Mark Perry on US Manufacturing

I could link Mark Perry almost every day, and have to restrain myself.  If you like my blog, you should be reading his too.  Anyway, here is his take on US manufacturing figures:

If the U.S. manufacturing sector were a separate country, it would be tied with Germany as the world's third largest economy. It would also be larger than the entire economies of India and Russia combined. As much as we hear about the "demise of U.S. manufacturing," and how we are a country that "doesn't produce anything anymore," and how we have "outsourced our production to China," the U.S. manufacturing sector is alive and well, and the U.S. is still the largest manufacturer in the world.

  • roger the shrubber

    meh, maybe so, maybe not. still, hard to proudly make that claim when huge swaths of pennsylvania & ohio & upstate new york & west virginia & indiana & wisconsin & illinois and most especially michigan,(largest city: mogadishu. population 50 years ago: 2,000,000 +. population today: 850,000 and falling by the second.), lie rusting and abandoned in silent ruin and the good folks there who once built stuff can either move to texas or learn to live on mcdonalds/7-11 wages. hard not to be pessimistic when you see american corporations cheerfully destroying the cities and people where they once bragged about living in in order to make a little more money, and our government does everything in its power to help them do it. it's not merely economic suicide - it's economic *murder*.

    as for that proud "we're bigger than russia and india (LOL) combined" brag, (*great* to know we're still ahead of backwards 3rd world countries! no doubt we're also kicking the crap out of moldova and mongolia, too!!), i'll bet the buggy-whip industry ran ads in 1910 proclaiming how they were still a major force in american business. that things would turn around soon, and with hard work and drive, they'd be back on top in no time.

    take a scenic drive through detroit or akron or flint or cleveland or st. louis or youngstown or buffalo sometime. (but make sure you lock the doors, carry a shotgun or two, and for god's sake, *don't stop for any reason*.) maybe consider snapping up a few of those $500 bargain houses. hell, you could have bought the $55,000,000 pontiac silverdome - where the mogadishu lions used to play "football" - for less than $600 grand at auction last month. note the eerie quiet of the shuttered and crumbling downtown skyscrapers and auto plants and steel mills and washing machine factories, and tell us how that's a good thing. how we're still doing really well, and have nothing to worry about.

    the good folks in rust belt might beg to differ, though.

  • LoneSnark

    He is comparing apples to oranges. US manufacturing alone (excluding the Mcdonalds jobs) is on par with Germany's entire economy (including Mcdonalds jobs).

    But the region you mention is hemoraging jobs and people not to China but to less corrupt regions of the US. As such, I suggest you take a drive through the south to see all the auto plants, steel mills, and fully occupied skyscrapers that did not exist twenty years ago.

  • 3legdog

    RE: Roger - "[...] hard not to be pessimistic when you see american unions cheerfully destroying the cities and people where they once bragged about living in in order to make a little more money [...]

    Fixed it for you.

  • Jim Collins

    I'm not sure about the rest of the places that Roger mentioned, but, in Western Pennsylvania, you should see the number of SMALL manufacturing companies that have sprung up. I deal with two of them, that look like somebody just built a large garage, until you go inside and see a CNC lathe, 5 axis mill and weld booth. There may be only 4 or 5 employees, but they are turning out high quality complex parts. There are hundreds of these shops all over the place and they are feeding dozens of high tech companies. Yes, most of the huge mills are gone. Yes, there are unemployed people, but, most of these are semi-skilled laborers from the construction industry. We have a shortage of certified welders, machinists and CAD people who have decent mechanical knowledge. I was laid off right before Christmas last year. I didn't start looking until after the holidays and averaged 2 interviews a week until I found a job I liked in the first week of March. In the mean time I had freelance work coming out of my ears.

