First 100 Days: Manufacturing a dream and a recovery

January 19, 2009

Scott_Paul– Scott Paul is executive director of the Alliance for American Manufacturing (AAM), a labor-management partnership of several leading U.S. manufacturers and the United Steelworkers. The views expressed are his own. —

Barack Obama knows the story of American manufacturing firsthand. He cut his political teeth as a community organizer on the South Side of Chicago in the shadow of shuttered steel mills, working to salvage hopes and dreams that had been crushed by the weight of layoffs and economic decline. As President, he can authoritatively recall America’s industrial heritage and decline, but more importantly, Obama can lead the nation to a renaissance in American manufacturing.

Manufacturing has boosted the American economy, jobs, and wages for generations dating back to World War II. Recently, it has fallen on very hard times. Nearly one in four manufacturing jobs has vanished since 2000, and 40,000 factories have closed since 1998. Last year, manufacturing accounted for nearly a third of all lost jobs in the U.S., while factory orders plummeted to record lows.

The health of manufacturing is important even for those who do not hold factory jobs. That is because manufacturing jobs pay better wages than other forms of employment—twenty percent above the U.S. average. Manufacturing jobs also have a stronger multiplier effect—supporting as many as five other jobs—thus contributing disproportionately to the economy. Manufacturers are large local taxpayers, supporting vital public services and schools in communities across the nation. American manufactured products tend to have a much smaller pollution footprint than Chinese products, and we are already deploying new technologies to compete in the clean energy economy of tomorrow. Finally, our national security depends on a strong defense industrial base to supply our troops and protect our interests.

If the creative destruction of capitalism and the arc of history were responsible for American manufacturing’s steep decline, there would be a legitimate debate about whether or not it is worth saving. But public policies have contributed tremendously to the predicament we now face; smarter public policies can get us on the path to recovery.

Wall Street’s woes and the collapse of the housing bubble bear some responsibility for manufacturing’s current condition. Credit markets and consumer demand have dried up, idling factories all over the nation. A substantial, strategic, and sustained economic stimulus package is needed for the overall health of the economy, as well as to boost manufacturing.

The stimulus should focus on investments in infrastructure such as mass transit, a smart energy grid, roads and bridges, which not only provide the greatest return on investment for American taxpayers by generating more jobs and economic growth than any type of tax cut, but will also make us more competitive in the long run. A sizable stimulus that includes a $148 billion annual new infrastructure investment can create up to 2.6 million jobs, including more than 252,000 in manufacturing. But manufacturing job gains are reduced by one-third unless all infrastructure materials are sourced domestically.

Dramatically reducing America’s trade deficit—which stood at a record $700 billion in 2007—will also boost manufacturing. American workers and companies often face global competition subsidized by governments, as well as violations of intellectual property, disregard of reasonable labor laws, and non-enforcement of environmental regulations. Governments such as China’s artificially lower the value of their currencies to gain a trade advantage. Simply enforcing domestic and international trade laws designed to ensure a level playing field, while ending subsidies and currency misalignment will boost our exports, reduce our trade deficit, and create jobs.

If Obama delivers on a manufacturing agenda, every American will benefit. He will also offer a new generation of Americans the same opportunity as their parents and grandparents had: to achieve the American Dream and join the ranks of the middle class.

94 comments

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Manufacturing is absolutely required if we import. Simply, in the balance, we must maintain a net zero balance of imports and exports or money simply flows out of the country. Service jobs do not provide a product that can be exported. As long as we purchase imported manufactured products, we have to export manufactured products. There is simply no way around it.

Posted by John Fitzgerald | Report as abusive

You can see by the response this struck accord,we have been building up china and other countries with grants for higher tech machinary to produce textiles to steel only for their cheap labor or they will not be worth it for multinational companies.If we put that investment into our own manufacturing base we would not have the trouble that has been created by outsourcing,A strong america is a stronger and safer world and you can see that with americas decline that the world has prosperd by without us strong and earning strong they will not be able to servive as is being proven now. .The rules made by the wto are not what our forefathers would have agreed to.To help other nations we need not lose our wealth in the process.If you want to help a homeless man you do not put yourself in the street and he in your home.If the leaders of the United States does not put the American people first,the ones they are sworn to protect,then they should be held for treason and put in jail for a min time of 20 years.That would stop the outsourcing for good.

