One of the sad things about the state of the U.S. economic engine as it sits with the gearbox in neutral is that we seem unable to break so many bad habits. For decades, we have exported jobs by outsourcing first manufacturing and then services gaining cheap goods by ultimately paying for them with the most precious trade good of all: quality of life.
We became addicted to a disposable economy based on strategic corporate principles like "a 100-percent replacement of the installed base every 10 years" and "just-in-time supply chains seeking the lowest mathematical cost of execution." The engineering design principles for product development and maintenance have changed from the old hallmark of American-made durability to "buy it, use it, trash it," particularly in consumer goods where designed-in-obsolescence has been elevated to a business strategy.
The old joke about contracts being awarded to the lowest bidder has become our nightmare as it idles companies, their workers, the commercial real estate they sit on, the durable goods they invest in to manufacture things, and the secondary economic accelerators like housing, education and the rest of the infrastructure that defines the vision of the American way of life.
When I talk to bankers about this and ask them why they aren't lending to domestic commercial and industrial borrowers, they tell me they'd love to but there's no demand to borrow. The bottom line is that U.S. businesses have so little faith in where the economy is headed right now that they don't want to take the risk of new debt. And why should they if all that will happen is that their good efforts will get outsourced and come back as a cheap replica for half the price that lasts a third as long. You math folk can work out how the lifetime value of the customer is boosted by that trick. So the banks sit on excess deposits to lending ratios on their books, waiting for the day business owners believe it's time to put the engine back in gear again. In the meantime, "Third World America."
This is a mess we made for ourselves, to be sure. It was fueled by academic theories that valued the unfettered circulation of money far more than the preservation of culture and lifestyle. And so sits one of the world's most important economies suffering from having mined out the hole of the disposable society to the point that it doesn't make a lot of sense to people anymore. We spent our piggy banks on garbage, and it's bothering every one of us. And not just in the United States. Every other economy on the planet knows full well that since 1945, the world has needed a healthy and viable U.S. economy around which to organize and calibrate their socio-economic strategies. We unhinge for an extended period of time, and it will have enormous complications for the human race.
But here's the thing. What was done can be undone. And personally, I think that the damage isn't that great. My bet is that repatriating 5 percent of the U.S. manufacturing and services sectors will more than put the U.S. economy back on track, and that will have positive implications worldwide.
But how can it be done? What American ingenuity can make this happen? Here are a couple of ideas to ponder that will hopefully spark imagination and innovation.
It's time to shift gears away from the false god of disposability. We should consider demanding changes in our engineering design and product-support strategy expectations. What I mean by this is to retrain our industries and designers to emphasize aspects of products that focus on making products more durable and maintainable. Or to put it another way, American-made quality again. The jargon that goes along with this are things like "fault tolerance," "doubled mean times between failure," "designed for maintainability" and other techno-babble. But what it ultimately does is change the balance on the products we use so that instead of buying and trashing three of them every seven years, more of them will be bought once and maintained for five years. This restarts what used to be a healthy and viable repair-shop industry in this country that got blown away in the last couple of decades.
It's also a very green-conscious strategy, by the way. The highest carbon emission cost for a manufactured good is the initial production event, so deliberately redesigning a fraction of our consumer products inventory to two carbon hits per decade, down from three to five per decade, is worth taking a look at.
And there's nothing that says cost and quality of production won't continue to improve even within such design guideline changes. There's a whole new generation of technologies that, if applied creatively, can leverage one American worker to have the output equal to that of several overseas workers, possible even enough to equalize our folk to teams of other folk on a per capita GDP comparison basis. That sentence means it will make economic sense for companies to choose to manufacture in the United States again. Can you say improved aggregate quality of life?
Speaking of disruptive technologies that could change the foundations of many service industries away from outsourcing, I point out the parting gift of Steve Jobs. His girlfriend SIRI may just be the solution we've all been waiting for instead of talking to some overseas call center that can't really help you, anyway. And she's sassy. The implications are tremendous. I'd say tidal. The question to me is: will we be able to reap it properly?
I'll close with a loud and clear challenge to academia. One of the things the U.S economy desperately needs is for U.S. schools that teach engineering, business and public policy to begin to devote more research to this line of thinking. A little disrupting the status quo from time to time is a good thing. Earn your keep. Push the edge in new directions. Never mind occupying Wall Street; we need solutions for Main Street.
Follow Dennis Santiago on Twitter: www.twitter.com/DennisSantiago
Problem number two...thousand of H1B visas taking American jobs. This GlobaliZation thing will only create jobs for China, India, Indonesia. And last the author is right this built in obsolescents is creating havoc in the long run.
Here is H. Clinton asking for more H1B visas.http://www.youtube.com/watch?v=UhLBSLLIhUs
1. Marked efficiency, accuracy and skill of technology. Robots replaced need for majority of blue collar workers. Computing and IT reduced need for middle level management.
2. With 50% school drop-out and an additional 25% failing to graduate from college, many in next generation are not ready for skilled employment.
