Friday, March 27, 2009

Why It is Crucial to Maintain Manufacturing Plants and Jobs In The US If We Wish to Retain Related Design Jobs

My previous post ended with a number of questions. Let's consider one. I will restate it for convenience and clarity.

Do we understand that it is crucial to maintain manufacturing jobs within our country if we want to dominate related design fields and keep those jobs in the US? (Hint, the answer is "Yes, some of us do.) Why do I pose this as a question? Simply because this experienced fact known to every fashion and every industrial designer, is in complete disagreement with the current paradigm, that I admiringly call "The Chicago Economic School's Standard Business Model" (CESSBM.) They have Nobel Prize winners aboard, so they have cachet and respect and admiration. However they have very limited knowledge and understanding of the design field. (Do they even watch "Project Runway"?) Certainly no understanding of any field where both the "raw materials," i.e. hardware and software used in the design, and the resulting designed product are in fact manufactured products. Design fields where this is true include women's clothing fashion design, computer chips, network computers, missile design, automobile design, aircraft design, office design, etc. The list of design fields for which it is true is long and very real.

Now let's list some design fields where dominating the manufacturing industry does not make the design field fall into your hand like a ripe plum off the tree... There must be quite a few, since the "Chicago Economics Group" says it is the norm that giving away the manufacturing industry leads to ensuring and maximizing control of the design process and the retention of all the design jobs for lots and lots of designers making good money. They claim you will have a much more focused effort and therefore a tighter grip of the design field.

I can't offhand come up with a good example. I am at a loss... Can someone help me out here. Does someone know of any field where this is, or was, actually the case?

The (CESSBM) also claims that US workers are much more innovative, and that training foreign students in our schools will have no negative unintended effects on our industry when they return to their countries of origin. Is that even politically correct? PC or not, it is totally false! Engineers from all over the world with whom I have worked are sharp as tacks.

So, why and how is it that shedding control of the manufacture of a product gives your company or your country an advantage in retaining and expanding quality, well paying, jobs in the associated design industries?

I cannot think of even one reason or example, so let's see what manufacturers and designers themselves, in a few disparate fields, say about that.

Women's Clothing, The Fashion Industry of New York

Anna Sui, a successful New York Fashion Designer was born in Detroit and educated at Parsons School of Design, Ms. Sui made all the journeyman stations of the cross before achieving overnight success when she was close to 40. Her company is privately held and remains profitable, she says. (Dun & Bradstreet estimates annual sales of $20 million.) Her clothing label is substantially underwritten by earnings from the 14 global fragrance and cosmetics licenses she operates in partnership with Procter & Gamble and her 42 store franchises in China, Japan, Taiwan and Kuwait. — Excerpted from a New York Times article titled “Testing Her Strong Suit,” by Guy Trebay, The Times, Feb. 12, 2009. In the article, Ms. Sui points out

“It’s not just designers who are affected,” by the impact of the economy on fashion, she said. As a longtime advocate for preserving the Garment Center, Ms. Sui is attuned to the perils to the industry over all when any designer or collection fails. Long before the recession hit, high rents had driven businesses out of the area. Employment in the apparel trade has shrunk drastically from its 1950s peak of 250,000 jobs to fewer than 20,000 today."

Now here is the key point:

"Without a production core, it becomes increasingly difficult for young designers to set up shop in the city," Ms. Sui said. “When I was starting, there were wool mills in the U.S. that could make you anything. The U.S. used to produce the most beautiful cotton denim in the world. Now all that is gone.”

The article continues... A person walking down Seventh Avenue runs little risk anymore of being mowed down by a pushcart. Just a handful of workrooms remain that can whip up custom trimmings, and there are few skilled workers capable of operating the bulky machinery required to make gossamer fripperies like Schiffli lace. Come 2010, when the runway shows move from Bryant Park to Lincoln Center, the last symbolic link between Seventh Avenue and Fashion Week will also be lost.

Fashion was a radically different business when she was starting out in the 1980s, Ms. Sui said — less corporate, more subject to the whims and intuitions of gifted merchants and also influenced by the fact that department stores could still afford to showcase unknowns thanks to open-to-buy budgets.