  • roger the shrubber

    RE: 3legdog -

    i'm a guy whose politics are somewhat to the right of attila the hun, but blaming the destruction of american manufacturing on unions is something i just can't buy into. take cars: was it the *unions* who planned, designed, set tolerances for and ok'd each & every nova, vega, pinto, pacer, gremlin, mustang 2, et al that rolled off the lines in the '70's, the decade that sealed detroit's fate? nope: *management* did all that. *management* said "it'll do" when they saw a car with a blatantly obvious defects rolling off the line. what the unions did was to build each car as management dictated, using materials and methods and tools mandated by management, working to tolerances and quality standards set by...management. so naturally, when their enterprises failed, management blamed...the uppitty *unions*, just like the laughably inept airline industry did when THEY hit the skids due ENTIRELY to lousy management.

    i'll keep it short. 1) union workforces CAN be managed/motivated to do high-speed, high-quality work. UPS does it every day. it is EXTREMELY hard to do - i managed for UPS - but it can be done. highly-paid employees do top-notch work, because management works their asses off to **makes it happen**. what a concept. 2) i come from a city on the mexican border. amazingly enough, *at exactly the same instant all of US business started whining about how unions were killing them*, they all opened maquiladora factories in the city just across the border in mexico. paying a buck-and-a-half an hour. almost as if it were *planned* that way.

    i tend to think of money in terms of the early '80's, when i became an adult. so when a business today pays a "sensible" salary of $12 an hour - global competition! can't give away the whole show! - i run it through the ol' inflation calculator (you can google them; the US dept of labor & stats has a good one) and find out that that munificent $12 is actually $4.57 in 1980 money. not real impressive, is it. hell, even union-scale $24 is only $9 in 1980 money. better, but still nothing to write home about.

    i remember 1980 quite well. even way back then, back in the dark ages, a princely $9 an hour was all of $18 grand a year: not exactly "company-breaking" wages. today's $12/hour folks would be making all of half that: essentially, pretty close to the poverty line. so, sorry, i just can't make myself buy that "it's all the unions fault" garbage. it's great cover for bad management and rapacious corporate greed, true. but why is it that americans making midddle-class wages "is what killed the rust belt"?

  • M Heiss

    roger the shrubber,

    For a slightly different take on what happened to the rust belt, northeast, and pacific coast regions, try reading "The Box" by ... Marc Levinson, I think.

    He makes an argument that the rise of standardized shipping containers ~40 years ago rewarded the nimble and penalized the bureaucratic/slow/incrementalist... and the world is still adjusting.

  • 3legdog

    Roger,

    From http://abcnews.go.com/Business/Autos/story?id=6402552:

    The UAW's Role in Creating Inefficiency

    Toyota isn't asking for a bailout. Neither are Honda or Nissan. Yet, they all sell and build cars in America. In fact, while the Big Three were begging for your money, workers at Honda celebrated the first cars coming off their new assembly line in Indiana.

    Why can Honda do it, when the Big Three can't? Well, Gettelfinger's union is one reason. The Big Three have to deal with strikes.

    The UAW even got the Big Three to create places where longtime workers who are not needed are still paid 95 percent of their wages to just sit. They wouldn't allow us to videotape these so-called jobs banks, but Linda Swan saw them when she worked for Ford.

    "For the most part our people just sit inside and do nothing," she said.

    Sen. Bob Corker. R-Tenn., was one in Congress who thought jobs banks were a good reason not to bail out carmakers.

    "I understand the good job Mr. Gettelfinger is doing on behalf of the employees that are not working but still being paid," he said.

    Corker told me that if they idle a plant, they have to pay these employees for four years after the fact.

    "There's not an industry in America that is like this," he said.

    Last month, Gettelfinger said the union would make no concessions, but this week he said they would suspend the jobs banks.

    Economist Peter Morici of the University of Maryland says the automakers are only making cosmetic concessions.

    The union would have to concede much more to make the Big Three's workers as efficient as say, Honda's. Honda just hired 900 Americans to work in Indiana.

    "How can Detroit possibly compete against Honda paying $29 an hour plus benefits when Honda pays $18.41 an hour," Morici asked.

