95 Comments

1. Fred:

The Titanic is sinking. Let’s lash all the lifeboats to the side to keep it afloat. Yeah, that’ll work.

Good companies will be starved for cash because it has been diverted to GM. Lots of non GM jobs are at risk.

Nov 17, 2008 - 1:46 pm 2. Bohica:

If only I were childless. I might then find it amusing to watch the left-wing Dem leadership’s emotional call to save the icons of American industrial might. But I do have kids and grandkids - lots of ‘em. And I will fight the urge to puke when I hear their indignation because I’ll know who the pupeteers are who are yanking their strings.

Nov 17, 2008 - 1:59 pm 3. DanM:

The Social Engineering of our economic system has never been more glaring. What remains astounding is the lack of spotlight on the cause of our “malaise”. Once again, thank you for your perspective, Wretchard.

Big ideas bring either dramatic or disastrous results. Anyone remember the first time you brought a “Big Idea” to your boss? Remember the reaction? I’d bet the reaction was “simmer down there..”. If it wasn’t, your boss was a rube…

Nov 17, 2008 - 2:01 pm 4. Eggplant:

I understand that many basic industries are unprofitable, e.g. steel making, ship making, automobile manufacturing, etc. For years, I’ve heard this matra that because manufacturing is unprofitable, we need to become a “service economy”. The implication is that we can all make a living selling life insurance policies to each other or working as waiters in restaurants. However to my ignorant way of seeing thing, a service economy is essentially parasitic (it doesn’t produce anything that’s real). At the source of the economic process, someone(?) produces the wealth that keeps the service economy alive. Why can’t we be that source of wealth? Why are we obligated to be parasites?

IMHO, this stuff about “service economy” is a nasty deception. The not so hidden agenda has been to transfer America’s accumulated equity to the developing world as we de-industrialize. The people pursuing this agenda have been skimming off their 2% fee and doing just fine thank you. Why the rest of us sheeple have permitted this is a deep mystery to me.

Nov 17, 2008 - 2:02 pm 5. Zim:

Bacteria have something called an SOS system. When the oranism is under assault it will begin grouping chains of ammino acids together in a desperate hope that a new DNA strand will survive whatever is killing it. 99.9999 etc.% of the time it fails and the bacteria dies. However, occasionally one will survive but as a wholly different creature than the pre-assault organism.

Bacteria understand capitalism and the free markets. Humans use to and will again, or die.

Nov 17, 2008 - 2:06 pm 6. trangbang68:

Eggplant, Cogent analysis. I also have wondered for many years how we can survive as a prosperous society manufacturing nothing. Not to mention the strategic implications of having no industrial base if we need to get on a wartime footing. Will China or Mexico make our next supply of Higgins boats?
Look at a Youtube video of Niagara Falls, New York urban blight. I grew up there when the factories were cranking out petrochemical products. Now the once decent working class neighborhoods are boarded up ghettos and the factories sit rusting and vacant.

Nov 17, 2008 - 2:27 pm 7. ADE:

Eggplant,

The reason the number of service jobs increases is because we have increasing numbers of machines to do the production. Hypothetically, if we have the right number and type of machines, we can eliminate work completely, even waiting in restaurants. Nothing wrong with that.

Ultimately, humanity will end up as brains in jars, with vital fluids (eg alcohol) pumped in at just the right doseage.

I’m half-way there already.

ADE

Nov 17, 2008 - 2:37 pm 8. DanM:

Eggplant, trangbang68,

The answer is, we can’t without a global economy with us as the head. When China and India overtake us in education and experience (which has us on the trailing edge of a bell curve and China/India on the leading edge), we must drive our wages down or our cost of goods down (re-build manufacturing base)to compete for a finished good sale.

I put experience in the mix to emphasize the need for experience in manufacturing any good - or service. When it goes away, the ramp-up time is a profit killer. This will drive any sane person away from the endeavor.

Nov 17, 2008 - 2:43 pm 9. Eggplant:

ADE said:

“The reason the number of service jobs increases is because we have increasing numbers of machines to do the production. Hypothetically, if we have the right number and type of machines, we can eliminate work completely, even waiting in restaurants.”

A problem with that economic model is the factories are mostly in China. Also it appears that a Chinese industrial slave (subsistence wage unskilled worker) is cheaper to pay for than a robot.

DanM said:

“The answer is, we can’t without a global economy with us as the head.”

I remember hearing that bit of nonsense when they were selling us the Dot-Com, i.e. we would all become “knowlege workers” (A bit like Hitler telling the unwashed semi-educated masses of Germany that they were all Uebermenschen). I wonder what half-assed story Obama will tell us?

Nov 17, 2008 - 3:12 pm 10. Peter Boston:

You don’t have to be a financial genius to figure out that loaning more to a company than the aggregate value of its capitalization is not a good idea. Stock investors already figured out that GM was de facto bankrupt some time ago.

Bankruptcy seems the better route. Honda or Toyota could pick through the pieces, renegotiate union contracts, and keep at least some of the car manufacturing divisions in business along with the factory employees and third party jobbers.

Is there any reason to believe that a massive cash infusion now would make GM any more profitable that is has been the past several years? If not it’s throwing money down the hole to make a few more paydays.

One of the massive crimes of our times is that pension money is not put in trust, out of the reach of corporate and union raiders.

Nov 17, 2008 - 3:24 pm 11. Peter Boston:

Does anybody really know the numbers for manufacturing?

I heard on an economics podcast recently that Switzerland has the highest per capita of manufacturing jobs in the world. That was unexpected. Is the state of US manufacturing equally underrepresented?

Nov 17, 2008 - 3:28 pm 12. Eggplant:

Peter Boston said:

“Bankruptcy seems the better route. Honda or Toyota could pick through the pieces, renegotiate union contracts, and keep at least some of the car manufacturing divisions in business along with the factory employees and third party jobbers.”

I’m compelled to agree. Now I have to ask: Why are the Japanese better at managing car companies than Americans?

Nov 17, 2008 - 3:29 pm 13. Eggplant:

Peter Boston asked:

“I heard on an economics podcast recently that Switzerland has the highest per capita of manufacturing jobs in the world. That was unexpected.”

I don’t know if that is true but it has a “ring of truth”. However the Swiss economic model is “different” in many ways. The Swiss play nasty tricks with their guest workers to keep their own citizens fully employed. Also Switzerland does a brisk trade in the high quality armaments business (SIG makes excellent rifles). I would not be surprised if a significant fraction of their manufacturing was infantry rifles and artillery rounds.

Nov 17, 2008 - 3:37 pm 14. peterike:

Eggplant,

Well said. Why exactly have we sold off much of our manufacturing? Ok sure you can go into WalMart and get a foreign made t-shirt for five bucks. But the real result of that is that Americans have closets full of clothes they don’t need, and damn near every American kid outgrows a pile of clothing before he ever wears it. It fosters terrible habits of buying and wasting.

On the other hand, we could have kept all those t-shirt manufacturing jobs in the US. Maybe your t-shirt would be $20 instead of $5. Would the result be you went about naked? No, you’d have five t-shirts instead of 25 t-shirts. An American would have a well-paying job and we’d save vast amounts of garbage.

Of course, the biggest thing you’d lose is that the owner of the t-shirt company would only be well off, and not a multi-millionaire.

And it’s not just low-end work like t-shirt making. I saw it first hand when I worked at Lucent, a company run by the Sopranos of technology. What was once arguably the greatest center of technical knowledge, innovation and expertise in the world — Bell Labs — got turned into a chase-the-money scam of selling junk that didn’t work through the miracle of “vendor financing.” Oh them were great days!

If you never heard of it, it went like this. Here comes the Lucent sales rep….

