Steven Rattner wrote an article that is a good analysis of
the dire situation in which America 's
industries find themselves today but offered no solution that will make enough
of a difference to change the outlook. And yet a workable solution exists that
will offer at least a temporary relief till a permanent new approach can be
worked out. The temporary solution can be attained with little effort;
requiring only that the political goodwill be there and be real. The Rattner
article was published in the New York Times under the title: “The Myth of
Industrial Rebound” on January 25, 2014.
His argument is that yes, manufacturing is coming back to
America, but doing so at a trickle compared to what was lost over the years.
Also, what is coming back pays wages that are barely higher than those of the
Third World, which is bad enough ... but the worst part is that American
industries could not afford to pay even this much were it not for the subsidies
they receive from the various levels of government. And all that contributes to
the slowness of the recovery because low wages mean low purchasing power. In
turn, this means low spending by the consumer in an economy that is driven to
the tune of 70 percent of GDP by consumer spending.
And things are bound to get worse for America , says
Rattner, because the competition for manufacturing jobs from the emerging
markets will continue to increase as more countries decide to follow the
Chinese example and lure industries to them, offering low wages, tax advantages
and lax work rules. America 's
answer will have to be increased efficiency but when this happens, it will mean
less people working, a situation that does not help the employment situation or
the economic recovery.
In addition, there is the fact that even the high tech
industries where America
always had an advantage, are now relocating to places like Mexico and China , and Rattner gives a few
examples of that. He goes on to point out that there is a study out there showing
that only one-tenth of manufacturing involves significant energy costs. And
this means that the energy boom in America will do very little to help
industry.
It is a good thing that Steven Rattner came up with this
article when he did because only a day before, the same New York Times had
published an article by Vikas Bajaj under the title: “Submerging Markets” in
which he gives a totally erroneous picture of what is happening in the world
today. His article is the kind of talk that investment bankers and brokers
peddle when they decide the time has come to motivate investors to switch from
one market to another.
And what these characters are doing now is tell the people
who will listen to them; they should pull their money out of the emerging
markets and put it somewhere else, perhaps in America . And this happens to suit
the strategy of the bankers and the brokers who see the emerging markets
entering a new phase. They want everybody out of there so that they get in at
the bottom, and position themselves in the right places for when the cycle
begins anew.
But what solution is Rattner offering? He says that America still
has an advantage in the service industries such as education and medicine. He
wants America
to rely on them to keep the economy going at a high clip, but he also wants the
country to maintain an industrial presence. And the reason, he says, is that
“companies locate research and development facilities – stuffed with high
paying jobs – near their manufacturing facilities.” This, in turn, yields more
innovation and more jobs in the field as well as additional employment in the
service and supplier positions to the tune of almost 5 new jobs per industrial
position.
Is this enough? No it's not. And that's because as much as
foreigners like to get an American education, Americans like to go overseas and
get an education there too. And as much as foreigners like to get healed in
American hospitals, Americans go to foreign lands where they get healed there
too.
And so, the thing to do is not to mentally create some kind
of division of labor where America
will specialize in some things while ceding other things to the emerging
economies. A country the size of America has to be in all the places
where its own consumers are willing to spend their money and that include the
manufacturing of cheap goods.
Thus, the thing to do is to open training centers where
youngsters are encouraged to go learn a trade. Also, it will help a great deal
to have subsidized on the job training programs in some places – especially
those that keep the prisons stuffed with inmates. It will be cheaper to pay
these youngsters while teaching them than to look after them in a jail cell.
And the effect on the economy will be good.