Industrial competitiveness

[vol_scouter]

Over the last 50 years or so, we have witnesses a continuing loss of both heavy and light to other countries. As a country, we have increasingly become a service oriented economy which is an economy that makes nothing. There are many reasons for this. Clearly cheap labor elsewhere is a major factor. American consumers typically buy on price alone instead of overall quality. The major export that we sell is intellectual property from research and development as well as entertainment. Even entertainment is being challenged by Bollywood.

 

In the mid 1980's, MIT was asked by the federal government to study and determine the root causes along with potential solutions (as usual, the government paid millions for the study and ignored the conclusions). The study was covered in "Scientific American" (a once proud, interesting, reliable, magazine and now just a political rag). One of the issues that stuck in my mind was the problem that the US stock market presents. They pointed out that the companies responded to the stock market which rewards quick increases in value and punishes long term goals for market dominance. This is driven by retirement plans that are always looking for short term gains. The article compared and contrasted stories about American companies compared to foreign counterparts. The US often made innovations that would lead to long term market dominance that were sold to foreign companies to receive immediate stock market increases. Those foreign companies then went on to dominate the market.

 

Obviously, the post WWII dominance due to the decimation of much of the industrial world would not last for ever. However, it seems that the US is one a negative slope and the rest of the world is on a positive slope. The US needs to be on a positive slope too.

 

So what can the US do? US basic research is being eclipsed in the rest of the world. Industry is leaving, especially heavy industry. How can this trend be reversed?

[Eagle92]

My thoughts.

 

1) Make it attractive for companies to remain in the USA. Whether that it reducing corporate taxes, tax credits, etc. if companies can either reinvest their earnings or pay their stockholders, they will remain.

 

2)Increase economics education at the HS level. There are folks who do not comprehend simple supply and demand economics.

 

3)get rid of the new healthcare law and start from scratch. If 111+ companies are getting waivers to opt out of it's provisions, including proponents of the new law like AARP, and various unions see http://www.hhs.gov/ociio/regulations/approved_applications_for_waiver.html You know it's a problem.

 

Heck if someone who's JOB it is to know all the various state and federal medical laws can't tell you what the new federal law actually says, you know there is a problem.

 

4) Union leaders need some common sense and actually work with companies. I'm from a union family, and there are a lot of problems with senior leaders. I have read and heard of abuse from union leaders, and know of one company that shut down completely because of a union.

[Nike]

We need an industrial policy like Germany's that nurtures and maybe even gives a leg up to small & medium sized privately held companies. We have tons of small, precision manufacturing in Germany employing 10-70 people. Unions and management here also understand that they have to work as partners and not adversaries.

 

[GernBlansten]

Wanna be competitive against China?

Eliminate the minimum wage.

Eliminate child labor laws.

Eliminate environmental laws.

Eliminate health and safety regulations.

Eliminate collective bargaining.

 

That would make us competitive again and bring us back to the good old days when we dominated the industrial world before 1920.

 

[vol_scouter]

Gern,

 

Surely all of those Ivy League educated liberal politicians can figure out some way to become more competitive without returning to a time that none of us want. Many of the health, safety, and environmental standards could be relaxed without a significant impact. By the way, I noted that we were dominant after the Second World War and we had collective bargaining, some environmental standards, some health & safety laws, and child labor laws. You sound like someone who hates that the USA has been successful. The left seems to always make a ridiculous emotional argument so that they never solve problems - only make most worse. The republican party is not much better but I have so hope currently.

 

So can the left offer any constructive ideas?

[GernBlansten]

What Would Sarah Do?

[packsaddle]

Take a look at the list of names for the most recent batch of Rhodes Scholars from the USA. As a proportion of the overall population there is a disproportionate representation of students from families who recently immigrated. To me this indicates one of the problems...a growing anti-intellectual culture in this country.

[Eagle92]

I would go further than anti-intellectual; it is a "gimme, and gimme NOW" society. Folks want things handed to them. When I was teaching, I had students expecting an "A" simply for showing up to class "because my job is paying for me to go to school." I have had students who do job shadowing at my work expect that the can go anywhere they want to go, at anytime they want to show up, wearing whatever clothes they have on. They expect to have everything set up in a few minutes notice for the next day, or even the same day they turn in their paperwork!

[NealOnWheels]

It seems to me that Gern has a firm grasp on reality. The US has a lot of regulations that cost business a lot of money. Asian businesses do not have anywhere near the regulations we have. And then we have to have "free" trade with them.

 

Even though Gern may be liberal, I doubt he hates that the US has been successful. I am very conservative and could not agree with him more on this subject.

 

If we are to be competitive we have three choices:

1. Eliminate our regulations.

2. Require trading partners to have similar regulations.

3. A compromise between 1 & 2.

 

If we cannot do any of those then we allow our dominance to wane.

 

[GernBlansten]

You don't bring a knife to a gun fight.

If we want to become industrially competitive, we must lower our standards to our enemy.

The slums of India, China, Indonesia and the Philippines must be our new standard of living for the worker class. We cannot sustain our current lifestyles and remain competitive with them.

[Beavah]

Yah, with packsaddle and Eagle92 I too am dismayed by the anti-intellectual, poor work ethic and entitlement culture in da U.S. Respect for the value of knowledge and hard work are a lot more powerful in the long run than regulatory challenges. Especially when many of those regulations result in having a population with a much longer productive lifespan and a potentially higher level of education and innovation.

