Manufacturing: Necessary for Survival of Our Economy and Our Nation

Several years ago the drumbeats started. You heard the words..."We are becoming a service economy". They were said often enough that people actually began to believe them as truth. Worse, manufacturing jobs began to slip away overseas, in many cases based on false financial analysis and expectations. Yet the great strength of America since the Industrial Revolution has always been, and still is, manufacturing. No single factor has hurt the economy of the United States more than the loss of manufacturing to our country. Conversely, no single move could help the economy more than bringing back the great strength of manufacturing. It requires a national commitment.


We have a strong and productive work force; access to a great number of raw materials; transportation systems including waterways, rail and roadways; and very importantly a huge market for consumption right here in our country. Very importantly we did have a great education system in support of manufacturing that included engineering, technology, research and development, quality and process control, manufacturing business related courses, and more...all in support. If one just looks around you see "things", and all of these "things" have to be manufactured. This will never go away, and those that pushed us into believing that we should accept just being a "service economy" have misled America and this has dramatically and negatively affected our entire country, including our economy, and every American.


When manufacturing is given up, much, much more goes with it. The obvious is the huge loss of jobs and the spiraling negative effect on our economy. Along with this, however, goes the loss of technology know how, the loss of manufacturing know how...the ability to make things and the associated process technology. We set ourselves up as a DEPENDENT NATION, relying almost entirely upon other countries to supply our basic needs. In addition it is a major detriment to our national defense since critical components of both offensive and defensive weapons, as well as technology come from outside the U.S. There is more, but the important point is that the loss of manufacturing greatly weakens the United States.


It is difficult to purchase anything today that isn't made in China. China also holds a huge portion of our national debt with our financial dependency on them expected to increase even more. It is well known that controlling the purse strings tends to control the entity that receives the funding. Yet China is a communist country that can hardly be considered friendly. They have a dictatorial regime that routinely abuses the human rights of their citizens and others. How possibly can we feel comfortable with this? Yet we sit here and not only allow it to continue, but continue at an ever increasing rate. Do we not care at all about America?


We don't have "trading partners", we seem to trade with countries where we are always at the disadvantage thanks to successive administrations and Congress. Our current annual trade deficit is running at a rate of $480 billion and approximately $216 billion of that is with China. Even more alarming is that China holds approximately $895 billion of our national debt and it is fast approaching $1 trillion! All of this is with a country who is unfriendly to the United States and whose ideology is that of a communist dictatorial regime. What in the world are we doing with the future of our country?


Looking at the facts, the manufacturing share of the economy has gone from 53% in 1965, to 39% in 1998, and was only 9% in 2004. We are well on our way of totally giving up our greatest strength as a nation. Why? Reported unemployment is at approximately 9.4% with the independent Financial Forecast Center predicting that it will be 9.9% in February of 2011. The real unemployment is around 15 to 16%. Our ability to competitively manufacture is waning fast. Over the last several years we have lost millions of manufacturing jobs; over 3 million of them since 1998.


Following manufacturing it is predicted that 3.4 million white collar jobs and $136 billion in wages will end up overseas by 2015 (Forrester Research, Inc.) . An even worse report by the University of California indicates that 14 million jobs may be lost overseas. By the end of this year Gartner, Inc. forecasts that 10% of the computer services and software jobs will be lost. Over the next 5 years Deloitte Reasearch has reported that 2 million jobs from our largest financial services firms will end up overseas. Princeton economist, Alan Blinder, has estimated that 42 to 56 million jobs could potentially be lost overseas! Is this not a crisis of major proportions?


Andy Grove, the former CEO of Intel, the world's largest maker of computer chips, has warned that outsourcing is destroying Middle America and our economy. He is calling for the need to have manufacturing infrastructure here in the U.S. He has also indicated that when we don't participate in the first phases of some of the high tech development we may never catch up and participate. This is the eroding danger of giving up not only development, but the process and manufacturing know how.


The CEO's of manufacturing companies have allowed themselves to be driven by greed and simplistic approaches. They look at the lower wages of some foreign countries and by simple arithmetic begin counting the "apparent" profits for their company by manufacturing outside the U.S. What they don't look at enough is start up cost; the costs and tariffs of shipping in raw materials and finished products out to markets (one huge market is right here in America!); and they don't look at the REAL measure of manufacturing...the dollars expended per unit of good quality product produced...NOT wage per hour. Further, many manufacturing companies are material intensive where the yield of good quality product produced far exceeds labor cost considerations. For example, in one company the hourly labor cost was only 7% of the total cost of operating the company...or more clearly stated 93% of the costs were other than direct labor. Where would you look if you wished to reduce cost to increase profits?


There are further complications, and these complications cost money. For example there are complications with both U.S. and Chinese tax laws. There are issues of currency, and the manipulation of currency not necessarily in the best interests of the U.S. dollar and the companies involved. There are other laws that strongly favor China at the expense of U.S. companies. There have been a multitude of quality problems that have cost U.S. companies millions upon millions of dollars. There is a lack of a basic concern for health and safety issues in the production of products and the products themselves. Air pollution and environmental concerns exist and are essentially ignored.

Compare all of the above with manufacture in America with ready raw materials, a productive and quality oriented work force, and a huge market right here in America, with greater ease of exporting products overseas. Compare the ability to keep inventory under control, offer fast response time, and excellent customer service. There is no doubt whatsoever that quality and customer service have taken a back seat since American companies have started manufacturing in countries for the apparent benefit of a lower wage work force.

In answer to lower wages....what ever happened to manufacturing process technology improvements, automation, robotics, an emphasis on productivity improvements while keeping quality high? Again, manufacturing cost is NOT only about wages, it is about the amount of dollars expended per unit of good quality product produced in a time frame. Years ago there was a television program entitled Industry on Parade showing various manufacturing where automation and process technology was used and was a great strength of America. This was when our economy was booming, during a period of our manufacturing "heyday". We were second to none and took great pride in our manufacturing companies in America. Whatever happened to this? Were we sold down the river by lulling us into thinking that we are a "service economy"? It appears so.

The CEOs of manufacturing companies need to look at real and total costs in the direction of their companies. And how about patriotism? How about doing something for America and the American economy, while making a good profit for their shareholders? How about "made in America" by American workers for American markets? Do they realize how much people actually hate having no other alternative other than buying products made in China? Do they realize how the American people would flock toward buying good quality products made right here in America? It would be overwhelming and at the same time everyone would know that it is helping our economy. Have we not run the course of the fallacy and misdirection of "we are becoming a service economy"?

We are losing and will continue to lose millions upon millions of jobs. For realists, our economy is in a state of collapse. The greatest strength of our country and the rock solid pillar of our economy is manufacturing. Our federal government MUST offer incentives and direction to bring back manufacturing to America. CEO's of companies need to wake up, and wake up fast....for the good of their companies, for their shareholders, and, most importantly, for the good of and the survival of our country.


Without manufacturing we will become a 3rd world country with an economy in shambles with little chance of recovery. With a sense of urgency. For our very survival as a nation. We need to bring back manufacturing to America.