We Don’t Make Anything Anymore!

Yeah, well, you know, that's just like, uh, your opinion, man.

First off, thank you to the 31 people who took my little quiz about where Wal-Mart’s products are sourced. My study isn’t scientific, so please, don’t hold it to be some definitive result of what the American populace thinks.

So, I asked 25 questions about where 25 different products that Wal-Mart sells. The question, for each, remained the same. Where do you think this product was made?

Here is the list of items:

Metal Christmas Tree Stand, Plastic Christmas Tree Stand, Plastic Christmas Present Bows, Radio Flyer Twirl and Spin, Playing Cards, 2 Pack of Plastic Tumbler Cups, 4 Pack of Plastic Spatula Spoons, 18” Cast Iron Pan, Tinfoil Cake Pan, Steel Cookie Sheet, Tinfoil Cupcake Pan, Steel Cupcake Pan, Polymer Cutting Board, Porcelain Enamel Non-Stick Cookware (Set), Paula Deen Scented Candle, Set of 12 Plastic Hangers, 3 Gallon Garbage Can, Can of REPEL Insect Repellent, Bottle of Fuel Injection Cleaner, Armorall Car Wipes, Bag of 100 Wooden Golf Tees, Box of Crayons, Spool of Knitting Thread, Pink Paper Plates, Paper mache Party Streamer (Spool), Barack Obama Birthday Card, Coors Original Beer

Only one of the 31 respondents got all questions correct. As most of you saw after the quiz was over, the answer, for all items, was that ALL were made in the USA.

So, it was a bit of a trick quiz. Why did I do this? Well, Betsy broke one of my cooking spatulas the other day when her girlfriends came over to cook. We were out of plastic spatulas. While picking up my gift for our office White Elephant party/Secret Santa, I picked up some spatulas.

They came in a mesh bag, were all plastic, and there were four of them. Price? $.97 for four spatulas. Seriously. I was ecstatic. Why? Most consumers buy based on price, not where products are made. Where were the spatulas made? The USA.

It got me thinking about those economically deficient emails people send me. “We don’t make anything anymore!” they opine blindly. People who claim that are wrong. Even after taking the quiz, a good friend of mine from SLU g-chatted me saying “well we still don’t make anything.” Not true.

So I grabbed my blackberry and ran down the next few aisles (you can tell I was in cooking, auto, and sports) and picked random items. Of course, many are made in China, Malaysia, Japan, Vietnam, Canada, Mexico, wherever. But a lot of them were made in America. I found far more than 25, but took pictures of 25 items that people might not assume were made here, along with things people would assume to be made in the USA or “definitely” made in China.

Of course, a lot of the products we buy are made abroad, and what’s the big deal with that? We’re still one of the world’s largest manufacturers.

Wait, what? Yes, we are.

Our share of the world’s manufacturing output is equal to that of Brazil, Russia, India, and China (yes, China) combined.

Now that may change soon, and it’s not the end of the world the combined output of four very large countries could soon produce more than we do. Come on, their combined population is eight times the size of ours, and yet we currently produce slightly more than they do? We’re even the world’s third largest exporter.

Silly me, I thought we were outsourcing everything these days. I thought we “don’t make anything anymore.”

Yes, manufacturing employment has declined, but is employment in manufacturing the true measure of our economy? No. It’s not even a good  measure of the health of our manufacturing sector.

Here’s an example. If Ford makes and sells the same amount of cars in two years, let’s invent two years, X & Y. And General Motors also makes and sells the same amount of their cars in those years. Let’s say that X occurs 10 years before Y.

But let’s say that Ford, but not GM, decides that the legacy costs (retirement costs, basically) of employees are extremely costly because of union demands. And they decide to implement labor saving technology, and phase out labor through attrition, buy-outs, and layoffs. They do this to save money and to increase efficiency. Is Ford an evil company because it values efficiency? No. They are doing what they can to attract investment. Companies, both big and small, are wholly dependent on capital. And if they don’t have it, they usually die off.

