factories, casinos, financial institutions, retail businesses, and most other assets located in the USA in order to pay people in foreign countries to manufacture the things that US citizens consume, and also to pay for US government expenses when the expenses exceed the taxes raised by the government. The USA government is selling our means of creating future wealth, in order to pay for imported products that US citizens consume and US government expenses.

Since the USA has de-industrialized, the USA has been sending title to US real estate and other assets to pay the people in industrialized countries to work to make the things that US citizens are consuming. The USA is almost completely de-industrialized, and the public pressure is being applied to eliminate the remainder of our industries with the proposed "Cap and Trade" legislation. US industries know that there will be many more future Environmental Regulations piled upon them and that they will have to comply. Our US businesses know that even if they can economically survive the current proposed environmental legislations, more and more environmental legislation will be piled onto them in the future. This means that if there is an economic analysis that would allow the factory to stay in the USA today, the business should fire the US workers and relocate that factory to a foreign country in order to escape the costs of future environmental regulation that the US government will certainly create.

Industrious productive nations like China, India, Brazil, Pakistan, and other productive industrious foreign nations grow wealthy and secure the value of their currency by producing and creating enough products to support the needs of their populations with their farms, factories and mines, plus they earn additional currency by creating additional wealth by exporting additional products that they manufactured. The economic health of every other business in that country depends upon their productive industries. These industrious nations will soon own title to most of the assets and wealth located in the USA.

Future generations of our children and our unborn grandchildren will have to work very hard and buy back these assets if that is possible.

Should I believe that US citizens are entitled to sit idle and not work in some dirty factory making the things that US citizens consume, when US citizens can obligate our grandchildren to work and pay for our easy living? This situation might end when the USA runs out of US property and other assets that foreigners will buy for the cash that US citizens need to pay the foreigners in foreign factories to make the things that US citizens consume.

The only thing that will create/save US jobs, preserve/restore the buying power of the US Dollar is reversing the trade deficit, reducing US government borrowing, and reducing US government spending of borrowed money, to start re-building the USA gold reserves which is the basis of the buying value of the US dollar. Only a positive balance of trade will eventually restore the value of the dollar, and we must accomplish this by any means possible, or we shall have to accept third world poverty for the majority of our citizens. The only way to do this is to produce and export more (dollar value of) things than we import. The only way that we can accomplish exporting US made products is to re-industrialize and make these products, hopefully with mostly US materials & Labor. The only way that our products will be sold abroad is if these products are either technologically superior, or cheaper. US citizens must manufacture and sell things to foreign countries in order to get US currency from foreign nations in order to buy back the US assets recently sold to and now owned by foreigners.

guest says "Re: Selling ..." on 08/24/09
It only happens when your plan to die and hence you do not care or when you expect inheritance. If the country is ready to file for bankruptcy then we can spend and spend while the top people stash some money away...

guest says ""Selling our best companies..."" on 08/23/09
I stumbled on this site and find that the quality of the articles is fantastic!

I understand that it isn't ideal to sell America to foreigners, however when we need them to finance our pleasures (frivolous spending habits with money we don't have), then we have to accept that the only way to repay them is to sell ourselves out.

Say you own a fully paid home and you decide you want to have some fun... You will spend until you can't borrow any more and the only way to pay back is to sell your one asset: your house!

It's a nasty situation, but it happens all the time!

www.economicawakening.com

biguru says "Capitalism" on 08/23/09
American capitalists do not feel the need to employ American workers. If the cost of labor is cheaper elsewhere they will move their operations over there.

I agree. It is true for mostly American version of Greedy Capitalism. The Japanese, Korea and Chinese Capitalism has a different flavor. It is Confucianism Capitalism. Even the chinese ambassador to U.S. said so. Those countries use technology, automation and engineers to improve productivity first, before thinking about the labor component.

We use, economists, accountants, lawyers and business graduates to outsource our inventions and enginnering ideas overseas to make a fast buck.

And the same group of people will analyze our demise and blame the general public and political leaders through television and books while asking for more free trade.

This website has been harping on the real solutions but they do not seem to sink in with the american public. So the results will be self evident.

guest says "The world economy is a zero-sum game." on 08/23/09
If a country like China gets the manufacturing contracts, a country like the US misses out. This is what the capitalists didn't tell the people as they extolled the virtues of globalization. Globalization is a natural development in a capitalism. Capitalism does not equate with nationalism. This is what many people forget.

American capitalists do not feel the need to employ American workers. If the cost of labor is cheaper elsewhere they will move their operations over there. American capitalists just care about maximizing profit.

Capitalists feel no loyalty to America. They think they owe loyalty to only themselves.

