Will Anyone Stand Up for American Industry?

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“Esau for one morsel of meat sold his birthright. For ye know how that afterward, when he would have inherited the blessing, he was rejected: for he found no place of repentance, though he sought it carefully with tears.” - Hebrews 12:16-17

Built from 1933-1936, the Bay Bridge linking San Francisco to Oakland was an engineering marvel of its day. A complex series of multiple spans, when it opened – six months ahead of the more famous Golden Gate Bridge – it was both the longest suspended bridge deck in the world and the longest cantilever bridge in the world. The western suspension bridge section, technically two bridges in one, had to settle for being only the second and third longest suspension bridges in the world.

The 1989 Loma Prieta earthquake badly damaged the Bay Bridge. The iconic western suspension span was seismically reinforced, but the eastern steel truss section required replacement. San Francisco wanted another iconic span, not just a functional one. A striking self-anchored suspension structure was selected and is under construction.

The dubious part of this new span isn't the usual matter of being way late and massively over budget - though it is - but where it's being made. The steel for the bridge is not being built in America but in China.

Why is this bridge being fabricated in China? The troubling answer, according to a lengthy article in the SF Public Press, is that no American company can do the job. America, a country that once pulled off the most audacious of engineering projects with panache, one that put a man on the moon in the 1960s, now can't even build a bridge to replace one it constructed with ease in the 1930s.

What's more disturbing, is that China can't really build it either – but we are teaching them, and paying for them to learn how.

When you drive across that new Bay Bridge, your tolls will literally be helping to finance the advancement of China's industrial base and the evisceration of America's.

I believe in free trade, strongly. I believe America can compete in a free market. But the United States is a country curiously uncommitted to industry. Other countries build, promote and protect industrial champions. They blockade their markets against American competitors. India freely sells us software and BPO, but passes laws to hamper Wal-Mart and other American firms. China demands many foreign companies do business there only through joint ventures, and transfer technology to local partners. It also intervenes to keep its currency artificially low. Many countries outright ban foreign involvement in many sectors such as energy. They view even their privately owned firms, many of which have close and corrupt ties to the state, as instruments of national and foreign policy.

These places see Japan as a model to follow, a country that used its closed market to build industrial champions, even in high technology markets. Perhaps in time the same problems that hobbled Japan – asset bubbles, debt, demographic collapse, or an inflexible economy – will similarly afflict these emerging markets. But by that time it might be too late for American industry. And those problems are just as likely to affect us as them.

This raises difficult questions about the future of America. Can we thrive as a purely post-industrial economy? Can we have a long term prosperous society built on little more than selling each other ever more exotic pieces of financial paper, creative consultancies, typing away at computers, serving up caffe lattes, and the like? Can we have a just social order as a two-tier society of only highly-paid elite knowledge workers and a low end service class, but not the robust middle class a manufacturing economy – along with agriculture and energy – supported?

Can America even retain its military industrial strength under such conditions? In the past, military technologies launched spin-offs to the commercial world. Today, the reverse is as likely to happen. Already the only major ship builders left in America are captive suppliers to the US Navy. Only the anomalous Jones Act has kept a tradition of small and medium sized commercial shipbuilding alive.

There's a positive reinforcement cycle at work. The less we manufacture, the less we can manufacture. We slowly lose the skills, the facilities, the institutions, and the culture that enable a robust manufacturing economy to thrive. Eventually, we won't be able to recover.

Maybe we won't even want to. The less we make, the less we want to make. As we become unmoored from our agro-industrial roots, we fail to see them as central to our national identity and frequently treat them with hostility. As Douglas and Wildavsky put it in Risk and Culture (1982):

A larger proportion of the population of working age was disengaged from the production process than had been before. The economic boom and educational boom together produced a cohort of articulate, critical people with no commitment to commerce and industry.

Increasingly, Americans have no personal experience with industry, and even no family experience with it. What was once common is just another niche, much like military service has become. This means most people have little familiarity or affection for industry, agriculture, or energy production. Many, especially urban dwellers, view most productive industry as a negative, as a source of blight where once others saw jobs and a strong tax base.

Portland provides the perfect example. It views its waterfront as prime territory for residences and recreation, but not for industry. As the Oregonian reports:

The question makes Jay Zidell uncomfortable. When will he stop building barges on the waterfront and start building high-rises? The room goes silent....Oregon power brokers have nudged the Zidell family for decades to do more with their prime Portland real estate...In the 1970s, Gov. Tom McCall called Jay Zidell's late father, Emery, to suggest he stop adding industrial buildings. As Jay Zidell has told the story, McCall said: "We have big plans for the waterfront."

