Thursday, March 26, 2009

Do You Know, and Does it Matter, How Many Items In Your Favorite Store Are Made in The United States?

During the Clinton Administration, I started counting, rather informally, the number of items in my local hardware store that are made in the United States and the number made in other countries. I began counting because it was becoming clear that a significant fraction were manufactured in other countries. I wish I had saved those results year by year. But the trend is startlingly clear. In my first census or on shelf item count, in Lynn Massachusetts, at my local True Value store, the percentage of items manufactured outside our metes and bounds was less than 50%, but growing rapidly. I knew someone personally who was moving a fraction of his production from Peabody, Massachusetts to China. I liked him a lot. He and his wife were beloved in China. His local Massachusetts workers were not as happy... He felt that he had no choice in order to stay in business and sell to the dominant stores, such as Walmart.

My last census took place, about six months ago, at my nearest hardware store, an Ace Hardware in Tucson Arizona. It was no longer a counting operation. It was a desperate search through a much larger store. It took all morning for me to get about halfway through the store. I stopped because I needed to pee. I had found less than five items made in the United States of America!

Would you call that a sea change? I think that conveys the right impression. The perfect storm is upon us. I will explain the arguments why this made perfect sense to a small group in our society and our nation. For most of us the results are rather grim. Jack Welch, was from Lynn, MA, where I counted my first stock in a hardware store, and realized how bad this accelerating trend would be for the cities and towns, and for the national budget. For Mr. Welch, reshaping and transforming General Electric into General Financial was the path to personal riches. His mantra? If you are not number one in an innovative age, stop wasting money on tough, possibly slow improvement through R&D. Just get rid of the difficult-to-create-and-nurture technical skill set, and move into areas that require no technical skill, or very little. The new mantra is: Just switch to creating information laden or financial products that only need the agreement of a few in power and the skill set of an alley cat. The short term results of changing the company's focus are spectacular, when they reach the near term bottom line for the enterprise. The shareholders, the customers (a different set of customers of course), and the management stand to profit beyond their wildest dreams. The "method of steepest descents" takes you to the nearest local minimum (or maximum in the case of profits.) It is unlikely to be the actual maximum for profits in the longer term, but the long term is years away, since spending money now on research and development, so necessary for maximizing future profits, reduces this year's profits. Not to worry. It's not on my watch man!

Once you have the keys to the candy store, who needs to manufacture candy? And then later, comes the new paradigm realization, that it's even more profitable to sell the illusion, the smell of candy, and no candy to back it up. That's much more profitable. And apparently legal. I suppose it depends on who is writing the laws. Just walk around Kendal Square, near MIT, in Cambridge Mass, and inhale the wonderful Necco factory aroma to get that paradigm message. It does smell good. But, I digress. Please forgive me.

Not 20 years earlier than my first True Value hardware store "stock characterization counting" in Lynn, this country was the greatest manufacturing giant the world had ever seen. In my childhood it was known as The Arsenal of Democracy. This country has undergone a major change, to put it mildly. No one I know thinks the results are an improvement. The implications for the future are equally vast, and left unchanged, much worse.

Don't we need to ask, how did this happen? And, why was it allowed to happen? What are the implications and inexorable concomitants that cannot any longer be avoided by ignoring the reality and enormity of this "event"? It has unfortunately turned out to be one of the four or five major events of my lifetime. If you are in your fifties or younger, it may be the the single most important event of yours. "Event" is not the right word. Would "Change" be more accurate or meaningful? We are witnessing the final chapter of a major change in the "book of business" of this country. It didn't just happen by chance. It is the result of concerted national economic and social policy. An important part of the basis for this policy was, and still is, the belief of a new group of economists, whose main center of learning was in Chicago, that we should stop manufacturing any item in the US that could be done more cheaply (they use the word "efficiently") in any other country in the world. The US would be fortunate to enter the Information Age, and become the first Post Industrial Society.

We will have to explore a bit the implications of their definition of "efficient" in economics. This is not nuclear physics, and it is not rocket science, but it is extremely important to our day-to-day, year-to-year and decade-to-decade well being and happiness. Or is the pursuit of happiness no longer a motivator in the post industrial world? Shades of 1984 indeed! Unfortunately we are the target of this economic rocket and it is carrying the economic equivalent of a nuclear weapon on our used-to-be way of life.

Here are other questions we need to address:

Is efficiency as defined by the Chicago School a reasonable definition of efficiency? What key elements, crucial to The American Dream, or any Sane Society does it ignore?

What is the actual impact of manufacturing and manufacturing jobs on national wealth, not just short term corporate profits?

Do we understand that manufacturing jobs are crucial to maintain within our country if you want to dominate design fields? (Hint, the answer is "Yes, some of us do.)

Since they are a crucial part of job formation and "job retention," aka "Job Sustainability,"of many blue collar, well paying jobs, what steps are needed to rebuild our manufacturing sector to at least be able to supply our day to day needs as a society? (We can identify those.)

Is it true that the steps needed can result in creation of sustainable good incomes with reasonable growth? (Hint, the answer is yes.)

Is it also true that doing the steps is a lot cheaper than borrowing vast sums to mitigate the collapses that the financial wiseguys can bring upon us if we don't stop this foolishness? (Hint, the answer is yes.)

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