What makes this author think that Barack Obama knows the story of American manufacturing firsthand? Further, why does a majority of the media think that Obama knows the answer to our country’s problems? He is only a smooth talking politician with no real work experience. There is a real danger in handing over the keys to this man and his planned big governent programs. Are we all brainwashed by the idiot TV shows we watch and the empty news programs? The Federal Government is suffocating this country and it is only going to get worse under Obama. I know what is best for me and my family, not Obama and the Federal government.

It’s too late to salvage American manufacturing. It’s gone, or, as the Anti-spam security word suggests, TOAST. Or, at least, manufacturing of consumer goods is gone. There’s no way American labor will accept the Chinese wages, so the goods are not competitive. The only way to make them competitive is to slap tariffs on the Asian imports. Can anyone spell “WTO”?
You might ask how European and Japanese manufacturers survive? The answer is that they moved upmarket. European clothes and shoes and cars, Japanese electronics and, again, cars are luxury imports, they’ve become status symbols. Can you name one surviving American luxury brand? Cadillac? Struggling to stay in business, and positioning itself as poor man’s BMW doesn’t help either – luxury buyers buy on prestige first, and price distant second. Europeans that could not make it up the food chain are struggling just as badly as American manufacturers.
The only American manufacturing that not just survived, but is alive and well and has real chances to make it into the future is in the areas where quality and tradition still counts, and American makers are known for that. Weapons, Boeing civilian aircrafts, Caterpillar heavy machinery, some UT and GE businesses – that’s where American manufacturing has positions worth defending, and most of these are not in consumer goods business. These businesses are really worth of gov’t support. But these businesses alone can’t create nearly enough jobs to make a noticeable difference.
Autos are one big question mark depending, firstly, on UAW lowering their compensation demand to that of foreign makers, and secondly, on the companies coming up with cars that the buying public would actually prefer to similarly priced Japanese models. For that, American auto makers must offer models head and shoulders above in quality and features for less – sorry folks, reputation, just as credit, is easy to squander and hard to build. Too bad Detroit credit with the customers is far from that of Toyota and Honda – not even speaking about the German makers.
The jobs that still can and need to be protected are way up the food chain from manufacturing. It’s IT, biotech, pharma, health care – in other words jobs requiring higher education. These are the jobs currently being exported overseas, or being outsourced within our borders to cheap foreign workers. Don’t believe the execs demanding more H1B visas because they can’t fill positions. There’s no lack of qualified computer programmers, there’s lack of programmers willing to work for $20/hr without benefits. How to do it, and not violate WTO or some bilateral agreements? That’s THE TASK for Obama and his team.
Here I must make a disclaimer: I voted for McCain. I didn’t believe in Obama as the shepherd of our economy. I still don’t. But, despite that, I hope.
What I wish to Obama on the eve of his inauguration? To give me, and all other voters, a reason to vote for him in 2012. And that reason would not be rousing speeches or even foreign policy triumphs. Not even the end of Iraq war or a victory in Afghanistan. “It’s the economy, stupid!”

Posted by Anonymous | Report as abusive

I agree we need to get back to making products and we can compete if given a chance. I would rather pay a little more for a product–I look at the tag to find out where any product I buy is made and I do all possible to buy USA made products. I will go to all lenghts not to buy China made products.
I have looked at several stores to find a pair of jeans or a shirt made in the USA. I do it all the time and will do it until the day I die.
I have made my living here and will support all the others who make their living here.
I have made in America products on my computer and still check out the product before I buy.
You can call the town, city or county where they say it is made–call the chamber of commerce or the city clerk or whoever and find out if the plant is still in operation there–many times they will say it is, but has closed.

Posted by C. K. Justus | Report as abusive

There is one comment that is very charming and very wrong. We are not in an American renaissance. This may be a country where one isn’t stopped by paramilitary police thugs, but that’s because they are so much more high tech and even elegant now. Take a walk around Times Square and many other streets in major cities and look at the cornices of the buildings and along the rooftops or along the building edges and corners. There are more spy cameras than there used to be pigeons. You only know they are cameras because they don’t move. Many American cities and most of the big box stores even the boutiques are loaded with surveillance cameras. They’re all a gift form our high tech friends. We are a country glutted with spy ware and it isn’t just watching the hard drives of our computers.