Those big plans don't include manufacturing. Portland is the perfect example of where America is heading. It's a place where thousands of highly educated but often underemployed young people sip lattes by the light rail while on the waiting list for a job at Starbucks. Meanwhile people in third world countries, hungry for more, hustle to build an ambitious future for themselves and their nation. Americans increasingly view manufacturing as an undesirable activity, particularly in an urban context, when in fact we should be looking to build new industrial cities - updated, re-imagined, and re-designed for a 21st century economy.

Also, too often industry is viewed only as a source of pollution. Many industrial expansions are opposed on environmental grounds. But from a global, not local perspective, an ever stricter regime of regulation is sending firms offshore where pollution standards are usually far laxer. Corporations put a green gloss on their branding campaigns while building their products in China, where they get electricity from one of the new coal fired power plants that open at a rate of more than one per week. They also escape independent unions, anything like the Environment Impact Statement process in the US, and operate in a regime of weak property rights, questionable worker health and safety conditions, and a limited ability for the public to dissent. It's not just cheap labor, it's regulatory arbitrage. It's like inverse colonialism, only this time the joke's on the West. And the end result is a global environment that ends up worse, not better.

To really protect the environment, we should be doing more manufacturing at home, where we can keep an eye on it and prevent the worst abuses. It's like the Steak 'n Shake boast about their open kitchens: “In sight, it must be right”.

The sometimes exception to this negative take on manufacturing is, of course, “green” industry, notwithstanding that the concept does not exist except as a transitory state. In a decade there will just be “manufacturing”, and virtually all will adhere to green standards. But if America can't succeed at traditional manufacturing, why would anyone think it will be different with green manufacturing? Even if so, by then there might not be many major American producers left to succeed.

American firms and labor have made many mistakes over the years, but more often today they are adopting the new approaches needed to compete in tomorrow's world. American labor can compete, even against cheap foreign workers, since it is the best and most productive workforce in the world. But not when public policy implicitly favors shipping manufacturing overseas.

The answer is not protectionism, it's freeing American labor to compete and developing policies designed to advance American manufacturing interests. Alexis de Tocqueville talked about Americans knowing the difference between raw, naked self interest, and “self-interest well-understood”. Likewise, we need to find a new approach to create “free trade, well understood”, a modern day trade equivalent of speaking softly, but carrying a big stick. Billions for American infrastructure, but not one $4 Bay Bridge toll to finance China's technology ambitions.

Alas, this seems unlikely. American industry is trapped between a political right that can't see beyond instinctive anti-federalism and an overly ideological vision of free trade, and a political left that, while paying lip service to labor interests, no longer embraces industry. Almost alone among nations, America today lacks political champions for its industry. That, more than anything, is why it is being left to wither. Will anyone stand up and be counted before it's too late?

Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile.



















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Such bridges are considered

Such bridges are considered historic and world record holder of the longest cantilever and suspension bridge in the world. Its great to be a part of this country being the record holder of the longest suspension bridge in the world. I've been studying quality assurance certification in Texas and these type of information can help me in my research in bridge engineering.

As a business owner you have

As a business owner you have to look at it from the profit stand point. With how competitive things are in any industry price will be a definite attribute. By outsourcing they get it for much cheaper.

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Thank you for helping people

Thank you for helping people get the information they need. Great stuff as usual. Keep up the great work!!!
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Yes this country can't build

Yes this country can't build such things as bridges anymore; we also can't even fabricate manhole covers. The effectiveness of the Stimulus package was extremely mitigated by this country's reliance on imports. And this US citizen thus GM stockholder believes that GM should be given incentives to build streetcars and light rail vehicles in order to start meeting that nascent demand as well as improve our Heartland's industrial capacity.

The fundamental shift from a manufacturing-centric economy to one that's dominated by the service sector has pretty much led directly to the obviation of the middle-class and the fact that, today, one in five Americans is unemployed, underemployed or just plain out of work; one in nine families can’t make the minimum payment on their credit cards; one in eight mortgages is in default or foreclosure; one in eight Americans is on food stamps; more than 120,000 families are filing for bankruptcy every month; more than $5 trillion in pensions and savings have been lost.

"Can we thrive as a purely post-industrial economy?"

No.