    "The wage package is just too rich in Detroit, the benefits package is just too rich and the cars show it. The upholstery is not as nice. Why? Because they have to pay these high labor costs so they use cheaper materials," he said.

    I will agree, though, that it's not all the unions' fault. .gov plays their part in driving businesses away with regs, rules, taxes, affirmative action, minimum wage, etc.

    Sorry, but I just don’t buy the Big Bad Capitalists Don’t Pay a Living Wage line. If you don’t like the pay, don’t take the job.

  • roger the shrubber

    3legdog, we're probably mostly on the same side here. i'll be the first to grant that. but as to all those ridiculous rights and concessions the auto unions now enjoy, do you suppose they all just happened all at once? that management just one day decided to say, "ok, guys, take anything you want."

    nope. they happened in small, regular increments. the UAW would ask for something maybe 5% sweeter than they used to have. **now, this is how GOOD management deals with problems like this:** 1) they say "no", and then don't instantly back down (like GM was notorious for) when the union guys made frowny faces. 2) if a business decision is made to grant those concessions rather than endure a strike, GOOD management insists that that 5% sweetening be accompanied by 5% improvement in productivity. it's called 'negotiation': "ok, we'll give you this, but in return, you'll have to give us that." again, something the gutless auto companies didn't bother to do.

    effective management of a unionized workforce is dependent upon implementation of a systematic routine of constant confrontation. this is unpleasant sometimes, and takes a lot of work. but it must be done: otherwise, management allows a precedent to be set, a precedent that is detrimental to the company. i've read in several places that the big 3, GM especially, had policies that were the exact OPPOSITE of this: IOW, their policies were to *never* do the only thing that worked when dealing with a unionized workforce. when a GM VP running a factory locked horns with the union guy there, GM transferred the VP out. "we might not make quota if this continues! our bonuses depend on us making the quota!!" IOW, they caved like little bitches.

    naturally, self-interest being an integral part of human nature, the unions took advantage of management's cowardice and naivete. pretty girls take advantage of ugly guys who are obviously desperately in love with them. rich men take advantage of pretty girls who need money. that's life. still not seeing why unions doing this constitutes "the reason the big 3 went broke", and management's gutlessness and astonishing ineptitude is given a pass. 'job banks' didn't spring up overnight. management *agreed to* them. but i'm supposed to blame the guys who were MUCH better negotiators than the clowns who gave away the store?? why then is neville chamberlain so universally despised?

    as for the container revolution, MHeiss, i have no doubt you're right. that's where my contempt for government comes in. their inaction in the face of a hugely declining manufacturing base and the 'container revolution' was to shrug, and go to lunch on the ol' expense account. surely, they could have done SOMEthing. tariffs are out of favor these days, so how about.....say....tax credits for small and large companies for every american job they create? that might have helped - but we'll never know, will we. congress passed a law awhile back punishing american citizens who leave the country - something ridiculous to the effect that if you go, you still have to pay the taxes *you would have paid* for the next 5 or 10 years. why couldn't they do the same to american corporations? "if you ship jobs overseas, you're on the hook for huge taxes"? that might have helped. they could have tried to promote our exports: michael crichton wrote in 'rising sun' that japan's policy on imported american cars (popular with the yakuza, for some reason) is they each have to pass a rigorous, time-consuming "safety and mechanical inspection" that takes several hours, right there at dockside. every single one of them. what if we were to pass a law mirroring that policy for japanese cars? think that might loosen up barriers to american exports? what if we were to insist that all chinese imports must be accompanied by a bond/escrow account that would be used to pay for any lawsuits arising from shoddy product/poisonous ingredients? that might have prevented the "poison dog food" incident; or the "antifreeze in the toothpaste incident'. it might have helped all the folks in florida who have the chinese drywall pumping sulfur/methane gas into their homes - and who can't reasonably sue anyone, since the chinese company that made it was "sold" to 3rd cousin wu and that particular corporate entity no longer exists. that might have helped - but it never happened, did it.