“Every decision is harder for everyone to make now because things are so expensive,” Ms. Sui said, referring both to the steep cost of retail goods and the expenses designers incur to produce and mount collections two times a year.

A New York Times article titled Rents Falling In New York's Garment District , observes that

High rents are hardly the only problems plaguing the city’s fashion industry. Employment in the apparel trades has been shrinking drastically for decades, as tens of thousands of jobs have moved to China and other low-wage countries. After peaking around 275,000 in the 1950s, the number of apparel manufacturing jobs in New York has steadily declined to around 20,000 today, according to Barbara Byrne Denham, the chief economist at Eastern Consolidated, a New York broker.

Some fashion designers like Ms. Nanette Lepore, a New York fashion designer who manufactures 85 percent of her clothing line in almost 30 independent factories within a few blocks of her office on West 35th Street, says that unless the remaining core apparel industry is preserved, it will be difficult for them to design their fashion lines in New York — and next to impossible for young designers coming out of school to set up shop in the garment district, which spans the West Side of Manhattan on streets numbered in the 30s.

Computer Processor Chips:

Is Intel pushing to divest itself of chip manufacturing so it can do even better at design? Or is it finding and hiring the best design teams and providing them with state of the art manufacturing facilities to work with? It's the latter. Intel, a multinational company, has manufacturing and design teams in close proximity in the US, and in India, and in Israel. It is running into significant challenges from Taiwan, where other companies outsourced to separately owned Taiwanese companies to manufacture computer components. As a result, control of network computer design is rapidly evolving to Taiwanese hardware and software designers.

In an insightful article in Wired magazine The Netbook Effect: How Cheap Little Laptops Hit the Big Time, Clive Thompson writes:

"In The Innovator's Dilemma, Clayton Christensen famously argued that true breakthroughs almost always come from upstarts, since profitable firms rarely want to upend their business models. "Netbooks are a classic Christensenian disruptive innovation for the PC industry," says Willy Shih, a Harvard Business School professor who has studied both Quanta's work on the One Laptop per Child project and Asustek's development of the netbook."

" Clive Thompson then drives in to the key point: "The Taiwanese firms, Shih argues, now have enormous clout in the PC industry. In the US, we regard branding and marketing—convincing people what to buy—as core business functions. What Asustek proved is that the companies with real leverage are the ones that actually make desirable products. The Taiwanese laptop builders possess the atom-hacking smarts that once defined America but which have atrophied here along with our industrial base. As far as laptop manufacturing goes, Taiwan essentially now owns the market; the devices aren't produced in significant volumes anywhere else."

Here he really rubs it in:

"If you had asked Taiwanese hardware CEOs a few years ago about their relationship with Dell, HP, and Apple, they'd have told you that the American companies did the branding and sales while outsourcing their design and production to Taiwan. Today the view from Asia is increasingly the reverse."

"When I talk to them now," Shih laughs, "they say, 'We outsource our branding and sales to them.'"

Well now, to me, that says it all... In a relatively short time, the manufacturer inevitably sets the rules.

So we have seen that in computers and in fashion, design jobs physically follow the manufacturing jobs. The Chicago Economic School's Standard Business Model (CESSBM) that claims they are spatially decoupled is dead. The facts do not support CESSBM dogmas. The facts always rule.

If you want sustainable design jobs in your country or company, you had better retain the manufacturing jobs, since they are key to all wealth producing activities, and well paying blue collar jobs, as opposed to lower paying service industry jobs.

But you will say, (assuming you have internalized the Chicago school of economics dogma,) we got rid of our "low margin jobs" and kept the good jobs. There was nothing about these jobs that was "low margin" until the government decided to remove all equalizations because of differences in wage scales. Suddenly, "unfair competition" became acceptable and desirable Our Japanese competitors (head of Sony) thought our policy was madness, but he raised no voice of protest. All's fair in love and insanity.