Hello Mr. I-want-to-start-an-internet+phone-company-in-Tier2-and-Tier3-cities. Don’t have any money? No worries! We will loan you twenty million dollars which you will then give right back to us in the form of a ‘purchase.’ We will then ship you a bunch of junk that will sit in a warehouse and never be installed. Then we will loan you five million cash money for operating expenses. We will give you ten years to pay it all back. Forget that you don’t have anything remotely resembling a business plan. Heck, we all KNOW you don’t even have a way to bill your customers, but you will never HAVE any customers! Wink wink.

Meanwhile, the sales weasle got commission when kit went out the door — not when it was paid for! Lucent listed exploding “earnings” (ha ha ha!). The stock shot up, and the Mafiosi in charge of it all made millions as far as the eye could see.

Meanwhile, they shiped every job they could to China and India. Gotta cut costs you know so the stock goes even higher, making the few richer still, while great paying American jobs vanish by the tens of thousands. Meanwhile, the rock-solid quality of Bell Labs products — shoot a bullet in the thing and it keeps going — dropped dramatically as soon as it hit the Paradise of Cheap Labor.

Oh yeah, then it all went to hell when the ponzi scheme exploded, as they always do.

And let’s not even discuss the fact that so much of our critical high-tech components are now made by the Chinese and programmed by the Indians, either of whom could cripple our data communications by just saying “sorry, we’re not shipping you any more stuff.”

End of the story is that Lucent got sold to a French company. What a disgrace the whole thing was. In a sane country, the entire executive management of Lucent would be in prison for the rest of their lives. Instead they are living the good life in their mansions.

The moral of the story. Many of the people who run American businesses stopped being Americans when they realized they could betray their country for a bag of gold. It’s as simple as that. And now one of their ilk just got elected President.

How do you shut the barn door when you don’t even have a barn anymore?

Nov 17, 2008 - 3:40 pm 15. trangbang68:

I work as a carpenter/ woodworker. We ship trees to China, they ship back finished products cheaper than we can make them. That is in an industry that doesn’t pay particularly well here and is short on benefits. The quality of the doors is pretty atrocious. A lot of the driving force in globalism seems to be the bottom line; the cheaper the better.
With Obama kissing union bootie , the auto industry will suck tax dollars down the rat hole until nothing will save them.
Maybe we should try what someone suggested here a while back. Take the 700billion and divide it up amongst legal working adults and let them pay off their mortgages, college loans,etc. It’s better than some pimp on Wall Street stealing it.

Nov 17, 2008 - 3:42 pm 16. A Conservative Teacher:

I posted about this yesterday. Being from Detroit, this is all the news. The angle I want put forth is that what killed the auto industries was not ‘the market’, but government. It’s regulation, its oil policies, its support of unions, its CAFE standards- that is what killed GM, Chrysler, and Ford. Don’t blame the market on this one- we have to break the cycle of government killing industries and bailing them out with taxpayer money, acquiring more power in the process (leading to more failures, more bailouts, etc).

Nov 17, 2008 - 3:49 pm 17. RWE:

You can understand Moore perfectly if you saw an interview with him about 15 years ago. He started off by proudly saying that his family was with the UAW and that they “shut down these plants with our demands in the 60’s.”

Then he vented real anger, complaining that the auto companies had shut down the plants permanently and moved them elsewhere. “They were making enough money! They did not have to do that!”

One of my Masters program professors worked in the auto industry for years. He told us that reducing the cost to produce a car by 5 cents was a very big deal “People will kill for a nickel.”

Add these two views, Eggplant, and you have the answer to your question. One of the things I like best about Toyotas is that they don’t look or feel like they were built in plants where the workers were proud to have shut the place down or where management constantly looked for a way to literally save a nickel.

Nov 17, 2008 - 4:03 pm 18. Eggplant:

Trangbang68 said:

“We ship trees to China, they ship back finished products cheaper than we can make them. That is in an industry that doesn’t pay particularly well here and is short on benefits. The quality of the doors is pretty atrocious. A lot of the driving force in globalism seems to be the bottom line; the cheaper the better.”

I have a problem with buying foreign tools. I was once prepared to pay 10% more for a tool of equal quality if it was “Made in America”. Unfortunately I now find myself in the situation where the foreign tool is of superior quality to the American version and costs significantly less. I now feel like a sucker/idiot when I buy American tools. If you don’t believe me, go to your local hardware store and price a 1/4 inch drill bit, USA versus Chinese made (the Chinese drill bit will probably have a superior coating on it and cost significantly less). It’s frightening how badly we have had our doors blown off by the Chinese.

Of course, the “good news” is that decent quality tools are incredibly cheap. That was the bait for the trap that we now find ourselves in.

Nov 17, 2008 - 4:14 pm 19. Peter Boston:

It seems that we are becoming a rent-seeking autocracy where those groups that neither produce goods nor entrepreneurial organizations - lawyers, union bosses, environmentalists, and social theorists - have the most input on policy making and national treasury expenditures.

The anointing of a community organizer and the savaging of an accomplished executive in the same election is pretty good evidence of same.

Nov 17, 2008 - 4:21 pm 20. Eggplant:

RWE said:

“One of my Masters program professors worked in the auto industry for years. He told us that reducing the cost to produce a car by 5 cents was a very big deal “People will kill for a nickel.””

One of my hobbies is fixing old cars (I drive around in old junk heaps). I have the greatest respect for automobile engineers. The bit that I enjoy the most when swapping out a worn out engine, is dissecting the old engine and studying all the clever tricks the engineers dreamed up.

Automobile engineers have an incredibly difficult job. Their designs need to work reliably for about 200,000 miles, not kill their owners and be usable by half-wits. Add to this that a typical production run for a successful model might be 100,000 cars. If the engineer can reduce the cost of a single car by 5 cents, that represents a profit of $5000. Given that perspective: Why isn’t every penny wrung out of a car’s design such that all cars are garbage? Of course, they try to do that and naturally no one will buy the car if it made too cheaply (the beauty of the free market at work). It still amazes me to see this. We do live in an age of miracles.

Nov 17, 2008 - 4:33 pm 21. whiskey:

Boston is quite correct.

That GM, Ford, and Chrysler should just go under is not smart politics or sound policy — throw about 3-4 million people out of work in a recession. China is spending about 1 trillion USD on make-work infrastructure to soak up it’s unemployment so they don’t get a revolution. It’s dumb to let massive employers fail.

However, the organization of rent seekers as Boston quotes is the problem. Rent-seeking unions and execs. The solution would be to do the following:

1. Inject cash into the companies, that must be paid back in stages, to the US taxpayer, at intervals, over 25 years.
2. Demand resignation with penalties of all top executives.
3. Dissolve the unions at all the Big Three.
4. Form new government-private corporations within the shells of the Big Three, with employees as the owners.
5. All employees make a base salary, with most earnings based on achievable and “Fair” metrics that they themselves can control, i.e. defects per 100 cars for line workers, and so on.
6. Each company has a CEO who works for $1 a year, with all other compensation tied to metrics that are “fair.” Decided upon by public debate in Congress.
7. Regular payments to the US taxpayer scheduled at 5 year intervals.
8. Assumption of pension/health care benefits by US Taxpayer, but requiring “balloon” payment at the end of 25 years in return. Debate in Congress over “fair” levels of benefits/pensions (likely lower than what was negotiated).
9. CAFE and emissiions standards for US autos relaxed for 10 years only.

There are millions of US car owners. They don’t want their manufacturer to go bankrupt and have their cars be essentially worthless. But doing things the rent-seeker way only guarantees disaster. In exchange for bailout money, the government must insist on entrepreneurial “new” Big 3 companies.

Nov 17, 2008 - 4:39 pm 22. RWE:

And by the way, can we knock off the nonsense about how the CAFE standards damaged the auto makers?