David Parvo
Most Senior Fellow
The Placemaking Institute
http://placemakinginstitute.wordpress.com

A long addendum

Just remembered that I wrote something about this about a decade ago: "Beginning in the 1970s, with the U.S. reaching its peak oil production output plus the nascent economic threat of the Asian Tigers and, later, the world at large, U.S. firms began to cut the cost of production in order to be more efficient and thus remain as competitive as they had been since immediately after World War II. One of those costs they reduced was the cost of labor. From 1970 to 1990, while mean rents increased by 350%, mean incomes only increased by 180% - a discrepancy that was exacerbated and only keeps being exacerbated by the industrial shift away from manufacturing toward the high-end service sector. This kind of society cannot effectively house itself (and unfortunately nor does it really care, due to the Horatio Alger myth and such things as the lottery, wherein people are conditioned to believe they can pick themselves up by the bootstraps and/or otherwise retire early filthy rich, when statistically this is very much not the case)."

Wendell Berry: "The 'law of competition' does not imply that many competitors will compete indefinitely. The law of competition is a simple paradox: Competition destroys competition. The law of competition implies that many competitors, competing without restraint, will ultimately and inevitably reduce the number of competitors to one. The law of competition, in short, is the law of war."

John R. Logan and Harvey L. Molotch: "The real consequence of governmental fragmentation is, not the realization of place-based democracy, but the ability of self-interested elites (either business groups or affluent residents) to control governments in order to pursue their own goals [. . .] In the U.S. today, communities are encouraged, even by national policy, to compete like business enterprises, to attract business enterprises, and to externalize the costs of this success [. . . by displacing] other values and concerns, such as the role of the polity in helping people find greater satisfaction in life, the role of government in building a strong community, or the role of government in caring for the disadvantaged [. . .] Not only are the poorer citizens out of sight and out of mind, they lack even legal standing to demand wealth and service redistribution...In many cases, probably in most, additional local growth under current arrangement is a transfer of wealth and life chances from the general public to the rentier groups and their associates. Use values of a majority are sacrificed for the exchange gains of the few. To question the wisdom of growth for any specific locality is to threaten a benefit transfer and the interests of those who gain from it."

David Parvo
Most Senior Fellow
The Placemaking Institute
http://placemakinginstitute.wordpress.com

The Growth Machine

David - I remember the work of John Logan and Harvey Molotch well. Their "growth machine" thesis was quite influential in the early 80s and, as you have noted, provided an explanatory framework for how developments that only benefitted a few were justified and cast in the light of benefitting the many. As for myself, David Harvey's notion of territorial alliances competing for growth resonates just a bit more. In either case, I still find any and all issues related to the competition among places fascinating on a daily basis.

We need clawbacks

Delore - Oh man, competition among places is the most fascinating thing; in a sense, it fuels my art. And actually in fact, for a formal thesis I did something along the lines of Harvey's work and based on the principles of correspondence and subsidiarity. I quote: "Based on these two principles, regionalism might very well be able to deal with the negative externalities of economic development in a manner more efficient than our contemporary governmental form"....if you're looking for your daily fix of place-based competition, this here post of mine received a comment that triggered a relevant response: http://placemakinginstitute.wordpress.com/2010/01/11/all-austin-has-to-d...

This one also contains some more subject matter: http://placemakinginstitute.wordpress.com/2010/01/15/a-truer-cost-of-spr...

And these folks are doing great work quantifying the ramifications of such growth strategies: http://www.goodjobsfirst.org/publications/index.cfm

Cheers,
David Parvo
Most Senior Fellow
THE Placemaking Institute
http://placemakinginstitute.wordpress.com

Chicken Little

Mr. Renn's opinions are thoughtful and deserving of a considered response. They are not, however, new. Nor do they do justice to his own claim of "discarding old stereotypes." Americans have been bemoaning the loss of treasured economic models at least since Jefferson railed against manufacturing at the expense of our agricultural economy. In 1987, Berkeley Professors Cohen and Zysman dedicated a book to the subject ("Manufacturing Matters"). And more recently, as Mr. Renn points out, it has been much on the mind of the current administration.
The facts, however, tell a very different story. While manufacturing employment has fallen dramatically in the last fifty years, productivity has skyrocketed. We are, as a nation, better at producing things than we have ever been. The Bay Bridge story begs a score of counter-examples, ones where foreign companies come to the U.S. precisely for our manufacturing expertise.
More importantly, the kind of manufacturing that we see fit to have done elsewhere is often neither profitable nor does it open new technological opportunities. As long as other countries have lax environmental regulations and dismal working conditions (to say nothing of low wage structures) our old-line manufacturing companies cannot be competitive, nor should they try to be.
Mr. Renn would do well to revisit the dramatic wealth-producing engines of current technology and ask himself whether he would rather work at Google or for a Chinese foundry. His answer will go a long way towards predicting the interests not only of our own students, but of those of China as well.

