“Obama Call for Manufacturing Revival a Tough Goal” – Really? Don’t Be So Pessimistic, Sheepish. You are Proud American, Aren’t You?

Today’s Yahoo news talks about:

“President Barack Obama is making a strong election-year push for an economic revival “built on American manufacturing.”

But he faces an uphill slog, with little consensus even within his own party on how to do it.“

Trade and industry issues are interesting subjects to me because I like to call myself some kind of expert or something. I included some excerpts from the article and explain some additional points to them.

Source: http://finance.yahoo.com/news/obama-call-manufacturing-revival-tough-095144615.html

Excerpt: “For decades, the United States has gradually shifted from creating goods to providing services. Fifty years ago, a third of U.S. jobs were in manufacturing. Now they account for just 9 percent, according to the Bureau of Labor Statistics.“…

“Economists suggest plans to help boost manufacturing jobs may make more political sense than economic sense.”

Just political sense? Really? I am somewhat disappointed to hear this. Which economists said this? The accuracy of what they are saying may  depend on which area of economics they specialize in, and what kind of data they have been dealing with. Not every economists know everything, every aspects of economics, economy, or industrial competitiveness. Economists have their own specialization area and know better on their experties, not on everything.

To deepen economists’ understanding on economy or industrial competitiveness, they should also know business aspects in details, business mangagement, marketing, etc., and vice versa for business people.

I suggest that:

“World/US market is not an amass of same all, same things. It’s not a standardized, homogenized bunch of consumer, consumer demand. It’s rather a whole mass of all different, heterogeneous bunch of consumers, consumer demands, with different needs/wants/tastes.”

“The revival / survival of US manufacturing / business depends more on how to decompose this big chunk of consumer market into small consumer of different needs, wants, and tastes that share some common factors, detecting the potentially profitable product markets / consumer groups whose demands American manufacturing/business can meet well, and digging into those identified small consumer markets with accurate reading / understanding of consumer mind and developing right strategies to attract their product royalty and purchase behavior.”

“The seeming failure of US manufacturing / business, up to now, may be not only due to the declining price competitiveness of US products but also due to US businesses’ failure in reading consumer mind, or avoiding / neglecting to do so, and running business, producing products as the ways manufactures like, not as the ways consumer like.”

“The key point of US manufacturing / business in dealing with US and world consumer market is to do “Accurate Market Segmentation” and “Zooming into the Right Target Markets” that “well match” with the Competitiveness of US Manufacturing / Business (probably should not be only about “low price.”).”

An Extremely Simplified Example of World/Domestic Market Segmentation: “World market consumers have different needs/wants/desires for different product groups. Some low-income-consumers (Let’s call this “Mass/Standardized Market”) may want cheapest products that meet their basic living conditions, like food, humble clothing, shoes, that’s it. Middle-income consumers (Let’s call this “A-Bit-Differentiated Market”) may want a bit better products at slightly higher prices with more varieties/differentiation of products. Middle-upper, upper, upper-upper, super rich consumers (Let’s call this “Highly Differentiated / Affluent Market”) may go for untra high quality, designs, highly differetiated style/taste, sometimes even eccentric or novelty products that other people usually don’t own, the kind of products that meet their differentiated tastes and desire for signaling their social status or uniqueness, desire to differentiate themselves from the rest of others.” (apology for extreme simplicity of example)

What would be the sizes of each market segments in world market sales (as a whole of all merchandize trade / sales, or those of a product or product groups, for example): to hypothetically guess:

“Mass/Standardized Market” accounts for 50% of world consumption/sales (all all merchandize or a particular product group).

“A-Bit-Differentiated Market” accounts for 30% of world consumption/sales. 

“Highly Differentiated / Affluent Market” accounts for 20% of world consumption/sales.

“So, with given nature of US industrial competitiveness, “Which Market Segments” American Manufactures should go after, tackle?”

Excerpt: “This heavy attention on manufacturing may be misplaced, economists suggest.”

Here, it would be more desirable if the rhetoric changes from “this heavy attention on manufacturing” to “balancing out US industrial structure, including manufacturing to have more desirable US employment structure / job markets” with the revival of declining manufacturing sectors that could have been competitive but were declining anyway, not necessarily because of the death of US competitiveness but probably because of ”Lazy-fair” Approach (watch out the different spelling, instead of laissez-faire) of American businesses to domestic and international consumer demand / markets.”  