Capital comes in many shapes, sizes, and colors, but very often, it comes from the purchase of stock and bonds. Ford looked at GM, and decided they wanted to improve efficiency and become more cost conscious to attract investors. If it were your money, would you rather see a bigger return on investment, or would you accept little/no real return but have the great feeling of knowing people have jobs because you gave them money? Clearly, since it’s your money, and will fund your retirement, you’d be more likely to pick Ford.

Labor-saving technology and improvements in technology often mean lost jobs. Of course, jobs are outsourced, too, but we can talk about that later. People who oppose free trade, globalization, and labor-saving technology adopt what I call the “Cher Trade Policy”– meaning they think we can somehow turn back time.

As Don Boudreaux examines, do we really want to eliminate EZ-Pass so we can have more toll-booth operators employed? Are we willing to pay higher taxes to pay their salaries, benefits, pensions, and overtime? Or are we cool with EZ-Pass? I think we’re OK making that change. More bluntly, are we willing to forgo advances in technology that save money so more people can have jobs? If you’re supportive of this idea, I have a cart and buggy especially for you. And a quill.

Similarly, employment in the agriculture sector declined sharply in the 1800s, when 79 percent of Americans worked in that sector in 1820. Boudreaux writes:

This number, however, was progressively reduced by improvements in technology.  Chemical fertilizers and pesticides; mechanized planting and harvesting equipment; refrigeration; improved veterinary medicine; better irrigation; faster transportation; and improved packaging for produce – along with more food imports made possible, in part, by motorized sea and air travel – all “destroyed” millions of agricultural jobs.

Obviously, we’d all be better off by banning those things, right? Some people, through a quaint, flawed, notion of buy-local produce, continue to try and “turn back time.”

Russ Roberts, puts it this way:

When I talk about the idea of “buying local” I often say that we’ve tried the “buy local” experiment, it’s called the Middle Ages. In the Middle Ages, we mainly bought local and pretty much everyone was poor.

Likewise, it’s equally ridiculous to think we can ignore a thriving global economy. Protectionism doesn’t work, and we’ve seen how well it has worked for Cleveland. We see how well it has worked for Detroit (thanks for trying to screw up this Korea FTA, guys!). And we see how well it has worked for the unions, whose membership is in rapid decline (in the private sector.) Trying to ignore the growing global economy is futile.

A while back, when we signed NAFTA, we agreed to allow Mexican trucks on our roads. We allow Canadian trucks free reign. But those “evil Mexicans”, we toyed with them for years, until President Bush got a pilot-program underway. The Teamsters, through political influence, got the program defunded so we wouldn’t comply with our free trade agreement with Mexico.

Awesome! More jobs for U.S. truckers. Maybe in the short run, but there are ways around Mexican trucks, and even if those U.S. jobs are kept in the short run, they are kept with higher costs.

Tell me what is cheaper. Having a single truck drive some goods from a deep water port in Mexico all the way to Colorado, or having that truck wait for hours in Arizona, and have the goods offloaded from one truck onto a U.S. driver’s truck to make the trek from Arizona to Colorado. (This is a rhetorical question.)

And as green as that isn’t, what would Mexico do to get back at us? Nothing, right? Wrong.

Try $2.4 billion worth of tariffs on U.S. made Christmas trees, potatoes, pears, apples, to name a few. Great job guys! To unions, their jobs are more important to the country than jobs in those other industries. Protectionism works for the working man*! (*Unless that working man grows trees, potatoes, pears, or apples.) I’m only kidding, protectionism doesn’t work.

Outsourcing isn’t bad at all. As I discussed in an earlier post, it is almost like a foreign aid program, bringing prosperity to developing nations. Of course, if some protectionists got their way, and Nike only made shoes in the U.S., those Hondurans would clearly be in great shape without Nike ever having come there (sarcasm) to “exploit” them through offering a job.