If the Big 3 were not able to build fuel efficient cars they were doomed anyway. If they could only make money building large pickups and SUVs they were doomed anyway, because the market for such vehicles fell off a cliff. And besides, the CAFÉ standards did not even apply to pickup trucks over most of their existence. If they got fat and lazy building non-CAFÉ vehicles and could not make the switch – given decades of warning - they were doomed anyway.

It’s not like the Feds required them to build vehicles that only got 12 MPG and then the price of oil went up to $120 a barrel and they were wiped out. It was the reverse. They were told for years to get their act together and their defense seems to be that they did not because they could not make money if they did that. So they were doomed anyway.

It’s a bad thing for the Fed Govt to come in and impose such standards on private firms, but if they had not done so the Big 3 would be in even worse shape.

Nov 17, 2008 - 4:51 pm 23. Sam:

This is why I don’t read Belmont club much anymore. There seems to be a elitist blind spot and lack of common sense. The idea that we can have a high standard of living without industry is stupid. If corporations wish to send all industry overseas let’s change the leaders of our corporations. How about for all corporations that manufacture overseas the highest pay for executives can only be 20 times what the average worker makes. They could always move to China where I’m sure they would be welcome.

Nov 17, 2008 - 5:31 pm 24. Fred:

Sorry Sam, nobody is saying we can do without industry. The point is that industry must be rational. Industry must make good products that can be sold profitably. That is how industry prospers.

The auto companies are not profitable, pick any reason that suits you for that fact but, acknowledge that it is a fact.

If they are not profitable, but are kept going “as is” then they are parasitic on those who are profitable. There is a limit to how much damage the auto companies can do to the rest of the economy before we either say enough or watch the economy collapse.

Nov 17, 2008 - 5:42 pm 25. Sam:

It is my opinion that the people that run the country have not put enough effort into making our industry profitable. They just sub out the work to others ,make a tidy profit ,line their pockets and damn the country. Hence my idea to MAKE IT MATTER to them.
This country was built on high tarrifs so was Japan and Germany.

Nov 17, 2008 - 5:57 pm 26. ricpic:

Hey, what comes first, America or the UAW?

Don’t be stupid! For Dems the answer is a given.

Nov 17, 2008 - 6:06 pm 27. Sam:

I despise the UAW, but they spend their money here.

Nov 17, 2008 - 6:17 pm 28. stu:

This thread assumes that US manufacturing is in the toilet. The facts are that for the last full year (2007) we produced 1.6 trillion dollars of manufactured goods, the largest dollar amount in our history. What has declined is the number of people it takes to produce those numbers. Productivity is the culprit. The less productive jobs such as in textiles have moved offshore and we now devote more of our limited capital stock to producing things like computers. From what I hear employees in the later industry have a more pleasant work environment and make more money than the former.

Nov 17, 2008 - 6:18 pm 29. Mike Sylwester:

Michael Moore’s movie “Roger and Me” is brilliant. Anyone who still has not seen it should rent it and watch an original and thought-provoking masterpiece of film documentary.

Moore himself is a successful example, however, of the economic development that his film criticizes. The left his car-manufacturing company town as a young man and became an investigative journalist, film-maker and political organizer. He became a wealthy entrepreneur in our country’s service industry. He has earned millions of dollars by selling political issues insights and understanding throughout the USA and the world. He employs many people directly and indirectly in his enterprise.

Of course, only a few people will be able to match Moore’s success. Only a few people matched Henry Ford’s success, but Henry Ford was only an extremely successful individual in a huge transformation of our economy to a new stage based on the organized development and mass manufacturing of modern machines.

Nov 17, 2008 - 6:23 pm 30. Mike Sylwester:

Correction: He left his car-manufacturing company town ….

Nov 17, 2008 - 6:24 pm 31. Orphaned Son of Liberty:

Crimee! What have I stumbled into today? Lessee, I have a guy that wants congress to “Debate … over “fair” levels of benefits/pensions” for our auto industry and then we have guy who wants to MAKE IT MATTER by imposing high tariffs, and we have a feller who rants about shipping “our” jobs to China as if they’re ours by divine fiat. Thought this was a laissez-faire capitalist hangout. Did we forget our Adam Smith because Obama was elected or what?

Then the usually cogent Eggplant takes issue with the simple assertion that “The answer is, we can’t without a global economy with us as the head.” (referring to how we can continue to thrive without extensive heavy manufacturing) as if the sentence is a recommendation that we do when plainly it is a truism — we can “trade with furriners” without making anything if the services we provide a desired by those furriners such that they’re willing to trade, say, cars for them. That’s what it means to be “a global economy with us as the head”. Of course the downside to that is that in poor global economic times (read: now) people can do without services much more than they can do without cars.

I don’t think we’re in Kansas anymore….

Nov 17, 2008 - 6:27 pm 32. Sam:

U.S. Department of Commerce reported yesterday that the goods and services trade deficit fell to $711.6 billion or 5.1% of GDP in 2007.
This is bad. The last time I replaced my motherboard it was , as are most, made in Taiwan.

Nov 17, 2008 - 6:41 pm 33. Eggplant:

Stu said:

“The facts are that for the last full year (2007) we produced 1.6 trillion dollars of manufactured goods, the largest dollar amount in our history. What has declined is the number of people it takes to produce those numbers. Productivity is the culprit. The less productive jobs such as in textiles have moved offshore and we now devote more of our limited capital stock to producing things like computers.”

Could you please cite a reference showing this? Shortly after World War II, America dominated the world’s steel, ship and automobile manufacturing industries. We’ve almost been wiped out of steel production and ship building. Other industries such as textiles and white goods have also almost been wiped out. The automobile industry is hanging on by a thread. There is very little margin in making computers. I find it hard to believe that computer manufacture could make up for all those other industries.

Nov 17, 2008 - 6:46 pm 34. Orphaned Son of Liberty:

Sayeth the Eggplant:
I find it hard to believe that computer manufacture could make up for all those other industries.

You need to get out more! There are pharmaceuticals, medical devices, integrated circuits, ATE for IC’s, all sorts of niche high tech machines which have virtually no international competition (USA! USA!). Cars are low tech. Let Mexicans make em.

Nov 17, 2008 - 6:57 pm 35. stu:

#33 see the following:http://www.bea.gov/national/nipaweb/Ni_FedBeaSna/TableView.asp?SelectedTable=2&FirstYear=2000&LastYear=2007&Freq=Year
Some of the bigger ticket names that come to mind are Boeing and Caterpillar. Computers was merely an example. The numerous makers of medical devices and pharmaceuticals are other examples of US manufacturing. The successful auto mfrs. w/plants in the US also contribute to our GNP and high paying blue collar jobs.

Nov 17, 2008 - 7:01 pm 36. RicardoVerde:

The US treasury should buy all of the company stock on the open market and then donate it to the UAW. Sink or swim, it’s up to them.

Nov 17, 2008 - 7:06 pm 37. stu:

As we outsource low productivity jobs we insource just the opposite. In addition to the foreign auto mfrs. producing cars in the South, in my area in southeastern VA German mfrs. of heavy equipment and chain saws and Japanese office products mfrs. provide well-paying jobs and benefits.

Nov 17, 2008 - 7:08 pm 38. Eggplant:

Orphaned Son of Liberty:

I think free trade is a fantastic concept. I also strongly believe in globalism provided it is based upon free and equal trade. However where I have serious problems with globalism is when it is “wealth transfer” masquerading as “free trade”. I remain unconvinced that our “free trade” is NOT “wealth transfer”. The evidence I have seen indicates that we have transfered the wealth accumulated by our fathers and grandfathers to the developing world, e.g. we are not exchanging American made computers for foreign made flat screen televisions of equal value but rather we are buying flat screen televisions on credit and then paying off the credit with American equity. That can only go on for so long before we’ve lost all of our equity.

