Recently, a reader of this column wrote to complain about the ill health of the U.S. manufacturing industry due to foreign competition. I reminded him that survival belongs to those who adapt by changing. And that started me thinking about U.S. industrial health and what needs recognition and correction.
The U.S. Census (Bureau of Economic Analysis) reported that 2006 was a record year for output, revenues, profits, profit rates and return on investment in manufacturing sectors of the U.S. economy. Every citation following is from this federal origin. The U.S. remains the prolific world product producer with 2.5 times the output of the current boogeyman, China. Yes, there were 3 million jobs lost between 2000-2003, but that trend has leveled. It is still in gradual decline but consistent now with historic averages. And in spite of these losses, about 12 million workers remain with the highest unit productivity in the world. Two out of three manufacturing sectors experienced increase in revenues, profits and output in the period from 2003-2006, and readers of this journal were in winning categories.
Political and vested-interest protectionist demagoguery aside, the truth is that U.S. manufacturing is in robust health. If you live in a state like Michigan, where GDP in value-added manufacturing growth was last among the 50 states last year, do you think it possible that workforce unionization, restrictive work rules, or state laws and regulations that deter investment might be a factor? Do you think that politicians, unions and media salesmen promoting socialist legislation and perspective may have an agenda? Industrial Heating is not the “drive-by media.” But I have a place of privilege to reach out and to ask you to reject any nonsense that U.S. manufacturing is in trouble or has anything other than self-inflicted woes. Some problems, yes – but solvable ones.
Be real. Since 1980, U.S. manufacturing-industry trade as a share of GDP increased 130% with imports up sixfold. American manufacturers are the chief buyers of imports. Job creation has increased by 46 million in the past 27 years while unemployment has declined as follows: 7.3% in the 1990s, 5.8% by 2000 and in June 2007 was 4.5%. What do you want for your money? Yet we had a dozen Congressional bills this year alone to advocate trade protections that America doesn’t need. In 2006, manufacturing output was 13% higher than 2001 and 53% higher than 1994 with value added to the economy of over $1.38 trillion, or 21.1% of world output!
All of this was achieved with the handicap of unionized labor and continued bad management by some in manufacturing industry. Statistics show that for NAICS codes 327, 331 and 332 – where most readers live – between 2002-2006, 13 out of 18 sectors showed double-digit-percentage revenue gains year over year and a similar profit picture. On a balanced basis, this is a strong performance that does not need saving from amorphous bad guys via protection from self-inflicted, bad business practices. But your world always needs saving from profits of doom and selling of wrong-headed ideas heaped on us daily by politicians who pander to financial supporters, unions and industry associations seeking power and subsidies, and the media that sells ideology to earn daily bread by maximizing controversy.
When thinking about it, there must be a reason why foreign-owned automobile makers with U.S.-operated factories in right-to-work states eat the lunch of the home-boys whose past bad decisions require them to add $2,000 per car price just to cover pension costs of retired union workers. A decade ago, there were 140,000 United Auto Workers union members. Today they are down to 90,000 but have successfully killed American industry in the transportation-manufacturing sector. Don’t take my word for it – look at the BEA statistics. Auto-industry management went along with suicidal ideas and has no clue that they were both a premier killer of their industry and a cause for complainers to seek redress for outsourcing problems that have robbed America of its livelihood. You reap what you sow. The steel industry is the first among equals in complaining about the harm of foreign competition while refusing to take responsibility for problems of internal creation.
Charles Darwin was eloquent in his expression of how survival belongs to those who adapt to change, and neither unions, politicians, bad management policies nor spreading myths and lies will alter these facts.IH
Industry-Health Myths, Unions and Bad Management
November 7, 2007