The lobbyists for the multinational manufacturers say in addition to getting rid of these "low margin jobs," in favor of the remaining good jobs, the US was now free to concentrate on creating lots of new high paying, high skill, "post industrial jobs." The remaining good, i.e., "high margin jobs" are meant to include design and production of aircraft, and automobiles for example. The even better new "post industrial" jobs include the creation and sales of derivative type investment vehicles and credit default swaps. (The Government and financial whiz kids at the bloated banks did not even understand why the latter instruments could not possibly reduce risk, and, of course they did not reduce risk. I may get around to explaining why that was obvious to anyone who looked at them even casually, as I did). Remind me if I forget.

As an aside, I discovered that, being a Physicist trained in systems engineering, made it easy to see things not visible to economists and financiers. I will only explain that, if asked. It's a really big deal, and President Obama and Treasury Secretary Tim Geitner do need to understand it. Their current economist advisors with their Chicago Economic School's Standard Business Model (CESSBM) do not. That's a guaranteed lock!

I should make it clear that the close relationship between manufacturing and design; and the need to have them in close proximity is well understood by technical people. Clearly the current crop of economists do not get it. I assume that is because most economists advising the US Government have not produced anything, so they have no technical or factual knowledge concerning it at all... Just dogma! Unfortunately it's the wrong dogma, and it's toxic.

To see for yourself that what I am saying is well understood by tech folks, take a look at this website assessing the likelihood of finding design engineering jobs The article, written before 2006, states:

" Additionally, some companies use design firms overseas, especially for the design of high-technology products. These overseas design firms are located closer to their suppliers, which reduces the time it takes to design and sell a product—an important consideration when technology is changing quickly. This offshoring of design work could continue to slow employment growth of U.S. commercial and industrial designers."

"Despite the increase in design work performed overseas, most design jobs, particularly jobs not related to high-technology product design, will still remain in the U.S. Design is essential to a firm’s success, and firms will want to retain control over the design process."

Job prospects.

"Competition for jobs will be keen because many talented individuals are attracted to the design field. The best job opportunities will be in specialized design firms which are used by manufacturers to design products or parts of products. Designers with strong backgrounds in engineering and computer-aided design and extensive business expertise will have the best prospects."

"As the demand for design work becomes more consumer-driven, designers who can closely monitor, and react to, changing customer demands—and who can work with marking and strategic planning staffs to come up with new products—will also improve their job prospects."

"Employment of designers can be affected by fluctuations in the economy. For example, during periods of economic downturns, companies may cut research and development spending, including new product development."

Source: Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 2008-09 Edition

So as you can plainly see, even the government knew it. However the US Government for the last thirty years at least has continued to actively push for the movement of manufacturing jobs to locations in other countries where the cost of labor is lower.

Who benefits from this? Its main beneficiaries are the multinational companies whose profit is raised dramatically through a lowering of their labor costs, and a happily gratuitous lowering of their corporate taxes. Their Management team benefits, and so do their shareholders. Workers clearly do not. It is the major reason that the real wages of American workers in the US have not risen, and have even declined, while the incomes of wealthy non-wage earners has risen dramatically. Municipal, State and Federal corporate tax revenues from these companies do not benefit. The manufacturers spin this as good for the consumer, since prices for goods do decline. So yes, the consumer does benefit from the lower prices. However that is more than offset by the loss in real income, combined with the hidden costs to the same consumer of degradation of the infrastructure, public buildings, services to the poor, services to the middle class, lowering of healthcare and other benefits to all; the disproportionate income taxes at the lower levels, and the increase in sales taxes, education costs, health costs and property taxes. The float was kept going by the apparent rise in the sales prices of houses. The rise in perceived value of their houses was a Ponzi scheme of gigantic proportions. Those rising house prices pushed by risky mortgage terms enabled the government to claim the GDP was rising steadily, when it was not!. The Ponzi House Price Rises orchestrated by Government and its agencies, enabled the spin to be continually pushed by multinational manufacturers, their lobbyists and the esteemed Chicago School Economists, who, unfortunately are still the President's Advisors.

Why do I say "unfortunately"? Because their weltaunshang, i.e. the CESSBM leads to preventing the rapid creation of lots of high paying jobs that are sustainable. It seeks to get rid of such jobs as demonstrated by history and many public statements. Plus, the remedial approaches floated and implemented to date are accompanied by the semi permanent need for a long term dole, which, is unsustainable.

No comments:

Post a Comment