Nov 17, 2008 - 7:09 pm 39. Sam:

I used to believe in laissez-faire . I once was a Libertarian. I now no longer believe in either. You can’t practice laissez-faire while everyone else is practicing Mercantilism. Being a Libertarian doesn’t work because people always lust after power and their lust is more powerful than your lust to stop them.

Nov 17, 2008 - 7:12 pm 40. armchairpunter:

Manufacturing will return to the States with a vengeance the second our infantilized workforce gets hungry enough to accept the kind of wages that will permit competitive manufacturing. Based on our most recent election, it appears we’re not anywhere close to that level of hunger.

Those bemoaning the rise of the service sector over the manufacturing sector need to recognize (1) we earn a tidy profit selling our services to the world, directly or indirectly, while much of what we actually manufacture in the traditional (read: not high tech) sectors can find no market overseas, and (2) we are much better off manufacturing nothing than manufacturing a bunch of inferior crap at inflated prices–when you’re losing money on every sale you don’t try to make up for it on volume.

Nov 17, 2008 - 7:16 pm 41. Sam:

Maybe we should do the same with the money center banks? At least the auto manufactures are producing something.

Nov 17, 2008 - 7:25 pm 42. Orphaned Son of Liberty:

Hey, Eggplant.. Guess I don’t see it. Every transaction is based on some guy trading his hard earned bucks for something he values more, or verse vica. So how can “free trade” be “wealth transfer” other than in the tautological sense?? Ever try to buy a container of flatscreens “on credit” ? They get paid off with, guess what?, more bucks. And to the extent that bucks are claims on “American equity” you’re exactly right. But they’re not claims on our souls, they’re claims on stuff we make, or services we provide, to be redeemed when some other sucker thinks they’re worth more than the thing he’s trading for ‘em.

Now there are things to be lamented — sweatshops which lower the cost of goods by treating people like chattel, providing lower prices at the cost of broken souls. But in these cases information is the answer, so long as there is a conscious in us. And we see the results of bringing the harsh light of public view to cases such as these… and sometimes not.

Anyway, my personal advice is only transfer your hard earned bucks to a foreigner when you think you’re taking the sap. That’ll serve us all!

Nov 17, 2008 - 7:25 pm 43. steelerfan:

Largest Manufacturing Output:

Nov 17, 2008 - 7:32 pm 44. steelerfan:

Largest Manufacturing Output

1) United States $1,738B
2) Japan $ 952B
3) China $ 760B
4) Germany $ 643B

Source: The Economist Pocket World in Figures.

China exports cheap labor. As their standard of living rises,which is happening now, their exports will become less competitive. Shipping costs will also revive US industry.

Nov 17, 2008 - 7:37 pm 45. Sam:

Try reading Lessons from Argentina’s economic collapse
http://www.powerswitch.org.uk/portal/index.php?option=com_content&task=view&id=2079&Itemid=2

He talks about how all the food was exported because the land was bought up by their creditors. The path of Argentina is almost exactly the path we are following.

Nov 17, 2008 - 7:45 pm 46. anton:

A good source of manufacturing in the US is the ISM, they survey a host of businesses across the US and track purchases and sales. It can be found at, http://www.ism.ws/ (sorry I’m no computer whiz and don’t know how to do the hyperlink thing) This is a pretty good tracking tool for manufacturing in the US and has some really eye-opening info.
Yes, far fewer people are making stuff in the US but until the last twelve months our manufacturing has been increasing. GM et al are dinosaurs, adapt or die.

Nov 17, 2008 - 7:56 pm 47. anton:

Oh cool it does the hyperlink by itself.

Nov 17, 2008 - 7:57 pm 48. trangbang68:

Eggplant, Disagree regarding the quality of Chinese vs. American tools. Taiwan makes very good woodworking machinery (Jet, Grizzly,Power-matic, even the Ridgid line sold at Home Depot)
Mainland China does not make good machinery and the alloys in their tool steels aren’t very good.Britain makes good tool steel. Their chisels hold an edge, not so Chinese. Chinese bits snap and break easily.
Dewalt and Porter Cable have shifted their portable power tool lines to Mexico. Lets see how that works.

Nov 17, 2008 - 8:00 pm 49. Eggplant:

stu said:

“This thread assumes that US manufacturing is in the toilet. The facts are that for the last full year (2007) we produced 1.6 trillion dollars of manufactured goods, the largest dollar amount in our history.”

I did a bit of Googling and learned a few interesting things. Refer to following:

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=270

Obviously something “broke” in 1976. Now refer to:

http://en.wikipedia.org/wiki/Image:US_Oil_Production_and_Imports_1920_to_2005.png

The “something” that broke in 1976 was our energy self sufficiency.

American Peak Oil is old scandal. We no longer achieve balance of trade because we lost our energy independence. To some extent this explains why we de-industrialized, i.e. a “service economy” requires less energy than a manufacturing economy. When the entire world goes past Peak Oil then global manufacturing will be in crisis.

The $64,000 question: Have we immunized ourselves by going away from energy intensive manufacturing?

Probably not because we’ll still need to buy foreign manufactured goods. Instead of shifting our fossil fuel based manufacturing industry into a service economy we should have maintained our manufacturing industry and based it upon nuclear energy. Making our economy dependent upon foreign manufacturing based upon fossil fuel may have been a serious error.

Nov 17, 2008 - 8:16 pm 50. bobal:

We oot to have a core of companies heer is the United States that co do something. Like GM, Ford, Cat, Deere. Somebodies got to buil our weapsons. I’d bail GM and Ford out, make then reduce the uniion committments, creat some tarrifs on selected imported cars, to heck with Chrysler, unless they may a tank, and stick with Boing, Cat Deere, etc.

Nov 17, 2008 - 8:22 pm 51. Sam:

ouch

Nov 17, 2008 - 8:36 pm 52. Derek:

Two things have hurt US industry. First the high dollar. Right away there was a 10-15% premium on US produced goods. Throw in the artificially low chinese currency, and you have what we’ve seen.

Second is the plethora of rent seekers that are the curse of mature nations. Intellectual property, copyright, liability suits. They add a percentage off the top to any US produced goods. And they make the decision to develop production capacity elsewhere easy.

The manufacturing numbers tell of another trend; the ability to manufacture competitively one offs or very small runs. The equipment is relatively inexpensive, the skillset required offers some protection from competition. If I come up with an idea that will sell in the hundreds, I can manufacture or get manufactured quite reasonably. The provisioning of this industry is huge, as well as the production itself.

Trends in business come and go. I think we may be seeing the peak of extraordinarily large corporations. The margins are low, and they depend on the availability of cheap money to buy or starve out competition, and to bring on overwhelming production capacity. But they are impossible to manage, impossible to turn around or change direction as required in the rapidly changing business environment. And they are easily replaceable. The automotive industry is the first to hit the wall. Wait till retail and distribution has to swallow the realities of the current market.

It’s a good time to be a bankruptcy attorney.

Derek

Nov 17, 2008 - 8:41 pm 53. E. Nigma:

My company does some business with a third tier automobile parts supplier, and they indicated just last week that the people they work with at GM and Ford don’t seem too alarmed at the moment (just last week).
Do they know something we don’t, or are they just stupidly confident?

Let GM and the rest go “bankrupt”. Bankruptcy isn’t the end; it just gives them a chance to re-organize. Let the Federal government pay off SOME of their long term obligations, and pay off some of the companies in their supply chain that also would go bankrupt without payment, so that they can have a chance at positive cash flow after bankruptcy. A lot of their long term obligations are to municipalities that they received tax rebates for to encourage placing factories in those towns, and now the factories are either closed or should be closed (no longer profitable).
Re-negotiate work rules and wages and benefits to be more reasonable with work wages in other “first world” countries, and downsize to fit the market. Hire better management, especially TOP MANAGEMENT. Close down the stuff that can’t turn a profit and re-organize in a form and size that can be profitable. This is where the Federal Government can help; help them with the costs of re-organization AFTER bankruptcy.

