Huffington Hysteria

HuffPo has so much to offer us, but an article run in today's business section can only be described as hysterical. View it here.  It describes the dire consequences of the decline of the industrial side of the U.S. economy.

In reality, there is no such decline except in relative terms. With less than 5% of the world's population, the U.S. accounts for almost 25% of the world's industrial output. China, with 24% of the world's population accounts for about 18% of the world's industrial output.

Additionally, U.S. industrial output has grown every year since 1990 (at least) even through the current recession.

SOURCE: http://investing.curiouscatblog.net/2010/02/17/usa-china-and-japan-lead-manufacturing-output-in-2008/

Industry is not going away. What will go away are the number of jobs provided in the manufacturing sector. As advanced economies automate and robotize their industrial plants, fewer and fewer people will be needed to work in them. This is roughly analogous to the 19th and 20th century decline in the number of farm workers or number of deck hands needed to move a given amount of freight tonnage on a ship across an ocean. (Think labor intensive sailing ships versus the mega cargo ships of today that can be operated with a handful of crew members.)

And consider this from MSNBC: "Whereas a Chinese industrial worker produces $12,642 worth of output... in the United States, a manufacturing employee produced an unprecedented $104,606 of value in 2005."

China's growth has been meteoric, no doubt. But, with 1.6 billion people, it's output is relatively puny on a population basis, and by default much of what China produces is consumed at home. (Japan and Germany lead both America and China when it comes to this population-to-manufacturing ratio. Although it should be noted that the manufacturing fraction of the U.S. economy is much smaller than either China, Japan or Germany, which means our economy is much more diverse.)

The United States must stop looking at China's new-found, if narrowly distributed, prosperity not strictly in Yin terms, but in Yang terms as well. It is a new, vast market to conquer and we have many, many goods (and services) China wants and needs.

Obviously, our government needs to be more vigilant about China's unfair trade practices - the renminbi needs to float, for starters - and we must be vigilant about the constant influx of shabby products the Chinese send here.

Reciprocity is the key word and Washington has to step up on the trade issues, even in the midst of all the other wailing and gnashing of teeth rising above the Capitol.

While we certainly have room for expanding our manufacturing capabilities, now is not the time to be acting as if we're on an industrial-strength bad acid trip. Better to ask ourselves what new industries and markets lend opportunity for expansion. Green Tech? Transportation?

The latter is an interesting case and shows why we feel as if we're stumbling. The U.S. dominates aircraft manufacturing. But we are dead last in manufacturing of heavy and light rail components. Why? We have a thriving airline industry at home, but have little in the way of passenger rail service. That's the main reason we have so little in the way of a rail manufacturing sector. Other countries have put increasing importance on rail, creating new manufacturing opportunities in their home countries but abroad as well.

Lack of progressivism hurts us in business as well as social achievement.

Think Local, Ummm… Think Narrow?

(See video at end of post)

On February 18, the New York Times published a profile of urban sociologist, Sharon Zukin, a professor at Brooklyn College. (link) As many of us do, Professor Zukin decries the passing of neighborhoods with special charm and character. But Zukin is wrong; they have not passed. They have moved to northern Manhattan, the Bronx, and countless neighborhoods in Brooklyn and Queens.

From what the Times says of Zukin, one would think that the entire swath of the five boroughs has descended into an 8 million person shopping mall more worthy of Phoenix than the Northeast. What seems closer to reality is that the likes of Zukin keep their middle-class binoculars focused on the old ethnic enclaves of Manhattan and Brooklyn that were made up largely of white ethnic groups. 

To cite one "colorful" ethnic group - Italian Americans - not very long ago, there were about 2 million people of Italian descent living in the 5 boroughs. Now there are about 625,000. (However, there are 3.3 million Italians living in the overall metro area.) To greater or lesser degrees, this holds true for the Jewish, Irish, German and Slavic populations. Of course their descendants are living in New York City, but they are more homogenized, less colorful and thus less able to lend their old neighborhoods ethnic flavor. As a coda, in the last census estimates, fewer than 100,000 people living in Manhattan identified themselves as Italian-American.

Yet we know that there are ethnic groups abounding in the great metropolis.

New Yorkers speak 170 languages in their homes and there are about 275 ethnic newspapers and magazines published here in 40 or so different languages. The striving, struggling and dreaming goes on, just not in the narrow confines of the Village, Soho or Noho, or formerly German/Slavic Yorkville on the Upper East Side. But, from what The Times says of Zukin's point of view, one would think that the entire swath of the five boroughs has descended into an 8 million person shopping mall more worthy of Phoenix than the Northeast. Nothing can be farther from the truth.

A visit to most of Brooklyn, the Bronx, and especially Queens - the most ethnically diverse county in the country - will confirm this. Ya want ethnic flavor? Get out of town!

Behind the picturesqueness or lack of same, however, comes a portrait of the new ethnic individual, however. A majority are working class, but they are not employed in manufacturing since New York's factory world has been disintegrating since World War II. Now there are less than 100,000 manufacturing jobs here, a loss of 1,000,000 since 1942.

The European-American, hearty lunch-pail image of the New York that we know so well from movies like On The Waterfront and The Naked City is gone for the foreseeable future. 

30% of people with less than a high school diploma who are employed at all, work in manufacturing. The remaining low skill workers toil in the food service industry, retail, and menial labor jobs. Since manufacturing jobs traditionally pay more than those other categories, this does not bode well for us. The difference, once upon a time, between a white collar professional and a skilled blue collar worker was largely a matter of luxury income. Now the chasms are gargantuan. (The blue collar workers of the building trades, and the light blue collar telecommunications and health care fields somewhat ameliorate the situation.)

Is the flavor of Manhattan below 110th Street becoming Walmarted? It surely is. Can that be governed? Probably not. The chaining of America is not a micro, but rather a macro trend.

To recreate the faded industrial era, one would have to bring back the garment industry that once made 70% of all women's and 40% of all men's clothing in the country. Or bring back the dozen and a half big breweries from Rupert's to Rhiengold's to Lion's. Or the slaughterhouse and meat packing business. And shipbuilding, brick making and railroad tie making.