Goodbye, Production (and Maybe Innovation)

The New York Times ^ | December 24, 2006 | Louis Uchitelle

[A. Pole]

AMERICAN manufacturers no longer make subway cars. They are imported now, and the skills required to make them are disappearing in the United States. Similarly, imports are an ever-bigger source of refrigerators, household furnishings, auto and aircraft parts, machine tools and a host of everyday consumer products much in demand in America, but increasingly not made here.

[...]

the experts shifted the emphasis from production to design and innovation. Let others produce what Americans think up.

[...]

But over the long run, can invention and design be separated from production? That question is rarely asked today. The debate instead centers on the loss of well-paying factory jobs and on the swelling trade deficit in manufactured goods. When the linkage does come up, the answer is surprisingly affirmative: Yes, invention and production are intertwined.

"Most innovation does not come from some disembodied laboratory," said Stephen S. Cohen, co-director of the Berkeley Roundtable on the International Economy at the University of California, Berkeley. "In order to innovate in what you make, you have to be pretty good at making it — and we are losing that ability."

[...]

Franklin J. Vargo, the association’s vice president for international economic affairs, sounds even more concerned than Mr. Cohen. "If manufacturing production declines in the United States," he said, "at some point we will go below critical mass and then the center of innovation will shift outside the country and that will really begin a decline in our living standards."

[...]

"It is hard to imagine," Mr. Tonelson said, "how an international economy can remain successful if it jettisons its most technologically advanced components."

[...]

[verity]

You cannot ignore something that exists.

[BikerJoe]

"I am not as disturbed by that, as I am by the examples of scientific endeavor that we are forced to do oversees, because of US regulations. THAT is exporting knowlege, in a BAD way."

Ridiculous, isn't it? The very MINUTE word got out that I was working with something in the megaton range, well, you wouldn't BELIEVE how upset people were!

They didn't like my cyclotron either.

[GingisK]

Most of the issue is the obsene profit levels at the retail outlet. I know for a fact that a router Sears used to sell for $79.00 was manufactured and sold to Sears for $7.20. WalMart took that to even greater levels.

The issue really is the greed on the part of retailers. This forces manufactureres to find ways to reduce production costs so that they can make just a small margin.

[1rudeboy]

It's not quite that simple, either. I remember 20 years ago, all the engineers were lording it over the "art majors." And now the engineers are out of work or under employed and the "art majors" are pulling down the big bucks.

And now for a regularly-scheduled reality check:

[BipolarBob]

You cannot ignore something that exists.

People do it all the time every day. That will probably be the most absurd statement I'll read today. And I'm sure to run across some doozies.

[patton]

Actually, doing atomic research in the megaton range in the US is easy. Real easy. LOL.

But cross the EPA one time, and you are OUTTA here.

[BikerJoe]

"The issue really is the greed on the part of retailers. This forces manufactureres to find ways to reduce production costs so that they can make just a small margin."

I'm not convinced it's really greed...the retailers aren't doing THAT well.

I think a large part of the problem is the ever more prevalent, ever less effective, ever more costly advertising.

The whole advertising model is, in my opinion, breaking down. The rare times I watch broadcast tv, I change the channel the second a commercial comes on, same with radio. I'm an marketing person's worst nightmare.

[patton]

I can vouch for that engineering number, anyway.

[SamAdams76]

Building our widget in China reduces the cost to Americans to buy our product, while raising the economic status of China, that will eventually lead to their workers becoming as expensive as ours, and production will return here. In the end, everybody wins. We get stuff for less (a form of wealth in itself). The Chinese become wealthier and more dependent on trade with us and makes them less likely to go to war against us. Capitalism is a good thing, even across borders. Read some Thomas Sowell or Walter Williams on this issue. They're brighter than both of us put together about this.

Very nice summation of the issue at hand and I agree 100% (especially about Thomas Sowell and Walter Williams being very bright).

Whenever I see these types of threads, I get the impression that many of these alarmists and protectionists really want the U.S. to adopt economic policies that keep other countries (like China and India) down.

I do not think this is a wise move. If you analyze all the major wars during our civilization, it involves countries that have been kept down financially which opens the door for dictatorships and oppression to take root. Nazi Germany is a perfect example of this phenomenon. The Nazis were able to take over the country because of the very severe economic conditions imposed on them by the terms of the Armistice after World War I (which was supposedly the "war to end all wars.").

Note that the United States learned their lesson after WW2. Instead of forcing Germany and Japan to accept humiliating terms, instead, the United States decided to help them rebuild their economies which enabled them to quickly rejoin the world community as prosperous nations. The end result was that instead of Japan and Germany being embittered enemies that were looking to "even the score" with us at some later date, they ended up being among our strongest allies and trading partners. (Some may argue we did too good a job in that respect but I am not among them.)

I believe that once the world community embraces captitalism and basic American values, we will truly achieve the world peace that the liberals are always dreaming about.

I probably shouldn't even say American values because the United States is truly a melting pot of all nations. Despite all our "problems", we are still the nation that the world wants to emulate and emigrate to. We could solve our immigration woes by helping other countries be more like us in the first place. And we can do this by continuing to trade with them and in the process, we create a global web of customers in which to sell our goods and services to.