Ford and GM are profitable in Europe. Why is that?
GM makes first rate diesel locomotives at EMD, why throw that away?

But don’t enable more of the same by putting money into a bailout that will just need more bailing in 6-12 months.

Nov 17, 2008 - 8:48 pm 54. Bob W:

I think the mission creep “too big to fail” spin being put on the Detroit bailout is worth satirizing a bit. If you are willing to save the pathetic auto industry, then you’re willing to save anything

Nov 17, 2008 - 9:10 pm 55. 3Case:

I like that idea, RicardoVerde.

Nov 17, 2008 - 9:16 pm 56. buddy larsen:

i like RicardoVerde’s idea, too. Give the cars to the UAW, and let the new owners protect the asset value –let’s see what they do –

Nov 17, 2008 - 9:25 pm 57. Dave:

Ludwig Von Dave here: What keeps these messes popping up so frequently is, IMLTHO,
the tax system.

A surprising number of people persist in the illusion that businesses pay taxes. For the umpteenth time, those who buy business products pay the taxes.

But having said that much, it is true that busineeses are handy for collecting taxes. It is a lot easier to collect $100,000 from a moderately sized firm than it is to collect $1000 from 100 customers thereof.

The problem is the notion that business taxation should be on net income. No way.
The tax should be on (adjusted) gross income
and should be paid ahead of everything else,including the payroll. That way, he great externalizing factor (government) stops
intervening along every step of the way.

Do that and the Luddites in both management and labor will have to run away and hide. When everything is after-tax, transparency is the order of the day whether anybody likes it or not.

Same principle applies to foreign goods. Rig a revenue tariff, not a protective one. Simply charge weight and volume fees and grab all the revenue you can. The goods themselves are irrelevant. How much space they take up and/or how much they weigh determines the fee.

This does the same thing to foreign goods as taxing on gross does to domestic ones. All products will be “equal in the eyes of the law” regardless of what them thar furriners say or do.

When the government stops playing favorites, things get resolved very quickly, thank you.

Oh, BTW; If circumstances do warrant governmental assistance for an industry (airlines after 9-11 come to mind) simply suspend their taxes for a specified period of time. The increased cash flow will provide relief without favoring the poorly run over the squared away.

Of course, nothing I am saying here solves the immediate problem of the Big Three Automakers. Time frame is way too short.
However, Chapter 11 is available and will work. When Chrysler got “bailed out” in the early 80s, it was a de facto Chapter 11.

Buddy, 3Case and RicardoVerde; Should the proposal of giving the stock to UAW actually come to pass, why don’t we invest in coin laundries? There will be one ENORMOUS pile of repeatedly soiled underthings to clean up.

Nov 17, 2008 - 10:09 pm 58. buddy larsen:

“Hey, who gotta da book?”

>>”what a da book?”

“Da booka on how to runna da biznis!”

>>”Oh, DAT a da book!”

Nov 17, 2008 - 11:17 pm 59. Eggplant:

Trangbang68 said:

“Taiwan makes very good woodworking machinery (Jet, Grizzly,Power-matic, even the Ridgid line sold at Home Depot). Mainland China does not make good machinery and the alloys in their tool steels aren’t very good.Britain makes good tool steel. Their chisels hold an edge, not so Chinese. Chinese bits snap and break easily.”

A co-worker of mine needed to have big steel forgings custom made so he researched different manufacturers to see who made the best steel. He found out that American steel wasn’t that good and the best steel in the world was made by Kobe Steel in Japan.

My favorite power tool manufacturer is Milwaukee. Unfortunately, Snap-On has allowed their quality to degrade but I like to buy older used Snap-On torque wrenches from eBay and then have them recalibrated. I also like old Starret micrometers (a great American company). My favorite ratchet wrench is my Australian Sidchrome (very clever design). Most Americans have never heard of Sidchrome but they make outstanding tools. I won’t buy Chinese wrenches or sockets because the steel is no good.

Nov 17, 2008 - 11:21 pm 60. John Sabotta:

Perhaps Jenson meant well but this quote

“He wanted his students to understand that when a company makes money-losing investments, the cost falls upon all of society. Investment capital represents our limited stock of national savings, and when companies spend it badly, our future well-being is compromised.”

is very dangerous, as it leads to the conclusion that “society” needs to oversee and regulate what companies invest in, and that there is something called the “national savings” that GM has defrauded by making bad investmewnts.

No. My savings are my own. If I blow every dime on heroin and Lotto tickets, I am the only loser and I must alone take the consequences. I have not imposed a “cost” on society, because no one should be obligated to bail me out. The same is true for GM, and the only problem here is that GM may indeed convince politicians that “our future well-being” is “compromised” and that UAW needs more heroin - sorry, “health benefits”. Then the State will rob us all at gunpoint - or tax us all, if you like the sound of that better - to pay for GM’s bad decisions. It’s the bailout, not the misinvestment, that threatens our future well-being.

Nov 18, 2008 - 4:20 am 61. John Sabotta:

“On the other hand, we could have kept all those t-shirt manufacturing jobs in the US. Maybe your t-shirt would be $20 instead of $5. Would the result be you went about naked? No, you’d have five t-shirts instead of 25 t-shirts. An American would have a well-paying job and we’d save vast amounts of garbage.”

I like the casual way in which Mr. Petericke spends 15 dollars of my money. I wish I could return the favor with his money - I have a whole list of things I think he should spend his money on, instead of all the wasteful stuff he buys now. On the top of the list is “$500 for John Sabotta” followed by “New car for John Sabotta”. Hey, I’m an American too!

Here’s something to note carefully. If someone asks me to voluntarily buy American, I’d consider it. I might even do it. I often do. But if someone passes a law in order to force me to buy American T-shirts, then I will buy Chinese T-shirts even if I have to buy them from a street dealer, and I will do it for the sole purpose of defying someone who thinks he can spend my money for me.

If peterike is asking me to voluntarily buy American, I have no quarrel with him.

Nov 18, 2008 - 4:35 am 62. slade:

The floor traders think the Dow will drop below 8000 sometime next week.

I like the words used to describe the market response to summit meetings - “not impressed.” Stern mistress indeed.

John Sabotta - it’s not a slippery slope so much as it is a calamitous cliff.

Nov 18, 2008 - 6:25 am 63. buddy larsen:

I second John Sabotta, on all counts. “Buy American” is a good motto, and works fine wherever ‘America’ means what you & i know what it is meant to mean.

Wherever it means “good Americans, in order to support those who manipulate patriotism for personal financial gain, want to overpay for goods & services” then it’s become complicated and needs attention case-by-case.

Nov 18, 2008 - 6:25 am 64. slade:

That would be “Harsh Mistress.”

All this talk of power tools and slippery slopes - and Mr. Deliverance upslope - I don’t know, I just don’t know. Dismal tide sort of shadow to it. {I kid of course}

Nov 18, 2008 - 6:36 am 65. ledger:

I think Wretchard covered the Roger Smith/GM/Perot/EDS deal well with the main idea of diversifying. But that is not all (it also included operational efficiencies). There was huge fundamental cost containment problem in all of GM’s business segments. Smith eventually just kicked the can down the road. GM should probably be restructured from the group up.

Lee Lacocca ran into the same problem at Chrysler where he realized poor electronic data systems prevented him from know the actual average cost per auto (thus, it was hard to price the auto to sell and make a profit).

Although, Roger Smith hired Ross Perot to handle electronic data collection and eventual cost containment problem the endeavor failed due to in-fighting and GM’s entrenchment management.

Here is an outline of Smith/Perot fandango:

1. GM had huge cost problems.

2. Roger Smith recognized more than 100 different computer networks; each represented a different fiefdom, and few could communicate with others [1].