3. Modern society is shooting itself in the foot. Big growth industry in the last decade was tourism. With security concerns and high cost of transportation, tourism is stifled.
4. No longer can society create artificial problems so we can spend next several decades solving these concocted issues. Example is the whole period of the "Cold War"; and following that, the wars in the Middle East. So while America is worried about the Oil shortage and Mid-East stability, the BRIC countries are over-taking us, by addressing real problems like improving the standard of its people with a 7%-10% annual growth rate.
Immigration reform could integrate 12-20 million American undocumented residents (now living in the shadows), permitting them to be active consumers. Their purchasing power would stimulate the economy and (without federal stimulus) employ workers in the auto, housing, home appliances, furniture industry, to name a few.
Expanding Medicare eligibility to 55+ would permit workers choosing to retire to do so; creating openings for younger workers. Yet, the 55+ who chose to work would be helped by reducing their cost of healthcare insurance to the employer.
There should be employment available then for the Americans that are not able to become "skilled employees" or graduate college. (I am writing at the public library and have helped people that have to look for jobs using the Internet. They are not illiterate but they problems navigating the "desktop." Not everybody is educatable to a high level like yourself.
Every job is important now that 25 million Americans are experiencing long-term unemployment. We have to let the corporations know that we will appreciate them hiring more Americans to get the Recovery going:
http://www.flixya.com/blog/3201910/Beautiful-Butterflys
We need to be teaching high schoolers about economics and entrepreneurship.
We have to let the corporations like Apple and Dell know that we will appreciate them hiring Americans to get the Recovery going:
http://www.flixya.com/blog/3201910/Beautiful-Butterflys
Even well made things get broken. So if I can buy 5 from communist China for the cost of one high quality version then it makes sense to buy slave made goods from China.
The simple and correct solution is to demand and end to trade with communist dictatorships like China.
Like it or not the world is global now and, to be honest, Americans, (particularly younger Americans), no longer have the right mindset to do many of do the "crap jobs" that free trade has taken away. Who is going to work in textile/shoe factories, solder IPADs together, or even pick tomatoes? As an example, the Alabama immigration law was a disaster, and you will probably see the same thing if we try building IPADs or sneakers here:
http://www.huffingtonpost.com/2011/10/21/after-alabama-immigration-law-few-americans-taking-immigrants-work_n_1023635.html
"A crew of four Hispanics can earn about $150 each by picking 250-300 boxes of tomatoes in a day, said Jerry Spencer, of Grow Alabama, which purchases and sells locally owned produce. A crew of 25 Americans recently picked 200 boxes – giving them each $24 for the day."
We need to create high quality jobs for our people. We need innovative ideas like the author's to better compete in the world marketplace rather than isolating ourselves from the world. Americans can compete with anyone on quality and innovation. Ending trade is not the answer.
Our economy is a bucket. Money gets poured into the bucket and causes economic activity. The level of water is called our standard of living,
Free trade has put a hole in the bucket. Money pours out of that hole like water. Pouring more money into the bucket is not going to fix the problem. To fix the problem we have to plug the hole.
That means to fix the problem we have to stop freetrade.
I don't know how much simpler I can make it. You can pour money in by cutting taxes or increase government spending but it's not going to make a bit of difference. At best you can pour money in at the same rate as it's going out and it'll appear like you're staying even. Or you can even pour money in faster than it's pouring out and make it appear like you're getting ahead. But as long as the hole is there the only thing you get is deeper in debt.
Stopping freetrade, raising import rates, creates domestic demand for products made here. Raisin import rates is the way out of this mess.
Freetrade is not an innovation it is a theory. A theory that has been proven counterproductive to our interest. Freetrade benefits the exporter. Because manufacturing in every other country was decimated during World War II, after World War II that was us.
Now it isn't.
Yes it is a huge idea. Yes it is almost against the way we do business. Yes the companies would have protection from slave labor countries, they world have to match the money at whole sale.
It would on the other hand jump start manufacturing.
Many of us are concerned about Climate Change but many of us have no problems with buying imported coal energy produced iPhones to help organize a rally against a coal fired generation plant here! While the U.S. actually reduce coal usage between 2000-2008 the fast developing nations doubled their usage making products for us - fouling the air of their great CITIES! Endangering the planet.
Say the industrial nations stopped coal use all together at the rate the fast developing nations are increasing their usage the usage will be double by 2020 from 2000 assuming the industrial nations cut back to zero!
By adding a tariff for fossil fuel usage for transportation we encourage local manufacturing. Pick a product like a T-shirt does it make sense to transport the cotton from America to Asia have it manufactured into a T-shirt and transport it back again?
Unrestricted Free Trade is the Engine driving man-made climate change!
But ... but ... but what about planned obsolescence? According to Wikipedia:
'planned obsolescence was "Instilling in the buyer the desire to own something a little newer, a little better, a little sooner than is necessary."'
-- http://en.wikipedia.org/wiki/Planned_obsolescence
Suggesting that we start designing and building things to last is downright...unAmahakun. Why, we might even start looking like Yerp.