[GregoryFul]

And diminish by bankrupt companies that were in the DOW index over time.

I look at my father in the 50's and 60's, an average engineer, his family, 7 children, wife, only one working parent. Owned a nice house in Massachusetts in the 50's on 1 3/4 acres of land that you probably could not touch for $750k today. Another in the 60's and 70's in Pennsylvania that would go for $400k to $450k today (large colonial on 3/4 acre, $23k new in 1963). Bought a new car every three to four years ($2500 - $3500, VW's advertised for $1899, I picked up late model used cars for $200 - $500 in those days). You could buy lots of groceries for $20. A good loaf of bread, $0.28, hamburger $0.30 per pound. Large Mars bars, $0.05 in the 50's, then going up to a dramatic $0.07, which seemed outrageous to us kids.

Anyway, imagine raising 7 kids on the average engineer's income these days.

The dollar has been subject to ferocious devaluation over the past 30-40 years, to the benefit of the thieving scum arranging the same, the pestilence that infest government. They suck the lifeblood out of the economy.

[SamAdams76]

It's not quite that simple, either. I remember 20 years ago, all the engineers were lording it over the "art majors." And now the engineers are out of work or under employed and the "art majors" are pulling down the big bucks.

That actually helps me make my argument. Everything is upside down from where it once was and it will be again soon. The pace of technological change has greatly accelerated to the point where assumptions made today (regarding career choices) will be rendered meaningless tomorrow. It is actually a very exciting time to be alive. I wish I could be 21 again because the next few decades are going to be a lot of fun!

[SamAdams76]

I find it pathetic that one of our most profitable exports is entertainment -- movies, music, etc.

Why?

[gas0linealley]

Your argument for free trade reminds me of religion...you'll have pie in the sky when you die.

Will trade make China less likely to make war on us?

Great Britain had a good trade going with her American Colonies...what went wrong?

[SamAdams76]

The whole advertising model is, in my opinion, breaking down. The rare times I watch broadcast tv, I change the channel the second a commercial comes on, same with radio. I'm an marketing person's worst nightmare.

You are not alone. They will never be able to stuff TiVO back into that genie bottle. Once you get used to watching programs commercial free, there is no going back.

However, I must say that commercials are getting more entertaining. I prefer to watch NFL football in real time so I get the commercials. Some of them are very funny. Only problem is, I have no idea what they are selling. For example, there is this series of "Vonnage" commercials that is hilarious. Just today, they showed some dumb blonde playing with sharks after getting wacked in the head with a "Vonnage" box. I have no idea what "Vonnage" is (I think it's a computer graphics card) but their commercials are great!

[durasell]

And now for a regularly-scheduled reality check:




Starting salaries are meaningless since they don't reflect the future earning potential in the profession for someone who is really, really good. I know more than a few art majors who started below $30,000 a year (and some of them at zero a year)and are now at more than five or ten times that salary after a few years out in the world. But again, you have to be really, really good.

That entertainment is one of our major exports is shameful. It doesn't particularly benefit anyone and is easily replaced.

[RegulatorCountry]

"WalMart took that to even greater levels."

About two professional "reinventions" ago, I was involved with the textile industry, in a sales and marketing capacity. Domestic textile manufacturers went to great lengths to get into Wal Mart; they were viewed as a "holy grail" of sorts due to the tremendous sales potential, and so these companies were absolutely thrilled to get onto the vendor matrix. Once production began, at a price agreeable to both parties, Wal Mart would then eventually come to control the vast majority of their capacity. Then came the demands, on price, on turnaround ... you name it, they put the screws to it. These companies could not hold their ground, because they'd have gone under if they lost such a huge account, with nothing remotely plausible to take the place of it. They were quite literally over a barrel. And, this was in the "good old days" of Sam Walton insisting upon domestic sourcing wherever possible.

[SamAdams76]

Great Britain had a good trade going with her American Colonies...what went wrong?

Taxation without representation.

[gas0linealley]

Working in a factory has about as much appeal as busting rocks for most kids growing up today. Ask them what they want to do when they grow up and they will tell you they want to design video games or make music or produce movies, etc. I doubt that any of them will say "I want to punch a time clock and work in the factories like my daddy and granddaddy did."

Here in upstate NY, factories have waiting lists for employment...if they pay decent wages. The reality is that few people are able, or get the breaks, to get an "artistic" job, and when the dreaming and scheming is over, the factory job proves to be better than most.

[RegulatorCountry]

"Will trade make China less likely to make war on us?"

It already is a form of economic warfare. The whole thing strikes me as somehow corrupt. I'm being dragged, kicking and screaming, into dealing with China myself, and I am not pleased about the necessity of having to do so. I love my work; I love to see it come to fruition, to touch it, feel it , smell it. I also love my home, and so I have no desire to become a de facto expat, or to spend half my life jetting back and forth, as so many of my clients are doing already. It ruins marriages and lives. The money is excellent, though. At least for now it is. I don't see a good end to it, when all is said and done.

[GingisK]

I had extactly the same experience with them in regard to electronics devices. My company died, I found a new employer. The process has repeated three times. My hate for WalMart is fully justified.