3. Roger Smith bought Ross Perot’s company, EDS to fix the problem [2].
Ross Perot became the largest shareholder of GM[3].

4. Perot determined that Smith and his flunkies were the problem [4].

5. Perot threatened Smith and his flunkies with his block of stock and public denouncements [5].

6. Smith bought out Perot at a steep price to retain his position [6].

7. The problem remains. GM still has bloated costs.

8. Other: Ross Perot’s paramilitary operation in Iran [7].

Note 1.

“…EDS acquisition reveals perhaps better than any of Smith’s other innovations how deep-seated the obstacles to radical change are within GM. The personal dispute between Perot and Smith obscured a deeper war between an aggressive, entrepreneurial culture and the stubborn traditionalism of GM’s management. Smith’s basic notion seemed brilliant. As GM acquired ever more information technologies, its data-processing and computer costs soared out of control. The company had more than 100 different computer networks; each represented a different fiefdom, and few could communicate with others. ”We tried to get control of data processing two times, but we never could,” says Smith. So he bought EDS, recognized as one of the best computer systems specialists in the business, and dropped the whole mess in its lap: some 7,000 GM employees and all the hardware. In effect he spun off a cascading billion- dollar cost problem, repackaged it into an entrepreneurial company highly respected on Wall Street, and then financed the whole transaction by selling a special class of stock tied to EDS’s profits, the so-called GM-E shares. ”It was very clever,” says Ronald Glantz of Montgomery. ”Smith took an expense, capitalized it, and then put a stock market multiple on it.” The financial dividends were just for starters. Smith was counting on Perot, an authentic management and media hero, to lead his entrepreneurial commandos at EDS in helping to transform GM’s old corporate culture…”

See Fortune, 50% down page
http://money.cnn.com/magazines/fortune/fortune_archive/1988/02/15/70201/index.htm

Continued.

Nov 18, 2008 - 6:37 am 66. ledger:

[2]

As EDS grew, it was ever on the lookout for new markets. At the same time auto manufacturer General Motors sought to diversify its holdings. Investment bankers at the Wall Street firm of Salomon Brothers suggested EDS as one of several possible acquisitions. Roger Smith, the chairman of GM, greatly admired entrepreneurs like Perot and hoped that EDS might be able to unify data processing in his company’s diverse operations. Smith did not consult his own data processing staff about the proposed merger. He also apparently was unconcerned by EDS’s lack of experience in the use of computers in design and manufacturing.
After lengthy negotiations, GM purchased EDS in June 1984. Owners of EDS stock had a choice of receiving payment entirely in cash or partly in cash and partly in a new issue of GM stock, designated GME. Dividends from this stock were tied directly to the performance of EDS. EDS executives expected to receive bonuses in shares of stock when their performance merited it. For the 45 percent of EDS stock that Perot owned, he received nearly $1 billion in cash and 5.5 million shares of the new stock. He also remained head of EDS and was elected to the board of directors of GM.
EDS set out to take over all data processing operations at GM.

See note 1.

Cont.

Nov 18, 2008 - 6:40 am 67. ledger:

[3]

Perot largest individual shareholder - but not largest voter.

“…uneasy chemistry between General Motors Chairman Roger Smith, 61, and H. Ross Perot, 56, the company’s largest shareholder…. At a session that Perot agreed to skip, the other members of the GM board voted unanimously to buy back his 11.3 million shares of company stock for $700 million. When GM in 1984 bought Dallas-based Electronic Data Systems, the computer-services firm that Perot had founded, Smith was trying to inject high-tech know-how and a can-do spirit into a stodgy company.”

See: Peace at any price
http://www.time.com/time/magazine/article/0,9171,1582817,00.html

Nov 18, 2008 - 6:43 am 68. ledger:

[4]

[Ross Perot]

…I come from an environment where, if you see a snake, you kill it. At GM, if you see a snake, the first thing you do is go hire a consultant on snakes. Then you get a committee on snakes, and then you discuss it for a couple of years. The most likely course of action is — nothing…”

See: GM Inside news
http://www.gminsidenews.com/forums/f19/very-interesting-interview-ross-perot-gm-51985/?t-51985.html=

Cont.

Nov 18, 2008 - 6:46 am 69. ledger:

[5]

“Smith had been slow to grasp that Perot’s criticisms of the past few months were directly challenging his authority. The article from Ward’s Auto World was tacked to many G.M. office and plant bulletin boards, and G.M. executives, not to mention the board of directors, were puzzled by his passivity. Smith inadvertently had sent a signal to the troops that he was weak and, indeed, might be vulnerable. Now he moved to get rid of Perot quickly.”

See: First page nyt
http://query.nytimes.com/gst/fullpage.html?res=950DE2DE1F31F935A15750C0A96F948260&sec=&spon=&pagewanted=6

cont.

Nov 18, 2008 - 6:47 am 70. ledger:

[6]

“Perot’s war with GM ends in $743 million goodbye. (H. Ross Perot) … find US … The buy-out even included a clause to muzzle the feisty Texas billionaire…”

See: Time
http://www.time.com/time/magazine/article/0,9171,1582817-1,00.html

cont.

Nov 18, 2008 - 6:48 am 71. ledger:

[7]

Jail break by Perot’s military men.

See: wings of eagles

http://www.answers.com/topic/on-wings-of-eagles-film

Nov 18, 2008 - 6:51 am 72. Ben:

Eggplant,

SOME of the service sector is as real as the manufacturing sector. This is something that many don’t recognize.

A couple of tests: When the service is performed, did something increase in value? Even temporarily? Even manufactured goods have a lifespan. If I buy a hand carved wooden lawn ornament, I spend X dollars and the perceived value of my lawn rises by Y but depreciates as the lawn ornament slowly ages and rots. If I spend my money on lawn care services instead, the same thing happens. Why is one real?

Services are “fake” wealth when the wealth they deliver is really zero sum. Advertising, for example. The value delivered by advertising is consumer preference- but this is zero sum, every consumer choice for one product is a choice against another. Simply shown, if the effectiveness of every advertising campaign everywhere were to double overnight, what would be the end result? Nothing at all. Compare to the end result of the effectiveness of all lawn care professionals doubling- we’d have better looking lawns at no increase in cost.

Transport increases value. A given product’s value is subjective, and varies with a lot of factors, one being location. And this is NOT zero sum, this is real. If you were to triple the supply of Gold, but move it all to the moon, it would be worthless. Transporting a material changes part of its description and increases its value, just like a manufacturing process does.

The restaurant industry does it too- in fact, since they take raw materials and sell finished goods, they really ought to be considered manufacturing, not service.

So, tarring the whole service sector as “fake” is not realistic. Some of it is far more “real” than some manufacturing. Of what value is a cheap plastic toy that holds a child’s attention for about 30 seconds before being broken/lost/ignored?

Ben

Nov 18, 2008 - 8:10 am 73. Me:

stu has it right.
US Manufacturing has long since been more than 3 simple industries, Cars, steel and textiles.

The big three should be left to bankruptcy.
Airlines survived, did they not?
IMO, merge to survive.

Nov 18, 2008 - 9:12 am 74. DocBill:

The real issue here is LABOR unions. They area a monoploy in restraint of trade. The Supreme court during the Roosevelt admin. empowered labor and it lead to the destruction of the steel industry, education industry, and now the auto industry. Until the power of labor is broken and the alliance with the Dem. party is shattered we will continue to see the prevention of business leaders making proper management decisions. Yes,yes there are also government regulation of various sorts in autos, like CAFE, etc. but labor is a culture wide problem for every industry.

Nov 18, 2008 - 9:20 am 75. buddy larsen:

Perot, coda:

1) runs for president, gets almost 20% and thus elects Clinton’s 43%.