An off the shelf economy is unsustainable

Aaron: you have touched on many elements of this conundrum that ring so true. Recently I have been encountering more and more instances where businesses and researchers (both university and corporate) boast that their products and technologies are made from off-the-shelf components. We are, I suspect, moving more and more towards being integrators and assemblers. While that is an admirable and most likely a great capability to possess it leaves us at the mercy of others who are actually making things. A particularly troubling example that I heard about recently is that nobody in the US makes filters for respirators that are used in intensive care units. If there were a serious worldwide H1N1 pandemic, for example, the US could rely only on the inventory in hand since it is possible that exports of the filters from countries where they are produced would be limited. I suspect these kinds of vulnerabilities are lurking in many different areas.

Thanks for the comment - and

Thanks for the comment - and that's a great example.

I certainly don't believe we should be self-sufficient in every commodity - not by a long shot. But clearly there are national security and emergency aspects to this that we need to consider.

Following Japan?

I find it unlikely that China or anybody is following Japan as a model. After all, look where Japan is now. And surely its trade and industrial policies played a significant role in getting it there.

I suspect China is subsidizing its steel industry, which for the moment makes them ultra-competitive. But there is only so long that a mercantilist trade policy can keep working. After all, "taking a loss on each item but trying to make it up in volume" is a proven loser.

In the meantime, if the Chinese taxpayer wants to subsidize our Bay Bridge, then more power to them, I say.

But Mr. Renn is right; we need to eliminate anti-competitive and stupid regulations here.

The need for reindustrialization

Thanks for the excellent post. You're thoughts on this critical subject made me think about comments that a local (Milwaukee) CEO made late last year regarding the need for a robust US industrial policy.

Link to article here:
http://www.automation.com/content/rockwell-automation-endorses-creating-...

"According to news reports, the Obama administration "wants someone who wakes up thinking about manufacturing policy."

We'll see...

Will anyone stand up for American Industry

One thing is certain.
If the US continues to agree that carbon dioxide is a pollutant and hence must reduce its use of fossil fuels and anything else that generates greenhouse gases (which includes belching ruminants such as cows if the mad ones have their way) this process of de-industrialising America will proceed even faster.

Owen McShane, Kaiwaka, New Zealand.
Director, Centre for Resource Management Studies.
http://www.rmastudies.org.nz/

Will Anyone Stand Up for Agriculture? or OMG THE SKY IS FALLING!

Since 1930, the Agriculture's share of the American GDP has plummeted by over 90%, and the share of the work force has plummeted by over 95%. Do we even know how to grow food anymore? Perhaps if you wrote in 1940 or 1950, you'd have written this:

Increasingly, Americans have no personal experience with agriculture, and even no family experience with it. What was once common is just another niche, much like military service has become.

This raises difficult questions about the future of America. Can we thrive as a purely post-agriculture economy? Can we have a long term prosperous society built on little more than selling each other ever more exotic pieces of inedible steel, creative gizmos, typing away in offices, serving up factory foods via automat, and the like? Can we have a just social order as a two-tier society of only highly-paid skilled factory workers and a low end service class, but not the robust middle class an agriculture economy – along with lumber and canals – supported?

Actually, we appear to still

Actually, we appear to still have vast amounts of agricultural production and expertise. We are still the world leaders in agricultural technology and it is American companies like Monsanto that are still world dominant. In agriculture it is other places like the EU that have over-regulated (for example, by banning genetically modified crops) while the US has maintained a permissive regime. The US has also protected (overly protected, frankly) its agricultural industry through a vast collection of subsidies, tariffs, and rules. If, in fact, we couldn't grow our own food, it would be considered a major political issue. Also, humans only need to eat so much and there are only so many staple products in our diet, while there is still significant innovation in the types of manufactured goods, moving on to totally different typologies. And we are seeing significant local and specialty production of agricultural goods and foodstuffs - the exact sort of things I advocate for manufacturing as well.

Clearly, many countries do care about their ability to be relatively food self-sufficient for matters of national security. They don't base their decisions on agriculture around purely comparative advantage logic.

If the US approached manufacturing like it did agriculture, things would in fact be quite different, though I wouldn't advocate the same approach.

There are two separate but related problems: the decline of manufacturing capacity and the loss of middle class jobs. I accept the fact that productivity will mean the loss of many jobs in the manufacturing sector. It will never be employment dominant again and will continue to bleed share of jobs. I'm more concerned about industrial capacity and technology. It is naive to believe we can simply outsource manufacturing and other countries aren't going to try to climb up the value chain. As an additional benefit, as we retain core manufacturing capability, capacity, and technology, there will be some jobs benefit, but obviously we're never going back to yesteryear.