 

Actually, though, if yeh look at the statistics, there has not really been a decline in American manufacturing. What there has been is a shift in American manufacturing. Manufacturing is more productive, which means it requires fewer (unskilled) workers. So as a percentage of the workforce, manufacturing has declined, but not in terms of output. Manufacturing has also shifted from heavy-concentration zones in urban areas (Detroit and da Rust Belt cities are the biggest example) to more distributed manufacturing closer to sources of reliable labor. So instead of having dozens of auto factories clustered around Detroit, we now have auto plants spread throughout the midwest and south.

 

So it's really a bit of a fiction that our manufacturing has declined. In fact, it's just become more productive and shifted. Unfortunately, that leaves the uneducated urban folks behind in de-industrialized high-poverty areas. U.S. manufacturing jobs now demand a higher level of education and skill, and some degree of labor mobility.

 

Yep, yeh can point to a few industries like steel that have dried up, largely due to mismanagement. That's what happens in a capitalist society, eh? If yeh don't fund your depreciation and modernize your mills, yeh can't compete.

 

And, interestingly, we receive as much or more foreign direct investment in American manufacturing as we make in overseas manufacturing. So even the offshoring is unclear, eh? For every Mexican Ford plant there seems to be an Indiana Subaru plant.

 

Still, I agree... free trade is a good thing, but it should be something limited to stable democracies with similar environmental and worker-protection regulations, or at least nations with a firm and demonstrated commitment to move in that direction. But I might be wrong, eh? There are others who would claim that free trade and industrialization naturally foments democracy and increased protections for workers, and I think that's also true at least to an extent.

 

Of course, limiting free trade to countries that have da same level of worker and environmental protections cuts both ways, eh? That would mean that we in da U.S. would be locked out of many free-world markets for our products.

 

Beavah(This message has been edited by Beavah)

[GernBlansten]

We are in a race for the bottom. Unless we have a level playing field, we cannot be competitive. If Walmart can source a widget for one cent cheaper than one made here, they are going to buy the imported one. Unless the sourcing nations follow the same rules we do here, we will always be more expensive and non-competitive.

 

As soon as we restrict our companies from dumping raw industrial sewage into our waterways, demand they put scrubbers on their smokestacks, require them to clean up their messes, recognize our human rights, we've lost the battle.

[Beavah]

If Walmart can source a widget for one cent cheaper than one made here, they are going to buy the imported one.

 

As well they should, if da quality of widgets is the same and the savings holds when shipping costs, breakage, currency, and political risk are factored in. That works for simple textiles and children's toys, mostly.

 

Note, however, that it doesn't work for grain farming. In mechanized farming, we are far more efficient, even if we were to scale back agriculture subsidies. Nor does it work for precision manufacturing.

 

In short, in da industries where we have made substantial capital reinvestment to improve efficiency, we can compete very well. While it may not be a level playing field in terms of environmental and worker safety regulation, it's also not a level playing field in terms of the education and skills and productive lifetime of the populace, either, and those things all run in our favor. So does the stability of our legal system and our culture of fair dealing.

 

Plus, in manufacturing, environmental regulation can be met simply by fixed capital costs; it tends not to affect (or even sometimes improves) variable costs. That's also true to a lesser extent in worker regulations.

 

So where yeh see the most whining about regulation, it's in da same industries that haven't been reinvesting in capital, and instead just milking what they have for short-term gains.

 

I think if yeh wanted to do one thing to really boost American manufacturing, it would be to eliminate quarterly reports, base executive compensation on long-term profitability, and put much higher hurdles in place for hostile takeovers and buyouts of well-capitalized industry. In short, make the incentive structure support re-investment in capital rather than faking short-term profit. Tax the crap out of short-term capital gains, keep the current tax structure on medium-term gains less than 5 years, and eliminate or phase out all capital gains tax on investment held 5 years or longer.

 

In fact, that's where I think da Republican trickle-down effect failed. Had we not deregulated the financial industry and created incentive through derivatives and executive stock options for wild short-term profit, we would have seen a lot more reinvestment of untaxed funds in capital development. But instead of going into manufacturing capital, the savings instead went into the financial markets.

 

Beyond that, a sound energy & fiscal policy that ensured predictable commodities prices and financing to reduce the risk of capital re-investment would be my second suggestion.

 

Beavah

(This message has been edited by Beavah)

[CalicoPenn]

We should figure out a way to minimize or eliminate 3rd party stock analysis as well. Too often, a company meets or exceeds it's own sales/profit projections only to lose value because it failed to meet the sales/profit projection of some analyst with an MBA and no real hands on experience in the business. I can't stand listening to analysts from Goldman-Sachs, or some other investment banking form pontificate about how some company should be able to do much better than what they say they're able to do. Hey analyst - if you're so smart, then why aren't you running one of these companies? Let's be honest - because they would fail - epically.

 

 

[Basementdweller]

We the people are to Blame.

 

 

Got a story for you..... My uncle worked for Kelsey hays making brakes in Fremont ohio...... Made in America.

 

For years as I stepped up to the counter at the Napa or Autozone I have always purchased my US made brake parts. Last time I did they were 3X the cost of the cheap brand. The wife's van needed brakes I could not buy american made for her van at any price. A sad state for sure.

 

My uncle died from cancer years ago, so it is kind of irrelevant.

 

 

Everytime you walk into walmart and save a few dollars on something because it is made in china or bangledesh or africa you hurt our economy. read the labels on the apple juice in walmart for pete sake it is even made in china.

 

 

Most Citizens of the United States are to selfish to spend a little extra on Made in America. Oh I gotta save $50 bucks on brakes so I can by my son that new ipod.......or cell phone.

 

 

So what kinda car do you drive?????? is it Japanese or korean??????? Quality or not your choice matters. I don't need heated leather massaging self adjusting seats. what I need is affordable transportation.