Yves Smith at Nekkid Capitalism:
The Decline of Manufacturing in America: A Case Study
One frequent and frustrating line that often crops up in the comments section of this blog is that American labor has no hope, it should just accept Chinese wages, since price is all that matters. That line of thinking is wrongheaded on multiple levels. It assumes direct factory labor is the most important cost driver, when for most manufactured goods, it is 11% to 15% of total product cost (and increased coordination costs of much more expensive managers are a significant offset to any savings achieved by using cheaper factory workers in faraway locations). It also assumes cost is the only way to compete, when that is naive on an input as well as a product level. How do these “labor cost is destiny” advocates explain the continued success of export powerhouse Germany? Finally, the offshoring,/outsourcing vogue ignores the riskiness and lower flexibility of extended supply chains.
This argument is sorely misguided because it serves to exculpate diseased, greedy, and incompetent American managers and executives. In the overwhelming majority of places where I lived in my childhood, a manufacturing plant was the biggest employer in the community. And when I went to business school, manufacturing was still seen as important. Indeed, the rise of Germany and Japan was then seen as due to sclerotic American management not being able to keep up with their innovations in product design and factory management.
But if you were to ask most people, they’d now blame the fall of American manufacturing on our workers. That scapegoating serves to shift focus from the top of the food chain at a time when executives have managed to greatly widen the gap between their pay and that of the folks reporting to them.
Could part of the reason our economy has been flatlining so long have something to do with the fact the we don’t make anything any more?
Seriously – what industry exactly is gonna generate a recovery? Food service jobs? Tech support? Government employees? I kinda doubt it will be the home construction industry.
We have lots of people who grow stuff, sell stuff, transport stuff, insure stuff, fix stuff and/or install stuff, but nobody in this country MAKES stuff.
We sent all our manufacturing jobs elsewhere and now everything is cheaper but nobody has any money to buy it.
Did the housing/credit bubble hide the fact that we fucked ourselves?
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