As the example of the Super Bowl Ads, “a Chrysler spot featuring actor Clint Eastwood that celebrates Detroit, suggesting it was near collapse until the residents “all pulled together.” Eastwood implores the nation to do the same.” (did “Some Republicans called the spot a valentine to Obama’s auto bailout“? the more proper way of calling it would be “the spot is the Ad incarnation of  “Obama’s Valentine Gift to Detroit,” or American Auto sector”)

So, we have to think about this point. If Detroit, or American autos, or Chrysler had fallen into almost collapse, but is being quickly recovered (though partially) yet) with some government help, ”Is this phenomenon happening because of the American Death of competitiveness in the auto industry?” or “American Business Failure in the industry because of wrong business decisions or doing correct things or negligence, although the industry may still have had remaining potential of staying relatively competitive if the companied have managed their business correctly?”

 

Excerpt: “It is still “20 percent more expensive to manufacture in the United States than it is anywhere else in the world.”: Interpretation - Low product price is an important factor, but not the only single determining factor. There are a lot of other contributing factors in determining the competitiveness of business or products in market competition.   

I respect Professors Robert Reich and Christina Romer for their role in correcting public misconception on recovering the US economy. But I cannot quite agree to their views on US manufacturing:

Excerpt: “Let’s not fool ourselves. We’re not going to have the kind of manufacturing-based economy we had 30 or 40 years ago,” says Robert Reich, labor secretary under President Bill Clinton. And Christina Romer, who headed the president’s Council of Economic Advisers from 2009-2010, says it is wrong to suggest that producing “real things” is more important than “services.” “American consumers value health care and haircuts as much as washing machines and hair dryers. Our earnings from exporting architectural plans for a building in Shanghai are as real as those from exporting cars to Canada,” she wrote. “The vast majority of jobs in the future are going to be created in the service sector, not the manufacturing sector,” said Nigel Gault, chief U.S. economist for the consulting firm IHS Global Insight. He said he thought it was “a bit misleading” to focus so much on manufacturing. “I’m not sure why manufacturing rather than any other industry warrants tax incentives,” Gault added.

At first, all of us have to remember that how the service/retailing/financial sectors-oriented US economy has melted into (along with other factors though) the current Great Recession. I heard that only fools learn nothing from the lessons of past hardship. Please refer to: http://mikyunglim.wordpress.com/2011/12/05/additional-truth-about-us-inequality-and-economy-global-trade-perspective/

President Obama’s View that “US manufacturers are poised for a renaissance”, is not completely guaranteed with certainty, but quite possible if the right strategies to pursue it is found by someone.”

Economists alone probably can not find the right strategeis to achieve “Amerian Business Renaissance.” Because they only see the big chunk of pictures but miss all details inside it. Business people alone probably can not find it either, because they only see the details of their own business/product  areas but often miss, neglect the big picture of the world.

 

“Only the combined knowledge of both economics and business marketing would be able to produce the right strategies to pursue “US Business/Trade Renaisance.”

“There are political overtones to Obama’s State of the Union appeal for “an economy that’s built to last, an economy built on American manufacturing.”

Yes, that might be quite possible, depending on the creativity of pursuing individual(s).

Good News for the economy but bad news for overall employment?: “Despite the job losses, the U.S. remains an exporting powerhouse, right behind No. 1 China and vying with Germany for the No. 2 rank. U.S. factories have steadily become more advanced and automated, requiring only a fraction of the workers previously needed.”

The City at the Risk of Double-dip Recession

Some month ago, when there had been news on the decline of, emptying Detroit, the used-to-be trade mark city of US car manufacturing, I had worried that this city may face the similar fate as Detroit. Detroit has undergone heavy concentration on car manufacturing, along with her historical political division, without developing other alternative industries to back up the city’s economic viability in case if the city’s car manufacturing either declines or collapses. In a sense, Detroit’s fate as a result of heavy concentration on one single industry should have been predictable. Because most manufacturing industries have undergone cyclical ups and down, growth and demise. And many experts of industrial analysts or economists should have been able to predict the fate of Detroit.

The same rational can be applied to predict this city’s future as it has been heavily focusing on the aircraft industry, which has been apparently undergoing similar industrial trend as car manufacturing (only with time gap between the two industries’ maturing in this country), globalization of manufacturing facilities.

I thought the possible decline of this city’s aircraft manufacturing facilities will be a gradual one over five years or a decade. But, within months, I ended up hearing the news, which sounds like this city may get into a trouble resulting from its high reliance on one specific industry, the aircraft industry, faster than expected.

Excerpts: “Wichita is one of 22 metro areas at risk of slipping back into recession most at risk of a “double-dip” recession as the rest of the nation’s economy is improving”…”Wichita’s manufacturing sector is heavily concentrated in the aviation and aerospace industries, and major employers, including Hawker Beechcraft, Bombardier Learjet and Cessna Aircraft Co. Cessna Aircraft Co. have sent layoff notices to employees in recent months…..” Source: http://www.bizjournals.com/wichita/stories/2010/08/16/daily26.html

This city’s second largest industry is the medical industry whose job growth seems to be the major source of employment growth in this city for now. But the medical industry will also face a shrinkage if its major patients, employees of the aircraft industry lose jobs and move away from this city.