So if Americans complain about the current situation then they only have their own thinking to blame. Many people believed and still believe that capitalism is vital to the US's integrity as a republic. Many wars were fought in the name of preserving capitalism around the world.

If Americans are to have any consolation, then they can keep in mind that capitalism will also eventually destroy China one day, as it is destroying America.

As to the person above who asked for proof for 11% employment rate and seemed to have an attitude that the economy is not as bad as many think it is -- where are the jobs coming from, in this supposed recovery? Building, services ... what? Manufacturing has moved overseas so that sector has had it.

What kind of evidence do you need that the economy is moribund and will expire very shortly? What more do you want to see to be 'convinced' that economic conditions are deteriorating? The $74 trillion derivatives collapse? Word is that that is just around the corner, though many of the 'capitalists' don't want to talk about it. But be assured, that will happen and probably sooner than later. You may not hear talk about it in the mainstream corporate media now but we know they are liars anyway and in the pay of the capitalists.

biguru says "Productivity" on 08/22/09
The labor in Japan is leveraged; one person operates equipment that can do the work of 100 ordinary laborers. America used to manufacture this way but now produces little by comparison ...

Our real productivity used to come from better automation. Then the bean counters figured out that it is too much trouble to hire smart people to design business and process automation...so they out sourced everything. The Japanese on the other hand continuously improved their process using technology. Therefore Japanese can still compete on high technology like optical lithography, even the laser assembly that goes with each DVD player and high performance engines be they portable power generators or chain saws.

guest says "AXmerican Manufacturing Can No Longer Compete" on 09/19/07
For the guest of 9/l9/07 who congratulates President Bush for destroying the U.S., I want to inform him that his arguments need to be stated. I don't understand what he is talking about. I'm not saying he's wrong or right - just that his arguments are not there. as for the guest of 9/l9/07 who has determined that the "real" unemployment rate is between 9-ll% I would like to know where that figure comes from. As for the poor workers at Walmart's, no-one forced them to work there. The other workersin the vicinity might like the low prices at Walmart's. Finally, inflation depends on too much money chasing too few goods. The flood of goods entering this country is key to keeping inflation low. It is certainly not the restraint on spending in Congress. Investments made in this country from abroad are keeping interest rates low. You just try to remove these benefits of world trade and you may not like what happens.

guest says "ECONOMY" on 09/19/07
I WOULD LIKE TO THANK PRESIDENT BUSH AND HIS FELLOW REPUBLICANS FOR THE EXCELLENT JOB THEY HAVE DONE DESTROYING THE U.S.WHAT A SHAME

guest says "Enforce our trade laws" on 09/17/07
The U.S. lost 46,000 manufacturing jobs in August 2007. More significantly, the ongoing losses are taking a cumulative toll on communities throughout the country. We need to adequately enforce our trade laws, and hold countries like China accountable for illegal trading practices such as currency manipulation. Otherwise, we’ll continue to shed manufacturing jobs. www.manufacturethis.org

guest says "Don't forget the tactics" on 09/16/07
McDonalds' Corporation went before Congress in 1974 and bitterly complained about "excessive minimum wages" that were threatening to destroy shred profits and undermine the financial well being of the company.

This same corporation which adds "Edible polymers" (plastic dust as a thickener)to its shakes lobbied for a SUBminimum wage to keep workers pay and esteem as low as possible. Keeping workers down meant keeping Ray Kroc's profits up.

McDonald's and
Walmart are very strong anti-union corporations.
According to WalMArt Watch, Walmart (like McDonalds) has resorted to closing entire stores rather than retain workers who freely organized to create a union and petiton for fair wages, benefits and hours.
The message is clear, these large corporations want to operate on their own exploitive terms and will do everything they can do discourage and destroy worker's self esteem and rights to organize because they undervalue labor and workers.
Walmart has also been found guilty of sex and pay discrimination by grossly underpaying women workers compared to men and passing them by for promotions and higher management positions.

These are the facts that anyone can look up that corporate America uses to create an environment of serfdom and poverty for the workers as CEO's earn ever more obscene salaries.

guest says "True U.S. unemployment is around 9-11%" on 09/16/07
The guest who stated a 5.3% unemployment figure is understating actual American unemployment.

The underreporting tactic has been used for years to artificially prop up the appearance of a strong healthy and robust economy to help keep the markets strong for top investors.

As we all know now, the face of reality is a very different and much sadder picture of desperation and decline that largely goes unnooticed and unreported by the corporate media.