2) Clinton demoralizes nation via great salesmanship of marxist gospel that man is the high model of the universe and yet nothing more than the sum of his desires.

3) Universe becomes, as a result, rather dull and tawdry, like Dallas.

Nov 18, 2008 - 9:24 am 76. Eggplant:

I tried to post this yesterday but it got moderated away. I’m trying again today as an experiment.

The following graph shows US trade balance as a percentage of GDP:

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=270

Note that “something” broke in 1976. That “something” was our energy independence. Refer to the following:

http://en.wikipedia.org/wiki/Image:US_Oil_Production_and_Imports_1920_to_2005.png

Our energy independence peaked around 1970 and we experienced a significant import spike around 1976 (M. King Hubbert predicted this peak in 1956 through his Peak Oil theory). Peak Oil in the continential United States is what broke our balance of trade.

The discussion becomes speculative beyond this point. My guess is that Adam Smith’s “hidden hand” came into play after Peak Oil. People doing long term economic planning realized that energy intensive manufacturing was a sucker’s bet and began shifting our economy away from manufacturing towards the service sector. Consequently manufacturing went overseas to places like China where the greater energy costs could be offset by cheap labor and high sulfur petroleum. Looking at this with 20-20 hindsight, the United States should have initiated a crash program of converting from fossil fuels to nuclear power in the 1970s rather than remaining with fossil fuels and allowing our manufacturing industry to go overseas. Unfortunately in the 1970s, moonbats more or less controlled the nuclear energy narrative so performing such a massive conversion was not a political option.

The world is now facing a global peak oil crisis. The recent spike in petroleum price was mainly due to speculators and later terminated by the onset of the worldwide recession. However (IMHO) it was global peak oil that initiate the run-up of oil speculation. Supposably Obama took a significant amount of money from the Exelon Corp. as campaign contributions (he probably took even more money under the table). Exelon is a major producer of nuclear power in the United States (could they be the puppet master?). If Exelon bought Obama then maybe(?) the long overdue process of converting over to nuclear power from fossil fuels can begin.

Nov 18, 2008 - 9:44 am 77. nilsonian:

Stalin said the Allies won World War II because they could produce more internal combustion engines than the Germans and Japanese. Sonetimes an insightful statesman.

Nov 18, 2008 - 10:22 am 78. Eggplant:

nilsonian:

“Stalin said the Allies won World War II because they could produce more internal combustion engines than the Germans and Japanese.”

I don’t like doing it, but I have to agree with Stalin. During WW-II, the United States had incredible manufacturing capability. We buried the enemy under the shear volume of our armaments.

Nov 18, 2008 - 10:28 am 79. buddy larsen:

the German Army called it “materielschlagt” –and blamed it for their defeat –

Nov 18, 2008 - 11:23 am 80. Eggplant:

This comment keeps being moderated away and I’m curious about the causes. I suspect there is auto-moderation logic that is picking up on the two URLs in this comment. I am deliberately breaking one of the two URLs (change http to Http) to see if this is the case (apologies in advance to Wretchard if you’ve been manually deleting this comment).

The following graph shows US trade balance as a percentage of GDP:

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=270

Note that something broke in 1976. That something was our energy independence. Refer to the following:

Http://en.wikipedia.org/wiki/Image:US_Oil_Production_and_Imports_1920_to_2005.png

Our energy independence peaked around 1970 and we experienced a significant import spike around 1976 (M. King Hubbert predicted this peak in 1956 through his Peak Oil theory). Peak Oil in the continential United States is what broke our balance of trade.

The discussion becomes speculative beyond this point. My guess is that Adam Smiths hidden hand came into play after Peak Oil. People doing long term economic planning realized that energy intensive manufacturing was a suckers bet and began shifting our economy away from manufacturing towards the service sector. Consequently manufacturing went overseas to places like China where the greater energy costs could be offset by cheap labor and high sulfur petroleum. Looking at this with 20-20 hindsight, the United States should have initiated a crash program of converting from fossil fuels to nuclear power in the 1970s rather than remaining with fossil fuels and allowing our manufacturing industry to go overseas. Unfortunately in the 1970s, moonbats more or less controlled the nuclear energy narrative so performing such a massive conversion was not a political option.

The world is now facing a global peak oil crisis. The recent spike in petroleum price was mainly due to speculators and later terminated by the onset of the worldwide recession. However (IMHO) it was global peak oil that initiate the run-up of oil speculation. Supposably Obama took a significant amount of money from the Exelon Corp. as campaign contributions (he probably took even more money under the table). Exelon is a major producer of nuclear power in the United States (could they be the puppet master?). If Exelon bought Obama then maybe(?) the long overdue process of converting over to nuclear power from fossil fuels can begin.

Nov 18, 2008 - 11:26 am 81. Voice of reason:

Well buddy, Operation Barbarossa and the like might have contributed a tad bit as well to that defeat.
I think that the Germans are being a little less than honest here, but it was certainly a part of their defeat. I do note that they never seem to want to give the American soldier credit for valor and execution on the flied nor acknowledge brilliant leadership on the part of American Generals, but maybe that is just me.

But there is a lesson to be learned form this: Advanced weaponry only counts for so much on the battlefield. Quantity matters too. We seem to have gone down the “super mystery weapons” path of the later 4th Reich. It is nonetheless a scandal that we cannot produce 500 f22 but we can toss money around to those genius on Wall St. and in Detroit. They should certainly be built. But we are playing with our future here.

Ultimately we cannot remain a superpower with out a sound manufacturing base across all industrial products a first rate power may need. That includes ship, steel and, yes, internal combustion engines. It has to be more than high end technology goods.

As someone stated, It is also absurd to imagine that we can somehow be nation of knowledge works or “service workers. Not everyone can be a C++ programmer; iron workers are not cut out to sell life insurance nor do they desire t do so. Perhaps the feminization of our society is caused by the export of good, basic and honorable masculine jobs. Something must also accomodate for rate of industrial change. The rate of industrial change must be dealt with as well. “Policymakers” who think that you can retool a bunch of 54 year olds most likely are under 45 years old. Fail to deal with this and real reform loses another voting bloc.

Somehow this has to be address if we are to retain something close to are postwar position, not to mention our dignity.

BTW, those manufacturing figures above have to include some very large aerospace sales — that cannot be counted on in the future, not can the fact that they are manufactured in the USA.

This is a marvelous thread — just brimming with ideas. Unfortunately, there has to a “national discussion” about this issue (and a great many other issues). This will not come from the Democrats or the media. It is a real opportunity for the GOP to speak in concrete terms about real things. Are they up to it? Seems thy have the same management problems that the Big 3 does.

Nov 18, 2008 - 12:11 pm 82. Voice of reason:

flied=field

Nov 18, 2008 - 12:12 pm 83. buddy larsen:

VoR, that German complaint was only a part of their postwar analysis –they also claimed GI battlefield prowess was due to their having no small-unit doctrine-discipline –presumably making it an ‘unfair’ fight?

I can’t agree with you more re ‘quantity’ –USN’s new brownwater destroyer case in pont –breathtaking capability –but we’re building what two copies? Same with Raptor –iirc, original 400+ is cut to a couple dozen? Great –we can rip the Somali AF, but what about those copius wings of almost-as-good fighters coming off the lines in you-know-where and where?

Nov 18, 2008 - 12:56 pm 84. buddy larsen:

“Somehow this has to be address if we are to retain something close to are postwar position, not to mention our dignity”

Ouch –and Amen

Nov 18, 2008 - 1:00 pm 85. JMH:

The reason manufacturing jobs are moving overseas are:

-unpredictable environmental regulations
-unpredictable legal liability system
-steadily increasing structural costs

Trangbang talked about shipping trees to China so they could ship finished woodwork back. A furniture compnay I used to buy a lot from recently shut down a prodcution line out here on the West Coast and moved that production to China. It wasn’t because of cost though. By the time they paid all the shipping costs, and increased warehouse costs associated with off-shore manufacturing, it was actually slightly more expensive to manufacture in China.