    instead, we get screwed coming and going. the rust belt - that area of america once glowingly referred to as "the heartland" - is becoming a post-apocalyptic nightmare. real wages have stagnated for 25 years now. the banks have dropped all pretense and now openly admit they own washington; america turned from the biggest creditor nation to the biggest debtor nation in 20 years; good people are losing hope and see a dark future for their kids; we **buy key military components from the nation that openly admits they envision a war with us one day**, our government promotes and helps PAY FOR american companies to move overseas; our government absolutely REFUSES to protect or defend our southern border; and on and on and ON......

    and the wall st. journal and too damn many on the right - limbaugh included - are content to mindlessly chant "it's all the unions fault!", just like 1984's 'two-minute hate'. again: once upon a time, america was viewed as special and a great success because we had a large, fairly prosperous middle class. nobody else in the world could say that, but we could. it was a *good thing*. union wages played a big part in making that happen. when did that change? when did an economy that forces dad AND mom to have to work, and sometimes work 2 jobs, while the kids stay home and watch TV, become a desirable goal? when did shuffling financial papers around become better for the country than the actual creation of wealth - I.E., turning $100 of raw material and wages into $500 worth of finished product? when did state & city governments having to sell their assets and lease them back become wise? did i miss that memo?

  • Fred Z

    OK, bad management, bad unions, now what? Why do these towns die when the industry leaves? Why are they commercially poisoned?

    Or are they? Transitions take time.

  • roger the shrubber

    fred - in partial answer to your question, let's look at detroit: ground zero for what i've been bitching about this whole thread. detroit fascinates me. never lived there, never even been there, but i read. back in the early part of the 20th century, detroit was so well-planned, well-managed, and well laid out - and so beautiful - that it was proudly and enviously known as the "american paris".

    then, as we all know, bad magumba happened, and it all went to hell.

    detroit has 2 neighborhoods close to downtown: 'brush park', and 'highland park'. in the late 19th and early 20th centuries, these were detroit's version of upscale gated communities. business owners and prosperous merchants lived there, and the houses were almost - but not quite - mansions. still lovely and impressive as hell, though. then, time passed. as american cities are wont to do, the well-to-do folks moved out as newer, more fashionable neighborhoods were built, and brush/highland park became more middle-class and later blue-collar. by the 1940's (?), they were played out, and became largely abandoned.

    so there they were: block after block, mile after mile of (mostly) empty old houses, crumbling slowly and being overrun with 'ghetto palms' and filth-strewn streets. some burned on halloween night, but most just sat empty and wasted away. the city of detroit's response to this? they did....nothing, near as i can tell. (this is also pretty much the exact same response cleveland and buffalo and st. louis have taken to *their* problems, BTW.) you can google pictures of these neighborhoods, (also check out the neighborhood known as 'state fair', if you're interested), mostly they'll be found on blogs commemorating detroit's slide into 3rd-worlddom. by now, some 60-70 years after they were abandoned, most have turned to dust or (finally) been bulldozed - but the pictures from just 10 years ago are stunning. like looking at pictures of pompeii, or hamburg after the war. this also happened in downtown proper: empty, boarded-up 20-story skyscrapers. massive hotels, taking up an entire *block* - boarded up. michigan central (rail) station - a huge, massive, 20-story thing - left to rot. the (original) model T factory - left to rot. same with the gigantic studebaker factory. same with the massive, 40+ acre packard plant. sat there untouched and crumbling for **decades**. rumor has it they've (finally) started to bulldoze some of these ghosts, after only 30 or 40 years.

    transitions? in detroit - and most of the rust belt, as far as i can tell - the most significant transition seems to be how large and useful parts of what was once 'america's paris' are gradually returning to their natural state of empty grassland and/or prairie. (well, that and the school system transitioning to "worst in the entire world" status.)

    limbaugh and the 'wall st. journal' would have us believe this is all the fault of a blue-collar union. the same folks who once lived in those now-empty houses, bought goods & groceries from those now-closed stores, paid taxes to that now-bankrupt city and state. i remain a tad skeptical that a bunch of hourly employees had that much power. back in UPS management school - you know, that company that somehow gets great results from the belligerent and highly-compensated teamsters union - lesson #1 was simple and brutal: "every bad thing that happens on your watch - every single one - is a result of bad management, and **you, the manager** are at fault. blaming the hourly crew is nothing more than a whiny attempt to dodge responsibility."

    bad management killed the rust belt. simple as that. now we'll get to see how they do with healthcare.