WE don’t need such obvious signs of a dominant hand. The eyes are always watching. Mooo, Bahhh, Meow but never ever bark. But I suppose one could call it all “user friendly”? Le charm descrete de bourgeoisie.

We are also a society that could slip into the same condition that so many Latin American countries used to experience. We are a very anonymous society and most bedroom communities are very transient. We could easily pass into a system where people “disappear”. Wasn’t that one of the fifties nightmares? It’s even easier now with our gated communities of barely interacting “neighbors” and certainly easy in a country scared of terrorists around every corner. Isn’t that the point of all those motionless pigeons?

Posted by paul rosa | Report as abusive

The only reason why things are manufactured abroad is because it’s too darn expensive to make it in the USA, plain and simple. This article is a joke as it implies all problems would go away if we just started up the factories once again and kept the entire supply chain domestic! For those who only buy Made in USA consider yourselves privileged enough to do so but don’t believe for one minute that’s the answer. The funniest statement in the article: “That is because manufacturing jobs pay better wages than other forms of employment — twenty percent above the U.S. average.” Anyone with no education or experience can typically do manufacturing jobs yet they’re paid 20% more than the normal work force. Anything more needs to be said? BTW, look at the auto-industry, another manufacturing industry going to hell.

Posted by John Smith | Report as abusive

To alex crudello

The WTO has been led by the US, most of what comes out of that organization has directly been influenced by the Bush administration.

It is very cleat that the situation were living nowadays is the result of our foolish policies. No need to be a rocket scientist to know that public money spent to help companies shipping jobs abroad will lead to unemployment and deficits…

The federal government did put lots of energy signing free trade agreements with countries that used to be called ennemies not long ago, communist China is providing low quality goods in order to have high margins for our corporations at the cost of US manufacturing jobs. Wouldnt it be time to help factories that stay in the US and slap all these delocalizing with heavy taxes ?

Who cares about the WTO ? US made it, US will break it by simply taxing all imports again, especialy with countries not playing by the rules.

Posted by jack | Report as abusive

A bit lofty I think. Out of all the things you mentioned on Obamas list, leveling the playing field with money adjustments when it comes to foreign currency and ours such as the cute thing we’ve been doing with the Japanese since the end of WW11 is the best idea But, too many fat cats have vested interests in keeping things the way they are and, this will never be done. Sorry but, one school boy is not going to change the way the mafia does it’s business. And, yes, by (mafia) I mean big business, congress and, the senate. No one can ease the the one hands grip around our throat let alone get the other out of our pocket. Nice thought though.

Posted by Mike Mckee | Report as abusive

Low wages off shore are only part of the problem, and not the major one either. Asia does not bother with things like EPA, OSHA, over time, trial lawyers, building codes,QC,patent licensing, etc,etc. Negotiations will never change that, because they have no incentive to change. They will promise what ever is asked and then continue business as usual. As long as non-US corporations (ie. multinationals like duPont,GE, GM, HP and all the others) can import at will and avoid US regulation, they will. I would propose a tariff on all goods imported from those countries that do not adhere to regulations comparable to those in the US. I would also propose a countervailing tariff on those countries which run excessively large trade surpluses with the US. Dump the WTO; it has done nothing to benefit the US.

Posted by george | Report as abusive

\”American workers and companies often face global competition subsidized by governments, as well as violations of intellectual property, disregard of reasonable labor laws, and non-enforcement of environmental regulations\”

\’disregard of reasonable labor laws\”. This is surely a joke.

I am from India and I can assure you that in my industry(IT) the labour conditions are better than any other country. So i do not get it when the author says \”disregard of reasonable labor laws\”.

Also just because china is a communist does not automatically mean that labour conditions are bad there.

They may not be up to american standatds but compared to developing world standards they are certainly good and improving.

I think the artcile stinks of \”protectionism\”.

It is trying to save the jobs of those who want to be paid 20% more than the average without contributing anything extra
at the cost of those
who are getting 20% less than the fair value and yet are striving to better themselves.

I dont think Mr Scott needs to be the saviour of asian labourers.

Posted by rohit | Report as abusive

here in the Bronx, NY a one bedroom apartment goes for $1000-$1200 per month–the neighborhood is lower middle class with probably %30.00 on welfare—explain to me how you are going to create jobs that bring in $2000.00 or more per month?

