David Brancaccio's Marketplace story Tuesday, Decline of Kodak offers lessons for U.S. business, traced the decline of Kodak and the loss of Rochester, NY's good, middle-class jobs to Kodak's failure to tend its "industrial commons." This is a national problem. For 2012, let's resolve to restore our industrial commons and bring manufacturing back to the U.S.
Kodak on Marketplace
Listen to Tuesday's Marketplace story, Decline of Kodak offers lessons for U.S. business.
Story summary: Kodak didn't tend its "industrial commons," the local concentration of expertise in making the things that go into a camera.
You make your money by selling cameras. And you now needed to make components. You needed to make lenses; you needed to make shutters -- all kinds of things that the skills for which no longer existed in Rochester.
This is what we have done in our country, too. We have been dismantling our "industrial commons." By sending manufacturing out of the country we have been taking apart the supply chains and abandoning the expertise and skills and culture that go with it.
Other Warnings
Last year, former Intel CEO Andy Grove sounded a warning about this problem. In How to Make an American Job Before It's Too Late, Grove wrote that we are not just losing jobs to China, we are losing the "chain of experience" that enables new companies and industries to form and to create new jobs, and argues for a national economic strategy to preserve our manufacturing and technology base. He lays out a plan: "rebuild our industrial commons,"
The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars -- fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability -- and stability -- we may have taken for granted.
We Gave It Away
Many American manufacturers made a deal with China to lower their manufacturing costs. Here is how it worked: Americans (used to) have a say in how this country was run, and said they want good wages, benefits, job safety, clean air, etc. These are the fruits of democracy, but to some they are an impediment to quick profits. So executives at the big multinational companies wanted a way around the borders of democracy and its demands, and pushed for "trade" deals that would let them move manufacturing to places where people had no say, in order to force American unions to make concessions. They got their deals and packed up our factories, moved them to places like China and then brought the manufactured goods back here to sell.
We lost 50,000 factories to China just in the 'W' Bush years, and our trade deficit soared, and now we as a country are paying the price. Making (and growing) things is how a country earns its living. It is how we bring in the income with which to buy things others make and grow. Leo Gerard of the United Steelworkers said it clearly,
"You don't create real wealth by flipping coupons or hamburgers, you create it by taking real things and turning them into things of value. And those things of value are turned into other things of value and all of a sudden you have a wind turbine with thousands of parts made here. You can't have a clean economy without good jobs and can't have good jobs without a clean economy."
We just gave it away, and justified the loss by saying that better things will replace it. The result has been ever-increasing trade deficits that brought us a huge debt that makes us poorer. Our debt is not because of government spending, it is because we have given away our ability to make a living!
An Ideology to Justify
In the process the 1%ers who did this to us developed an ideology around hating America and democracy. To justify outsourcing our jobs and factories they said Americans had grown lazy and wanted handouts. They said that the huge profits reaped by a few from selling off our manufacturing infrastructure meant they were "producers" and that democracy was "statism" and "collectivism" that enabled the "parasites" to "steal" from them. They declared that "taxes are theft" that "punish" the "successful" and the "job creators." They stopped funding infrastructure and education and law enforcement, denegrating these as "government spending," and declared that the wealthy few have a "right to rise" and saying the rest of us are "imbeciles."
They moved our "industrial commons" out of the country, closing the factories and thereby dismantling the supply chains and the "chain of experience" that enable us to innovate and compete. They let China capture the lead in emerging green manufacturing technologies that will bring millions of jobs and trillions of dollars. They even let China extort proprietary technologies, in exchange for short-term profits.
They rode the tiger and now the tiger is coming back to bite us.
Riding The Tiger
Richard Eskow reminded me of an old Chinese saying, "He who rides the tiger cannot dismount." American manufacturers rode the Chinese tiger to short-term profits, and now they cannot dismount. They "partnered" with China to get around the borders of democracy and the good wages and benefits democracy demands. But now the tiger wants more. The tiger wants to eat them up.
Riding the tiger: Forbes: Currency Manipulation is NOT the Biggest Chinese Threat,
China's hidden threats are a multi-headed info-tech "Hydra," the parts of which are interrelated:
- Intellectual property rights violations (or lack of enforcement in China) allowing open theft of proprietary designs, etc.
- Theft of private-sector technology (which has been going on for years) accelerating Chinese development cycles.
- Growing number of cyber-attacks, accessing highly confidential U.S. government information, costing the U.S. private sector billions of dollars in IT disruption.
- Growing military/technology stolen secrets (e.g., stealth fighter plane designs, acquisition of downed stealth-helicopter parts from the bin Laden attack, electronic technology & software from U.S. companies in China, etc.)
Riding the tiger: NYT: Chinese Rules Said to Threaten Proprietary Information,
China is expected to issue regulations on Saturday requiring technology companies to disclose proprietary information like data-encryption keys and underlying software code to sell a range of security-related digital technology products to government agencies, American industry officials said on Friday.