So why did they do it?

Environmental regulations and insurance costs. They use a lot of glues, and really a lot of paints, stains, varnishes and other finishing materials. Most everything you can use to paint or stain a piece of furniture has been labled a hazardous chemical of some sort or other. Just having them on hand exposes a company to legal risk, and the furniture maker’s liability insurance was going to quadruple because of it. Additionally, the costs of disposing of used paint cans, brushes, rags, etc. had doubled, and threatened to double again (and there was even a possiblity it would become technically impossible under State legislation being debated). The company had tried to keep up with changing attitudes about these things, but increasingly found it impossible to predict what their costs would actually be. Continuing to manufacture in the US had become a game of Russian Roulette. It was only a matter of time before the company was wiped out by a lawsuit or a regulatory change. They weren’t big enough or politically connected enough to protect themselves from it. So they became a design-and-import company instead of a manufacturing company.

The Big Three automakers long ago became politically well-connected enough to protect themselves from these risks, but the cost of doing that ultimately had the same result. In order to curry favor with the politicos, the car companies essentially turned themselves into social welfare agencies that made a few cars on the side. Car making was no longer the focus, so no wonder they weren’t very good at it any more.

I’ve yammered on long enough already and didn’t say anything about structural costs, but these are basically the increased costs associtated with decreased efficiency of local government services. Roads, airports, sewer systems, etc. etc., all are more expensive on a bang-for-buck basis than thirty years ago, and this is especially true in the Democrat dominated rust-belt cities.

If we want manufacturing to come back, we need to make our regulatory system and our legal liability system, more predictable, and our local governments more efficient. I don’t know where we will find the political will to do these things, but we’d better find it somewhere.

Nov 18, 2008 - 2:20 pm 86. peterike:

John Sabotta: I like the casual way in which Mr. Petericke spends 15 dollars of my money… Here’s something to note carefully. If someone asks me to voluntarily buy American, I’d consider it… But if someone passes a law in order to force me to buy American T-shirts, then I will buy Chinese T-shirts even if I have to buy them from a street dealer…

I’m not sure where you got the impression that I wanted to force you to buy American made t-shirts. My point was that there was never any reason to move the t-shirt manufacturing to China in the first place. There was no massive t-shirt shortage in the United States. No one was clamoring for cheaper t-shirts. Nobody felt some cosmic sense of loss because their closet didn’t have fifty t-shirts in it.

The manufacturing moved because the owners could make more money. Once somebody started it, the horse was out of the barn and it was off to the races. Had we simply never allowed foreign made t-shirts into the country, who would ever have cared? Who would ever have known the difference?

We also got one of those unforseen side effects. The cheapening of everyday products didn’t result in Americans saving money and investing the difference. It resulted in them wanting more and more stuff. Now Junior has five pairs of sneakers instead of one, and fifty t-shirts, and twenty pairs of jeans, and he gets 20 gifts every Christmas instead of three or four. I think it’s coarsened us as a people and implanted a kind of insatiable desire for things into much of the populace. Who hasn’t seen a spoiled brat little yuppie snotnosed kid wailing in a store when they aren’t handed what they want? I don’t remember a whole lot of that when I was a kid, because you didn’t expect your every material desire to be satisifed, and in fifteen different colors.

I realize this is all just fantasy, because the deed is done. But imagine if the business interests in the US had never embarked on their outsourcing mania simply out of loyalty to the country, and goods manufacturing was by and large left where it was, with imports limited primarily to high-end products (e.g. Mercedes) and regional products (e.g. French wine). I’m sorry but I just don’t buy into the notion that just because something can be done cheaper somewhere, that it therefore must be done there.

Maybe some people think it would be a bleaker country if our lives weren’t buried under a non-stop avalance of cheap new twinkling manufactured goods. I think it would be a better, saner, cleaner, less envy ridden and happier country.

Nov 18, 2008 - 6:07 pm 87. peterike:

Benj, your notion of a resturant being manufacturing rather than service is brilliant. I agree completely.

Nov 18, 2008 - 6:09 pm 88. Dave:

Peterike; That was Ben who made the astute observation about a restaurant.

Or is Ben really Benj in rational guise?

Nov 18, 2008 - 10:32 pm 89. peterike:

Ben not Benj? Yikes. My mind playing tricks on me.

Nov 19, 2008 - 7:37 am 90. Unsk:

I second JMH:

“The reason manufacturing jobs are moving overseas are:

-unpredictable environmental regulations
-unpredictable legal liability system
-steadily increasing structural costs”

In too many parts of this country, manufacturing has effectively been criminalized. State and Local governments often expect a manufacturer to have an environmentally clean manufacturing workplace that produces no pollutants, dust, and noise, use only recycled materials, places no burden on the transportation network or the electrical grid, exercises only politically correct practices and work rules, employ only union members, gives out huge employee benefits and pay, and produces perfect products that no one ever misuses, never causes any harm to any living organism, and that work perfectly every time forever. Oh, and btw gives big payoffs annually to the local politicians to boot.

And so some of you complain that these manufacturing types are being
un-American by flocking to other countries to locate their businesses.
These manufacturers often feel they have no choice.

Politicians, including most Republicans, have been almost totally out to lunch on policies that affect business. They are all afraid of offending the fashionable left media and interest groups, and have not effectively put forth a narrative supporting laws that to help to develop our manufacturing base.

Nov 19, 2008 - 8:08 am 91. Dave:

Unsk: You got it. Nominal monetary costs are
but a secondary reason when jobs go away. Harassment is much more prevalent.

Nov 19, 2008 - 10:23 am 92. Yashmak:

I recall reading, somewhere, that it currently costs $1400 per automobile more for US automakers to build a car, than for Japanese auotmakers to build an equivalent car. If that’s the case, there’s no amount of money you can pour into the Big 3 that will, in the long run, save them.

With the continuing escalation of health-care costs, and the likely advent of harsher environmental requirements for manufacturers, it’s going to get even MORE expensive for the Big 3 to make cars.

I don’t believe they can be saved.

Nov 19, 2008 - 11:26 am 93. slade:

I haerd an analyst on CNBC this morning who made the point that, while Detroit management deserved the condemnation currently being heaped on it for the last quarter of the last century, management over the last 3-5 years has been good. A case of too little too late for most people but an opinion worth noting.

exercises only politically correct practices and work rules - Unsk

This has a baby-bathwater quality to it. Same for some of the environmental regulations governing disposal of toxic waste.

Nov 19, 2008 - 11:53 am 94. Whitehall:

” Investment capital represents our limited stock of national savings, and when companies spend it badly, our future well-being is compromised.”

That’s what burns me about our nation’s energy policy. Even my beloved Sarah Palin was on-board with an “all-of-the-above” electrical generation mix. Unfortunately, that means investing BILLIONS of dollars in unreliable generation (wind and solar) that cost a lot more per unit output than coal and nuclear.

We are indeed wasting our investments in energy which in turn overburdens every other economic activity with electricity that cost more than it needs to.

We should give our automobile managements credit for giving what the customers want. The last few years buyers wanted big SUVs and Detroit was there to supply that needs. Tastes and buying habits change, sometimes suddenly, but lean years do follow fat years.

Nov 19, 2008 - 4:38 pm 95. buddy larsen:

Speaking of Benj –what happened to him? Did he ever post anything –a farewll perhaps –after the election? I missed the week after Nov 4 –they had taken away my belt and shoelaces and computer away from me damn them regulations. So anyway, what, did he just disappear after those many moons of beaucoup Obamanisms?

Nov 21, 2008 - 12:35 am

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