Posted by peter lener | Report as abusive

Do you include weapons manufacturing in your figures? Doesn’t this bring a lot of money to workers? Or does it?

Posted by anne | Report as abusive

President elect Obama has no clue about manufacturing.
He lived in Chicago and worked on the south side. If you know anything about the south side of Chicago you would know that the steel mills are in East Chicago and Hammond,
Gary area.

Bright boy don’t believe everything you read.

Posted by Dave Hamlin | Report as abusive

Our economic situation is not going to greatly improve until we end “Free Trade”, pull out of the WTO (how a communist country could be allowed to join the WTO is beyond all understanding) and restore American manufacturing. Manufacturing is the only REAL creator of wealth.

“Free Trade” is a swindle!

Posted by RFL | Report as abusive

Sounds great!!! But what do “we” the manufacures do now. We cant stay in business if no one is buying.

Posted by Maggie | Report as abusive

We can and we should improve and increase our manufacturing base over time. Our manufacturing base is important if we want to make it easier for poor people to become middle class over time and want it to be easier for people who are middle class now to stay middle class. Our manufacturing base is important to our national security, economic growth, and our ability to reduce the national debt over time.

Companies that make products in our country may cause less air pollution, water pollution, and land pollution on our planet than companies that make products in China. The greater the distance an item travels from place of production to final destination the more water pollution and other types of pollution that may take place.

Businesses especially small businesses need capital to stay in business. The federal government should stop taxing interest from savings accounts, dividends, capital gains, and estates. Businesses may have an easier time obtaining loans and investments for hiring workers, research and development, and plant and equipment. Individuals and businesses may have more money to spend. Many middle class people, union members, and government employees who have mutual funds may benefit from capital gains and dividends not being taxed.

Congress should eliminate the Federal Reserve or veto many of its decisions. If the United States Senate wants a Federal Reserve decision to be vetoed, it should be vetoed. If the United States House of Representatives wants a Federal Reserve decision to be vetoed, it should be vetoed.

Congress should consider backing our currency with gold, silver, and other commodities.

The federal government, state governments, and businesses should spend more money on buses within cities, buses between cities, passenger rail, and freight rail. If people have an easier time getting to jobs and from jobs via buses, governments may be able to spend less money on food stamps and Medicaid. If fewer families need to have 2nd cars and 3rd cars, they could save money on auto insurance, gas, auto maintenance, and other auto related costs and have more money for other things. If the air is cleaner, fewer children may have asthma attacks and have to go to emergency rooms. Many parents may lose less time from work if they are able to take their children to emergency rooms less often. Our country may use less foreign oil and be able to spend less money on our military.

I have posted comments after several columns on http://www.newgeography.com that you may read by going to http://www.newgeography.com/users/kenstr emsky I discuss manufacturing and other topics on it.

My website is http://www.myspace.com/kennethstremsky

I graduated from the University of New Hampshire in 1992 with a BA Degree in Political Science and a minor in Economics.

I ran for United States Senate in 2002.