Riding the tiger: Fiscal Times: Stealing America: China's Busy Cyber-Spies,
Economic and industrial spying by China appears to be more pervasive and egregious than ever, costing America billions of dollars each year, according to a new report by a U.S. government agency. And the report raises an important question: If stolen trade and technology secrets help fuel China's breakneck growth, then is more espionage required to feed the growing beast?
The Chamber of Commerce rides the tiger: WSJ today: China Hackers Hit U.S. Chamber: Attacks Breached Computer System of Business-Lobbying Group; Emails Stolen,
A group of hackers in China breached the computer defenses of America's top business-lobbying group and gained access to everything stored on its systems, including information about its three million members, according to several people familiar with the matter.The break-in at the U.S. Chamber of Commerce is one of the boldest known infiltrations in what has become a regular confrontation between U.S. companies and Chinese hackers.
They rode the tiger. But now the tiger wants more. The tiger wants to eat them up.
Let's Resolve to Rebuild American Manufacturing
Let's resolve to rebuild American manufacturing, starting in 2012. Manufacturing is the backbone of a prosperous economy. Let's resolve to bring back good jobs that pay good wages and unpin a middle-class lifestyle. Let's resolve to balance trade with the rest of the world so we can fight our debt problems. Let's resolve to start fighting to win the lead in the Green manufacturing revolution.
Don't let the "free traders" exploit workers in countries where they do not have a say to force concessions from Americans in unions. Don't let the oil and coal companies create false "scandals" like Solyndra to block government from investing in green alternatives. Don't let the 1% make democracy a competitive disadvantage -- democracy is the only economics that works!
Last week President Obama appointed Commerce Secretary John Bryson and National Economic Council Director Gene Sperling to co-chair a new White House Office of Manufacturing Policy. The new Office of Manufacturing Policy will have cabinet-level status, reflecting the importance of the manufacturing sector to our economy. It will coordinate the efforts of different government agencies, such as the Small Business Administration, the Department of Commerce and the Transportation Department.
This is a positive step if there ever was one. Let's resolve to develop and execute a national manufacturing strategy. (Please click through.)
It is time to restore our national "industrial commons."
Frank Sobatka explains:
This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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One problem though - especially with the mining/extracting-based industries. When we were the biggest Steel producer/refiner, and the leading petrochemical guys,... we were largely using resoruces also extracted within our own boarders. That's not going to be as easy to do without figuring out how to ensure a stable base of unrefined sources for these industries.
Labor cost is normally the greatest cost component of most products and commodities, closely followed by environmental compliance costs, material costs and electrical energy costs.
The country with the lowest labor cost, lowest electrical energy costs, and lowest environmental compliance cost normally gets the product sale and the manufacturing jobs, and the import of foreign exchange currency in exchange for these products.
Free Trade does benefit the foreign manufacturers, US importers, US distributors and US retail sales outlets of foreign made products with jobs for supplying US average citizen with less expensive imported consumer products, but this is at the cost of losing jobs in the USA to make these products, and the increase in the Balance-of-Trade Deficit.
If the USA had innovative products that foreigners did not have, then the USA could get higher prices for those products, until the foreigners copy the US inventions.
The US government has also destroyed the US Technical database that was previously used to create those innovations, patents, and inventions, and it will take generations to re-create that technical capability that won WWII and gave US citizens a bountiful lifestyle for a couple of decades after WWII.
We should petition the US congress to repeal their ratification and then withdraw from President Clinton's NAFTA, GATT, WTO, MFN trade with China, Financial Services Modernization Act of 1999, H-1b visas, etc.; George W. Bush’s 14 additional FREE TRADE AGREEMENTS with Jordan, Morocco, and other young democracies of Central America; plus President Obama’s new FREE TRADE AGREEMENTS with Vietnam, Brunei, Singapore, Malaysia, New Zealand, Australia, Chile and Peru and several other Asian and South American nations.
Germany has a trade surplus.
Forbes: http://www.forbes.com/sites/frederickallen/2011/12/21/germany-builds-twice-as-many-cars-as-the-u-s-while-paying-its-auto-workers-twice-as-much/
A real Patriot pays their taxes - and is (or should be at least) glad to have been given the opportunity to have done so well in their home country.
The US must take back our industries and way of life or ask China to take over one.
The USSR is an example of a great military power with a weak industrial base, it failed.
For the past three decades, public policy has increasingly favored those who wish quicker profits over those who wish a middle-class lifestyle. This did not happen accidentally. It happened on purpose. And it was not just a Republican thing. Clinton signed NAFTA and ended welfare, after all. And it's not like people weren't pointing out the danger of what was happening. By the 1990s, books had been written about the loss of our manufacturing industry. Ross Perot urged us to listen to the "sucking sound" of jobs disappearing, and he was right.
So coming up with little plans and helpful step-by-step procedures on how the government could "fix" things is a monument to futility. Things aren't broken. This is how they want things to be.
And the non-wealth producing nations like the USA might destroy their own economies with (deficit) government spending which will impoverish all of their citizens by selling and/or mortgaging existing NATIONAL WEALTH and spending the proceeds for federal government activities!