But Americans don’t like the idea of outsourcing. Nobody likes losing their job, or seeing their friends lose their jobs, only to have that job go to another country. For the better part of the country, nobody “owns” rights to their job, unless of course, they’re in a union. That’s a big driver behind the opposition to having jobs move abroad, and it is understandable.

People often lament “well we have to do something” to stop it, because I ain’t working for 25 cents an hour. No proponent of free trade suggests that will happen, or that is what should happen. How in the world could some company in the U.S. make four spatulas for $.97? Given the federally mandated minimum wage, taxes, red tape, bureaucracy?

Efficient labor is how. Combined with capital investment and technology, we can compete with anyone. But to suggest that tariffs and other trade barriers are a good policy is asinine.

Recently, Harold Meyerson wrote in the Washington Post that we should embrace Andy Grove’s suggestion that we:

Call for a tariff on offshored products, with the proceeds to go to a fund enabling such companies to manufacture their products domestically.

Wrong. Punitive measures do not work. We need to identify why some jobs go offshore, and find ways to compete. Let’s say we’re going to hold wages constant (and by law, we have to, to some degree). How can we compete? Lower taxes and less burdensome regulation.

Don Boudreaux (getting multiple shout outs today!) identifies, through an example, why this “solution” is flawed:

Let’s start small by trying this policy first only on the Meyerson household.

Mr. Meyerson can charge his wife and children a steep fee every time they purchase a good or service from entities outside of their household.  He can then use the proceeds from this fee to subsidize his, his wife’s, and his kids’ household production of all that the Meyersons consume.  No more Meyerson-household job’s destroyed by imported food, clothing, furniture, haircuts, etc.  All will be produced in-house, with the expense for generating this happy outcome of high-quality household self-sufficiency paid for by the very tax that dissuades the Meyersons from purchasing non-Meyerson-made goods and services in the first place.

If this strategy works for the Meyersons, we can then consider extending it to the country at large.

Ohio lost a lot of jobs to places like Texas, which had a better business climate. What’s the better solution? Levy a tariff on Texas-made products in Ohio? Or change our ways and compete to get those jobs back?

Clearly, the answer is the latter. Ohio hasn’t gotten that message. On a larger scale, America hasn’t gotten that message.

Embracing protectionism and shunning technological advancement are naive, costly ways to try and “turn back time.” The only real way you can turn back time is with Doc Brown and a DeLorean.

Ignore globalization at your peril. We can make things here, we do make things here. We make a ton of things here. If you want more manufacturing jobs and output, the best solution is to make America a better place to do business. Trying to tinker with protectionism forces equal and opposite reactions from trading partners that hurt other jobs.

RELATED LINKS:

Self-sufficiency is another word for Poverty

US Still the World’s Largest Manufacturer

The World’s Largest Exporters and How They Make Their Money

The Logic of Trade

Not Really Made in China

Want to see the results of my quiz? They’re below.

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3 Thoughts on “We Don’t Make Anything Anymore!

  1. For what it’s worth, long ago, in an ethics class of all things, we watched a tacky TV newzine piece on Albert Dunlap, who used to be a household name. One of the mandatory weepy scenes came from a bunch of Mississippians bawling their eyes out when their factory was closed and the manufacturing outsourced to Mexico because of Nafta. I pointed out that that factory in Mississippi had been in northern Illinois for almost 100 years and hundreds of suburban Chicagoan workers had lost their jobs a decade or so earlier to a bunch of dirty illiterate southerners who were willing to work for less than half of what a real American would charge for his labor.

    I really think the GOP would be well-advised to put more emphasis on establishing a stable regulatory environment that unleashes our nation’s creative and productive forces so that we’re not forced to continue subsidizing non-productive economic behavior at the expense of the rest of the economy. We also need to stop over-credentialing and coddling the truly skillless segment of our population, but that’s a separate rant.

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