Sunday, September 11, 2011

When the Answer is in the Question

The NYT asks "Is Manufacturing Falling Off the Radar?" today, and then proceeds to answer the question with a resounding "yes" as it spells out the consequences of letting that happen.

There's this:

Manufacturing’s contribution to gross domestic product — roughly equivalent to national income — has declined to just 11.7 percent last year from as much as 28 percent in the 1950s, according to the Bureau of Economic Analysis. In this century, the 20-percent-or-more club draws its members mainly from Asia and Europe.

The US still has a healthy manufacturing output in terms of dollar amount ($1.95T), but our GDP has become more dependent on "finance, insurance and real estate sectors". How is that working out for us? Well, we obviously have some problems as pointed out next, emphasis mine.

It may seem remarkable that America’s fall — or impending fall — from first place in manufacturing isn’t generating all that many headlines, certainly not when compared with the controversies over the national debt or persistent unemployment. One reason may be that the nation’s political leaders don’t see manufacturing as a problem. Put another way, they don’t necessarily regard making an engine, a computer or even a pair of scissors as having as much value as investment banking or retailing or a useful Web site.

That's too bad, because here is the reality behind the importance of manufacturing:

Recovery from the recession, they say, would not be so sluggish if there were still enough manufacturers to jump-start an upturn by revving up production and rehiring en masse at the first signs of better times. What’s more, each new manufacturing job generates five others in the economy. Shrinking the relative size of manufacturing has undermined that multiplier effect.

Gee, that might have helped the with the "persistent unemployment" and national debt problem, don't ya think?

But wait! There's more! Here's what happens next...

The damage doesn’t end there. The intractable trade deficit is attributable in part to manufacturing’s shaken status. And in many areas, craftsmanship in America has been eroding. Forty percent of the nation’s engineers work in manufacturing, for example, and that profession’s numbers have been declining. That is a particular problem because innovation often originates in manufacturing, frequently in research centers near factories, which aid in the creation of products and the tweaking of them on assembly lines.

As multinationals place factories abroad, they are putting research centers near them, with as-yet-undetermined consequences. At the very least, this trend challenges the view that the United States has the best scientists and research centers and is thus the research-and-development pacesetter.

"Yet undetermined consequences"? Does anyone foresee a positive outcome to that scenario? Of course not. It only means the loss of American innovation and more jobs in the long run.

Go read the whole article to see how our multinationals are being wined and dined by foreign incentives; Michigan-based companies like Dow and Whirlpool make an appearance. And then shake your head over what we have done here. Far too much energy has been spent pointing our fingers at the corporations that have moved and countries they have moved to, when we should be looking at U.S. law that has allowed this to happen. We did this to ourselves.

It's never too late to make some changes, but until we have leadership committed to a national manufacturing policy and adjustments in trade, we are going to continue to see those jobs slip away.

Or, maybe we can just sell insurance to each other instead. Wonder what a rider for "Permanent Unemployment Due to Short-Sighted Economic Policy" would cost.

Don't laugh. That's probably next.