Workers who have been looking for a job for more than 6 months are dropped off the tally because there are so many.
Shit jobs like McDonalds, Walmart, conveneince stores, and other abusive employers who conspire to keep wages ultra low, benefits to a minimum and retain millions of Americans poor, weak and enslaved to debt are counted as employment even though technically "Enslavement" is the more accurate term.
U.S. based employers can also count overseas workers as "employed" to help prop up U.S. numbers.

Actual unemployment is really in the 10% range.

What can be done? If unemployment is bad and employment is good, the government should create jobs for people. Repairing bridges, picking up litter, planting trees, etc. etc.
That's the right and smart parth to follow just like Roosevelt did with the CCC.
A government that allows and condones any business to outsource workers, restricts unions, and pulls the rug out from under families is actively destroying its own country and people.
Continuing on the probusinnes and anticitizen path is going to effectively ruin the world's greatest nation for the sake of short term gain.

guest says "American Manufacturing Can No Longer Compete" on 09/14/07
Over the past year the Bureau of Labor Statistics reports that manufacturing has dropped by 0.2%. As a matter of fact, manufacturing has been dropping all over the world. A lot of this is due to technological improvements such as computerization. Unemployment in the U.S.A. runs about 5.3%, not high by historical standards. The connotation of the article is that we ought to go back to an industrial policy. Shades of the Clinton years and Andrea Tyson at the head of the Clinton Council of Economic Advisors. It's all coming back. Protectionism, making unreasonable demands on third world countries to step up their unionization and social legislation. Whatever prosperity exists in the U.S.A. depends entirely or world trade or what is murkily referred to as Globalization .Shades of Mickey Kantor, Paul Krugman and Japan telling us no. I hope we don't get a repeat but I doubt it. I just noted that Charlie Rangel has entered an agreement with Alan Garcia for free trade provided that the Peruvians institute social legislation a la U.S.A.

guest says "Comparing the 36 year cycles" on 09/12/07
Looking at the last 75 years of America's political history, we can easily see two distinctive periods.



The Democratic Era (1932-1968)



7 Presidential elections with Democrats winning



2 Presidential elections with Republicans winning



The Republican Era (1969-2005)



7 Presidential elections with Republicans winning



3 Presidential elections with Democrats winning



Ronald Reagan asked voters in 1980: "Are you better off now than you were 4 years ago?"



Democrats should ask voters: "Is our nation stronger, safer, and more prosperous now than it was in 1968?"



Both periods ended in ahugely unpopular protracted war, but the overall well being of our nation is hugely different.



In 1968:



America was mainly loved, revered and respected by the world community for promoting freedom and opportunity.



America's businesses were strong and prosperous and our nation maintained its edge through exporting products.



America's labor laws and worker safety was improving



American's worked shorter work weeks for better pay



Minimum wage (adjusted for inflation) was much higher



America was safe from Terrorism



American jobs were being created, protected and wages were rising



American infrastructure was safe and properly maintained



The dollar was strong and valuable



Healthcare and homes were affordable for families



In 2007:



America is seen as an aggressive military empire and the single greatest threat to world peace



America's manufacturing is in steep decline and being sold out to Communist China as we've become an import nation



America's labor laws and safety standards are becoming weaker through tort reform and lax enforcement on employers



America workers are working much longer hours



American's minimum wage (adjusted for inflation) is much lower



America is in far greater danger of Terrorism than ever before thanks to open borders, port control under Dubai, failure to inspect shipping containers, soldiers away from the homeland, and aggravation of Muslims worldwide through the Iraq war



American's jobs are steadily being lost to illegals and deported to China and India



The nation's infrastructure is crumbling and unsafe



The dollar is weak losing 39% of its value against the Euro since 2001



Healthcare and Homes are grossly overpriced and increasingly unaffordable for Americans

guest says "Break the model" on 09/12/07
A hidden source of tremendous power that Americans citizens possess yet have failed to appreciate and use in an organized way is the power of the purse.

This is the "piece de resistance" and ultimate tool every American can use to break the terrible cycle of debt and dependency that are leading to ever lasting wars and offshoring of jobs and businesses as well as eternal debt that is ruining our nation.

Americans can and should ban together and commit to halting or severely reducing their spending to bare minimum levels.

If done effectively this will send huge shock waves in the markets resulting in panic and recession. If organized on a grand scale, this will force the government to make the radical changes necessary to save our nation.

However, as long as Americans are debt-addicted to overspending, the same awful cycle of dependency and weakness will continue, and America like a cocaine addict will finally succomb to death.

We must go cold turkey from our spending spree addiction and withold/delay purchases to acquire control over our destiny and the destiny of our nation.

As things currently stand neither our government nor international business will listen or be responsive to the people and make positive and meaningful change.

This is the painful yet necessary surgery needed to prevent the death of America.