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What's the future hold for the US economy? Manufacturing.


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2011 Aug 3, 1:39am   16,164 views  65 comments

by edvard2   ➕follow (1)   💰tip   ignore  

I wasn't sure how to name this post. Thus I could only come up with a generic title. Its been something I have thought about for years. Its a combination of looking back to where we were and fast-forwarding to today.

All throughout high school and up past 2-3 years out of college ( the economy sucked in 2000-2002) I worked at a number of home improvement and small hardware stores. Most of the time I opened boxes of products and stocked shelves. I also helped customers. Thus I was familiar with a wide variety of items that ranged from hose washers, bird feeders, chain saws, drills, loose nuts and bolts, lawn mowers, plumbing, electrical components and a zillion other things. This wasn't ancient history. It was the mid 90's- 2002. I'd say around 75-80% of everything that came through the door was made in the USA. That isn't to say it was all super-duper high quality. If you wanted a good weedeater you bought a Japanese brand machine. Most of the domestic brands were junk. But putting that aside, almost all of what we sold came from the US.

Fast forward to now. Years after I stopped working retail and entered the tech biz I still turn things over to see where its made. These days it doesn't matter where you shop. ALL of the stuff is made in China. Even long-established US companies that had 100+ year old factories that gave tours have resorted to having all of their products made there.

I recall reading something a few years back that was shocking. Between 200-2007 40,000 US factories were shut down. That's right- 40,000. That number seems appalling. Then again, it makes sense. If all of the switches, screws, washers, chain saws, pipes, and paint brushes are made in China then it would make sense that all the US factories that made those things just a few years ago are now shut down.

Call me old-fashioned but I find that sad and depressing. One of my hobbies is collecting antiques. I collect basically what most people consider "junk". Old tools, appliances, furniture, and so on. ALL of these items were made in the US. Take apart an old radio and all of the tubes, capacitors, coils, resistors, rheostats, and chassis components were made by some US form somewhere. The same goes for anything else that was made up to the 1960's.

At the same time its also somewhat depressing to me that at least from what I can tell most other modern western economies have managed to retain some degree of what you could call " premiere" type industries. For example, fine watches are still made in Japan, Germany, France, Switzerland, and Italy. We on the other hand have NO watch manufactures left- the last ones were shut down in the 60's. In fact, Germany in particular seems to have done a good job of holding onto its manufacturing base and still makes a lot of things. a LOT for a much smaller country all considered. Their labor isn't cheap either. Yet somehow they've made it work while we in the US seem to have cut manufacturing dramatically.

Where am I going with this? How can the US expect to retain any sort of middle class or a significant foothold in the world economy if we continue to diminish our manufacturing output? You can't defy physics and the only true way to grow economically is to bring money in, which means selling stuff to other countries. If we continue to cut down what we export... how does this bode for the future? Is there any means to somehow reverse this trend?

Anyway, sorry for the downer post. I know there's some rather intelligent people here who can lend some opinion.

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63   mdovell   2011 Aug 7, 1:20am  

This can be quite a topic.

We're always going to have some manufacturing because of a number of factors. Proximity, dependency and of course preference.

When I worked in retail it was like the OP said but I worked for the same things but later on. Many goods there are made in China and other countries. When I worked for a work clothing company there was really no assures that a product came from anywhere. If you wanted US made it would take a large order and it would have to be manually picked from the source and take much longer.

Make no mistake we can make anything in the USA. But it comes with a price. Everything we want to add onto the price of manufacturing gets added into the cost of selling it. Health insurance for employees, ergonomics for employees, environmental friendly packaging, community relations etc. It's like the concept of an environmentally friendly cleaner. Look at what is the primary vs the secondary. We ask for too much from some businesses these days.

And of course the consumer generally wants things dirt cheap.