  • Fred Z

    I was hoping my comment which would generate the answer, which is...property rights, which in Detroit are effectively gone. Capricious and arbitrary zoning / development / usage / taxation /labor rules for business or real estate destroy them.

    Detroit has been turned into a tribal fiefdom where property is worth what the local Democrat chieftain says it's worth. Who in his right mind would not leave such a place?

  • roger the shrubber

    agree completely with the 'democrat chieftain' aspect of big city failure, fred. IIRC, democrats also run the other post-apocalyptic nightmares of the rust belt, too: cleveland, buffalo, akron, st. louis, and all the rest, and have done so for decades.

    still not seeing how that translates into (detroit's) refusal to use their legal power of seizure/condemnation of abandoned property to bulldoze the miles & miles of empty houses, apt. bldgs., businesses and factories, though. i believe michigan central station was finally closed up & abandoned 25+ years ago. youtube says it's still standing. dynamite's cheap; scrap businesses will buy the steel and metals to be found within.....why the holdup? surely even a corrupt democrat chieftain can see it needs to be knocked down, and he could even cut himself in for a piece of the salvage action.

    then too, new york city is well-known for having "capricious and arbitrary zoning/development/usage/taxation/labor rules", and has had them for decades. NYC - at least until 15 months or so ago - didn't have 'detroit' disease, and was in fact a huge success. hip young 20-somethings like chandler and ross and rachel happily paid $20K a month to live in the village near a happenin' coffee house. why does (did) NYC thrive under the exact same kind of political & regulatory kudzu that you're blaming for killing detroit?

  • markm

    American manufacturing isn't gone. What are gone are the factory jobs with middle-class pay for skills that can be learned in a few weeks or less. Most of these jobs have either been automated away or moved overseas, whichever costs less. The low-skilled jobs that stayed in this country pay market value, generally barely above minimum wage. (That premium over minimum wage generally pays just for showing up on time every morning and otherwise acting like an adult.) The remaining low-skilled workers may or may not be unionized, but if they are, the unions are nearly toothless - aside from dying dinosaurs such as the UAW, the unions and nearly all the workers understand that when they get the workers a significantly better deal than their market value, the jobs soon won't exist.

  • roger the shrubber

    well, your post is certainly a succinct and accurate synopsis of the 'wall st. journal's' take on the situation, mark. here's the zillion-dollar question, though: while it's easy enough to intone "economic darwinism" and preach "up your market value" to the millions of blue-collar folks who once could aspire to the middle-class and now can't, was allowing all those factory jobs to be moved overseas a wise thing? a good thing? a desirable thing? was it *good* for the country, or *bad*?

    especially considering how rust-belt cities are failing and dying, costing the country many many billions of dollars in lost land value and taxes? considering how hundreds of thousands of american employees now make lower wages and pay less tax while at the same time using up much more social services? considering how, now that the idyllic/moronic dream of "we'll all be realtors or mortgage brokers or day traders" has crashed and burned, we now have an (actual) unemployment rate of 17% **that even washington admits will stay very high for years to come** because - obama's idiotic plots aside - because there's no longer any large-scale manufacturing to do the hiring, as they've traditionally done?