Facing the prediction of deeper recession hitting this city, the city should seriously consider how to deal with this potential situation, how to develop the plan of partially diverting, diversifying the city’s industrial mix from that of a few major industries to that of multiple alternative industries in order to make sure the continuing health, balance of city economy even when a few industries undergo downturns, still other alternative industries can support the city economy to certain level. Therefore, the city should explore, pursuit other promising industries and incubate them in this city to maintain the livelihood of its economy.

Recommendation: I recommend the city Mayor to consider to hire me (half humor half serious), who is freshly divorcing from an abusive guy and seem to need a job, who has uncommon experty in analyzing international trade and industrial developments of commercial goods from economics perspective. She will be a good resource, helper in unfolding the city’s needed strategic planning of identifying, developing new industrial mix for the city and gradually pulling the city out of the danger zone of potential industrial decline and recession as predicted by above news. By examining industrial and trade data, she would be able to help the city to hand pick which industries this city should pursuit to develop in this city from both economic and marketing perspectives under the consideration of international and domestic market / demand conditions and competitions and the city/state’s available resources and environments.

The Real Meaning of Michigan Gov. Granholm’s “Cracking the Code’ to Keeping Manufacturing Jobs in America”

Govenor Jennifer Granholm of Michigan suggested three industrial strategies in her blog post “Cracking the Code to Keeping Manufacturing Jobs in America.” (source: http://www.huffingtonpost.com/jennifer-m-granholm/cracking-the-code-to-keep_b_664287.html)

In this post, her three strategies are:

“First, the auto companies needed to get religion. The car companies are making major new investments in green technology in all aspects of their business. Second, labor needed to be part of the solution and not part of the problem. Modern, flexible, lower-cost agreements are becoming the norm. Finally, government must play a key role. We need well thought-out policy, consistent enforcement of fair trade policies, and competitive tax laws that reward companies for creating jobs in America. We need smart, public direct investment in research and development, infrastructure and targeted strategic industries.”

She states that “while we won’t be able to keep all labor-intensive manufacturing jobs in America…we can keep skill-intensive, advanced manufacturing jobs….”

This has been repeatedly said over decades. But few have defined which specific industries are skill-intensive, advanced manufacturing industries that US can have competitiveness over those of other countries. Although the US auto industry is striving to recover from near-collapse to gain competitiveness in green technology, it is just one industry that has shrunken in its industry size and employment level. There’s a question whether, by specializing in green technology, the US auto industry can succeeded in recovering its originia industry size and employment level and go further to compete with, excell over those of Japanese and other countries. And what about other industries? The needed government’s tight control of industrial strategies (previously Huffpost blogger also mentioned the need to develop national industrial strategies) should come to identify US-competitive industries and formulate national industrial and trade policies in ways of boosting them.

Regarding US need of modern, flexible, lower-cost agreements with labor, in ideal world, maybe. In real world, it is not feasible, sustainable under current wasteful, crisis-tuned US social systems. Current public outcry is about, along with bailout-gone-bad problems, the rapidest growth of richests’ income and flat growth/real decline of middle and low class income, which mean increasingly damaged consumer market and demand (no wonder why recovery is not going well) of middle class and low income classes. Unreasonable social economic system and slow/real decline of income that has deprived disposable income from middle/low income classes, disappearing middle class, increasing poverty, and housing crisis mean unstable, often unsustainable US living conditions with current wage levels and damaged consumer market, which make current US economic and job recovery more difficult without enough consumer purchasing power of goods. US labor obviously has it’s own problem of ignoring the factor of international competition. Sometime ago, NPR reported that US auto workers have been taking 30 work-free days (probably paid) per year (while the corresponding workers in other countries often work overtime at lower wages), which include sick days and holidays. One month off from work every year and still imagine that the US auto industry should thrive and auto workers’ wages should increase as much as they want. Working less than other workers but claiming their inborn entitlement of higher wages is called “daydreaming.” Nonetheless, demanding lower-costs agreement with labor may mean even further damaging of middle/low incomers’ economic lives, further shrinking of consumer demand/market.

“Without through reforms of US social structure, demanding lower-costs agreement with labor may only mean even further damaging of middle/low incomers’ economic lives, further shrinking of consumer demand/market“

US Self-Sufficiency, No Trade, Global Isolation / Protectionism, and Collective Sliding into Poorer US.