The reasons why other countries can be cheaper are multifold. To use China as an example it is a unitary state. There is no local/state or provincial government to deal with (UK is the same way) It makes it simple once you enter the country but at the same point it can also mean that other areas of the country might not be cheaper. In the USA laws vary wildly on the state..gambling and same sex marriage come to mind immediately.
China and Taiwan also have the Hukou system which is weird to say the least
http://en.wikipedia.org/wiki/Hukou_system
it is attempting to prevent massive influxes of unemployed people to cities (picture grapes of wrath). The permit system can actually prevent people from sending their children to school in areas they work. In a sense one might argue that they are illegal within the own country and thus the wages are lower. In looking at the currency some argue that it is fixed but at the same point when we took ourselves off the gold standard it contributed highly to the OPEC embargo.

It should be noted that much of what is made is not really designed in those countries. There is no Ivy league in Asia. The Asian way of teaching predominantly is instruction. Asking a teacher/professor a question or implying something is wrong is unheard of.

Sometimes inventors have odd ideas of their inventions. Thomas Edison supposedly hated the idea that the phonographic record would be used for music. He wanted it to be used to have audio books for the blind and to teach people foreign languages. But the money in it was in the music and that is what it is known for.

Countries generally HAVE to make goods at first because they might not have the method or means to buy goods. Heck you start with a bartering system then establish the concept of credit. Much of the gains that the developing world is making are marginal. By that I mean it is a one time gain. A family only needs one fridge, one washer, one drier, one microwave etc. The gains of more are less the more that they have.

Once an economy develops more and more actually consumption can go down. I would say the most dependable consumption is food followed by energy and then maybe followed by clothing.

"Today I bought a 60's vintage Osterizer blender. Its built like a tank, weighs a ton and is totally plated in chrome. Its built like things were typically built like. It makes anything made today- even the "fancy" brands look like disposable crap"

But that is also a paradox. If you make products that last forever then you aren't going to sell them again to the same customers. If you make products that break down you STILL aren't going to get the same customers since the quality was poor.

The problem with mass production of any good is that the more people have that given item the less it is worth. Microwaves at one point were a metric for how developed a country was. Now they are so cheap people in public housing have one.

The Heritage Foundation issued a paper that illustrates what amenities that poor people have vs those better off
www.heritage.org/research/reports/2007/08/how-poor-are-americas-poor-examining-the-plague-of-poverty-in-america
The objective isn't so much to illustrate that people are not "poor" but that our standard for "poor" is higher than most of the planet.

The other thing to keep in mind about manufacturing is that factory work is not always that sophisticated. Some honestly think those laid off from auto plants were somehow mechanics...they aren't. I had a great aunt that put together spark plugs decades ago (50's and 60s). Same action every 15 or so seconds..every day is the same..every week is the same..every month is the same. Stable work but there is no variance. I have a grandmother that worked for a beer company (go for the gusto!) again same thing..no variance (except the smell from when bottles cracked and that it was amplified in the summer)

Some of the reasons why we miss manufacturing is that at the time it did not appear to be that sophisticated and did not require (at first) standards. On the job training was enough. Now manufacturing is much more automated and sophisticated than before.
http://www.msnbc.msn.com/id/41349653/ns/business-us_business/t/despite-chinas-might-us-factories-maintain-edge/#.Tj6pXSwQ-Sw

64   Vicente   2011 Aug 7, 2:24am  

Bah the point of heritage foundation is to paper over a huge and worsening wealth gap and propagandize poor to accept their place.

65   Bernard   2011 Aug 8, 8:32am  

Regarding Spain, don't forget they spent a big bulk of their ill gotten gains from the cieglo del oro, on an ideological war called the Spanish inquisition.

Reminds me of Empire day in "The meaning of Life" To commemorate all those brave souls who selflessly gave their lives to help keep China British.

Also reminds me a little of both of George Bush's wars. I mean since we're going to loose them anyway, and I don't think the point was ever to win. Coulden't we just cut our costs by simply mugging everybody in the streets by some jackbooted fedral thugs and then giving the loot to Blackwater, and Haliburton. Saves those poor Iraqi's from getting shot and raped by the USMC. Put the army where it belongs, on the streets of America.

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