I have been in and out of “manufacturing” for 40 years and after reading some comments, am amazed. First for the more elitist and for want of a better term “service industry snobs” mfg does NOT mean dirty ole manual jobs. Doubt that goe visit a Boeing or Cat or Deer or auto as you have grouped the low tech-low education jobs with the hi tech higher education jobs. Go visit a real machine shop and talk about set ups, maintenance and cutting metal to 1/1000th or more tolerances. The jobs most envision from their service towers of mindless droid in cubicles that in truth require less skill, eduation and training then real manufacturing, doubt that one, check out exotic metals working, medical insts, and electronics. For those that enjoy slamming unions, go ask about what is required to enter and move up in many mfg area unions from entry to journey or master levels.. might stun you, more so as compared to the requirements for cubicle warriors.
Time we return USA to real MFG, not the image of creatures muscling heavy parts etc. Way back in 80′s saw this mess coming when the spin ministers started the “Dump the dirty jobs offshore (that paid well and crated the middle class) as soon we will all be using computers. The truth was the game was stop updating USA mfg plants,build stater of art offshore, get huge tax breaks and do away with tariffs on INCOMING, while rest of world keep tariffs way up on our exports, or changed them to “fees” not tariffs. To this day Japan “inspects” read takes apart for safety inspections” auto imports. China simply places fees on “Selected models” as such “encourages” they be built inside China, where by law China (“THE Commie government” some mention) must own more then 50% of firm and off course, unlike in USA that means at least 50% of cash generated remains in country. The profits stay there and to this day have yet to find ANY REPORT on dollar drain from USA by foreign firms in USA sending the profit dollars home, anyone solve that one?
But we can compete at world levels, but we must first get a better educated work force to build more complicate products, we must get the trade horror fixed, perhaps as simply as if we just respond in kind to other nations, our trade laws reflect their.. which would cause screams from those so very patriotic firms like WM, Target and most Corp USA.. that will hide behind USA flag as needed, but sell out USA as needed.
We need to cut the silly overhead that all to often burdens USA mfg and by that I mean more emphasis in updated hardware and less on overly manned support and reporting or as often called “Indirect employees”. We must replace this attitude only Neanderthal’s work in MFG and only the best and brightest work outside of MFG. What most simply cannot grasp is mfg was and is the engine that drives real economics, as you cannot simply shuffle or report on or manipulate data, numbers and as we found paper, and grow or even keep even. You cannot assign paper a value as you can a manufactured product, nor do you repair, replace, spare parts, maintain, after market etc service industry paper. We are now paying for that fiasco big time. I suspect if it was really examined that all to many with no degrees or simply English lit, lib arts ro business majors get a bit envious of wages paid in real skilled manufacturing jobs. Most in MFG are much more responsible and disciplined then their service paper peers. When most whine about “USA Made junk as unions did it” never were in a dirty ole mfg plant or they would KNOW that quality si a direct function of top management, NOT the workers and in their greed, all to often top end says :Get it out the door, file to fit and paint to match” and if workers want to keep job, they do as told. The foreign firms, like Toyota, award the workers with quality responsibility and as they grew are a lot less of the old corp where workers could stop the line to fix something as that is not longer a job security item now days.
WHen you slam the mfg world, your ignorance of econ 101 shows, as no economy cannot support itself just assigning value to paper and information is not a product that creat five or six other jobs to sell used info, repair it, after market it, or spare parts and installing them. Clean green hi tech mfg is what USA must go after, and the alternate energy field is wide open, so is things like high speed trains, wind and solar and whatever comes next.
Our education systems in advanced degrees in hi tech are often 70$ foreign students.. as most in USA to lazy or not prepared and not after jobs that end up paying less then some basket weaving 101 major after ten years. Real mfg jobs exist in two area, one is the low tech anyone can do and to call them Mfg jobs is an insult to the real world class industry and world class mfg jobs and industry we have to reinvent. We are a nation where about 1/3 do not finish HS, and most college grads are so poorly educated as to be a joke and most dodge the hi tech more demanding degrees as they simply slid through HS and cannot really take the new world class educations we need.
Obams is right, we need to bring back mfg and make it as respectable to the nation as those cubicle warriors that feel time spent on www at work is productive. Sorry for reality check, but shuffling paper or moving data at some bites per sec is not going to build the USA,. and anyone that ever took real econ knows that DOD dollar spent actually damages, not improves economy.. as once a bullet is fired, a tank built, or such, the dollar used by it does not really recirculate across the economy, So if you want reality check on how to fix USA, do not classify the job, measure how often the end product create other jobs, get resold, repaired, requires other items to work *(like power or gas etc) and what is it’s life cycle, what jobs are created after mfg, what are hte life cycle economic impacts-costs.. as that is the way a nation grows.
Sorry cubbies, but someone has to “Get hands dirty” so to speak or you will be out of your hands clean cubby job. Doubt it, look about at which nations grew nd which ar falling.. starting with your local mirror, smart man running nation now, and it shows… he wants mfg back, those core jobs and their products that so many others live off of…

Posted by chuck | Report as abusive

Lest we forget there is only ONE reason why American manufacturing went to China: COOLIE WAGES! That is the only reason why China was allowed into the WTO – to allow American companies to depress USA wages by shipping manufacturing and every other type of job they can to China so that they can pay Coolie Wages and then sell those products at outrageous prices back home.

Posted by RFL | Report as abusive

Chuck’s post is brilliant and right on the mark.

Posted by RFL | Report as abusive