The night before Thanksgiving, there was one person’s comment to my Huffpost comment that insisted on the isolation of US economy from the world, protectionism, and the lie of globalization.  As there must be a lot of people who share the same opinion as this person’s, I want to clarify their misunderstanding as much as possible. The contents of the comment is listed as below:

danarothrock replied on Nov 25, 2009 at 16:55:50

“Tarrifs were not the main cause of the 1930s depression. The cause was the exact same financial casino gambling that brought us down this time. Hence, the Glass-Steagall Act, which was repealed in 1999.

America grew strong in isolation and protectionism. We produced almost everything we needed, except rum, coffee and bananas.

Globalization – “Flat Earth” – has been the theory that has destroyed the economy of this country and several other countries. We are on the losing end of every “Free Trade” agreement. We are trading jobs for foreign workers. The Ex-Im Bank and Overseas Private Investment Corporation (two agencies of the US Treasury) are funding $billions every year for American companies to move overseas. 67% of American corporations have plans to increase offshore operations. Do some research on “protectionism”. “Globalization is a LIE.”

My Response was:

Although I am tired, sleepy now. I am still almost sure that “tariffs, protectionism” were the causes of Great Depression. That’s why, since then, there were  international multilateral negotiations to reduce tariffs worldwide and not to repeat the same bad experience of tariff imposition / protection. If you were not sleepy, please check the fact and let me know !

Regarding “America grew strong in isolation and protectionism,” this is the most “RIDICULOUS” statement that I have ever heard! You want to put this country in economic, political exile away from the rest of world and cut off its position of economic and political superpower in the world to degrade into poorer and poorer country? Let me guess. You must have never left your block of town to travel around and see the reality of the world.

What do we trade off by engaging in world trade?

LOSS :

Some labor-intensive manufacturing jobs as imports of those goods gain domestic market sales.

GAIN:

A. Gaining of export-related jobs (this is one reason of why the White House wish China to save US economy and unemployment problem through their purchase of US goods);

B. Cheaper imported goods make us be able to buy more goods, more foods, clothings, electronics, etc with same income. We feel richer when we can consume cheaper import goods; we feel poorer when cheap imports are not available and we have to buy more expensive domestically produced goods (please compare the numbers of grocery items that, with $100, we can buy from Wal-Mart (many of them cheap imports) and from a rather expensive grocery store. You will feel the difference of how much we can consume more or less with same income depending on whether cheaper imports are available to us or not.

Without cheap imports, we may save some jobs of ours or our fellow workers, but we altogether/collectively have to eat less food, wear less clothings and shoes, buy less toy…overall we will feel poorer without trade than when we have imports.

It would be a choice of what we prefer.

Unemployment: Blaming it on Wrong Causes? Why don’t we Blame it on Wrong Industrial Structure?

There was a comment to a blog about unemployment disaster by Adrianna Huffington. A person, nicknamed as Gatormouth, commented as below:

“ This obsession with pushing job creation as the central problem by pundits and politicians is a possibly deliberate distraction. The problem has been with retention of domestic investment capital and the exportation of existing and newly created jobs. Fair and reciprocal trade has been slandered as “Protectionism”. But “Free Trade” as practiced amounts to the equivalent of unilateral disarmament, a form of National suicide.”

My answer to this person is as below:

“Your comment is interfering with my Thanksgiving meal preparation and doing other fundamental living/bear- necessities.

This obsession with “Caring only for reducing Budget Deficits and Costs of doing whatever,” and “Having Nothing To Do /Doing Nothing” for “Recovering Economy and Helping with Unemployed People” as the central problem by “Misguided” politicians and people is a “Deliberate distraction for this country”.

The problem has “NOT” been with retention of domestic capital investment and the exportation of existing and newly created jobs. It has been the wrongly structured Economic Activities / Industrial Structure of this country, in which the major economic activities and growth have occurred in trading money in financial sector and having people enjoy good lifestyles via service and retailing sectors while US competitiveness in marketing and production of manufacturing goods have been staggeringly, delusively deteriorated by continuously producing goods that less and less people get interested in buying. Keep investing on businesses, production capacities or financial services, in which the executives keep producing products that nobody wants to buy, or legally robe investors’ money, does it help?

As far as I remember, the US government’s imposing “Tariffs” on international trade around the 1930s was one of the main causes of “Great Depression” !!! (apology if I were mistaken; there’s a saying that dog trainers don’t train female dogs because they forget their learned tricks after delivering puppies)

(Reference: http://www.huffingtonpost.com/arianna-huffington/will-the-unemployment-dis_b_368329.html?page=2&show_comment_id=35184189)