    is all that in the USA's best interest? i say no. it could have been prevented easily enough. corporations are by definition amoral entities, uninterested in anything but their own continued existence, bound reluctantly only by the laws of wherever it is they're located. so accept that fact. don't pass the law allowing for the creation of multi-national corporations that enabled them to dodge any & all national/social responsibilities. use a combination of incentives and penalties - carrots and sticks - to keep americans working at decent wages, and the factories to stay where they damn well were. seal the frickin' border and criminalize the employment of illegal aliens. doing business in/with the richest nation on earth is a *privilege*, and here in the real world, privileges go hand-in-hand with responsibility. why shouldn't the US gov't insist that corps doing business here do their hiring here? when did national self-interest become somehow unamerican?? the government has 10,000 tools at their disposal to keep american corporations and factories and jobs in america, and every right to use them.

    any or all of the above would have helped joe sixpack keep his job and his good paycheck. joe sixpack, american taxpayer, had the right to expect his government to do these things, and more, to protect him and his livelihood. **none of them** happened. not a one. joe's employer, and especially joe's government, *screwed* joe. they cheerfully & gleefully helped in the destruction of joe's hometown. they've essentially doomed him and his buddies **and their kids** to living poor from now on. THEN, in the ultimate "F.U." to joe and all the rest of us, they announce all this is JOE's fault. "joe and his union destroyed the economy!!" think that lie is good for the country to hear? talk to someone from detroit or cleveland or youngstown or flint and see if you can detect any hope or optimism for the future from them. (hint: you won't be able to.) this is a good thing? this is america????

    seeing my country turn into a place where joe & jane sixpack of the pennsylvania sixpacks both have to work 2 crappy jobs and *only* shop at walmart and can't save a dime or ever send their kids to a decent school, (graduation rate of detroit public school system: 25%. a kid entering the DPS system has a better chance of ending up in prison than of graduating), makes me sick at heart. it's disgusting; it's sickening; and it's *intentional*. i don't think that's the way this country was supposed to be - hell, it sounds like something coming out of frickin' zimbabwe or lebanon or albania or someplace similar. and i'm about tired of people talking about this stinking criminal **travesty** like it's normal or desirable or moral, and worse, blaming it all on the guy getting screwed and his union.

  • Scott

    roger the shrubber:

    Roger, I spent a career in the military and spent quite a bit of time in places like the Phillippines. It's been a while but at the time locals would visit our bombing ranges to collect scrap metal. A dangerous pursuit to say the least. The scrap metal turned up later has homemade knives, machetes, and the like for sale in local towns. Last I checked, 150 of the top 500 global companies were US owned... We have Apple, Intel, IBM, Boeing, Mcdonalds...Imagine life in most countries around the world. In particular, places like the Phillippines where no such industry exists. What I'm getting at is that America is still the land of opportunity. We have lost a lot over the last decades but our standard of living is still the envy of the world. Instead of pointing out the negatives of dead and dying industries I suggest looking for new opportunity. If it does not exists in your area then moving might be the best course of action. Instead of decrying lost industry, open your own shop making the latest widget that the world needs. The first and only BMW I ever owned, I sold to one of the orginal "boatpeople". Remember, those that escaped Vietnam on boats? This was in the mid-eighties in Southern California. This guy came to a foreign country and a decade or so later through hard work, I think he ran a landscaping company, he was buying a near new BMW...That is the American dream...That is why millions of immigrants over the decades have come to this country...And, they still come.

  • EricP

    I couldn't care less why some old buildings haven't been torn down, maybe the locals should ask the mayor. What it comes down to is that some people expect to get paid well doing jobs that take a week of training to do or that it might take a month or two to train a monkey to do. Blue collar workers who are willing to put in some time can make more than white collar workers easily. I'm head of software development for a large international company and one of my neighbors is a plumber and another is an electrician. I make more than them, I'm sure but not hugely so. Do you realize how much a trained mechanic makes? My uncle is in refrigeration and does well enough to own a building and rent out apartments.

    The fact is that the areas that have biggest employment problems are the ones that create the most obstacles to creating new businesses or create the most restrictions on business operations. At some point, someone with more time on their hands will map the number of pages of legislation versus economic development and unemployment. I think we'll see some pretty direct relationships.