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11
Sep
15

American Made: Why Making Things Will Return Us to Greatness

We have heard how manufacturing can bring back the U.S. economy to greatness several times now (like from  the Alliance for American Manufacturing), but the latest iteration of this idea is found in this 2015 book called: “American Made: Why Making Things Will Return Us to Greatness”. It is written by Dan Dimicco, ex CEO of the largest and most profitable U.S. Steel company and the largest recycler in North America, Nucor.

America made why making things

Recommended by Clothingmadeinusablog

If you took excerpts from my previous editorials about the U.S. economy, free trade and off-shoring, this book, “American Made: Why Making Things Will Return US to Greatness”, would be the ultimate culmination of that. These views about bringing Manufacturing back are somewhat unique with modern day pundits, and, therefore, very seldom expressed in public. The reason for the paucity of “Buy American” is because the vast majority of economists are hard-core Free Trade lovers.

The Introduction

The author, Dan Dimicco, starts off the book by looking at America at the rapid expansion of the Great Recession – looking at the numbers: 1) loss of 8.2 million jobs during the recession; 2) loss of 5.2 million manufacturing jobs since 2000, one-third since 2008; and 3) a real unemployment rate of 17.1% in October, 2009 (and not the published 10.2% which discounts people not looking for work). By the way the current official unemployment rate is 5.1% (real rate 11%).

The Philosophy of getting Away From manufacturing

The next section discussed what brought the US economy to its present situation. The new policies were about creating “service jobs” and that it was fine to lose manufacturing jobs. One of the problems is that since 1980, we worshipped free trade – “we supported an economic model and trade policies that say we could cease being a nation that creates, makes, and builds things, and become instead a nation that just services things-and not only could we  remain prosperous, we could grow richer. Sorry, that isn’t the way the world works.” The new wealth was coming from smoke and mirrors -many Ponzi schemes originating from Wall Street and what we got was bubble after bubble.

The author has noted that there has also been a change in the way Wall street invests: “A malicious trading-room capitalism has evolved on Wall Street over the past 20 years. A trader doesn’t care whether the company he’s buying or selling makes anything. He doesn’t care whether it’s going in any direction in the long term. He only cars if he makes money today ahead of the other guy tomorrow, or this minute ahead of the next minute. And those are the guys who make the money and reap all of the rewards”.

The result was a loss of contributions from manufacturing: in 1950, manufacturing contributed to 40% of GDP; 1980 20%, Since the recession 12.5%.

Manufacturing is the best bang for your buck. For each $1 invested in manufacturing means $1.4 for the total economy, more than any other category. (This is called the multiplier effect).

Manufacturing multiplier effect

Manufacturing multiplier effect compared to other industries

Depending on which reference you use, manufacturing may be really underestimated as being an economic multiplier

Depending on which reference you use, manufacturing may be really underestimated as being an economic multiplier

 

Free Trade is Bad For America

Another section was an attack on “Free Trade”:

“Free Trade is wonderful in theory, but it doesn’t work. It is an academic luxury that the real world doesn’t enjoy. If you want to study it at Harvard or Chicago, be my guest. But understand that global trade today is anything but free.”

It is free trade that has destroyed the American economy, especially when other countries like China use state supported companies getting subsidies, unfair tariffs and artificially devalue their currency.

Mr. Dimicco is also quite critical about the way China does business: “Behind the facade of tax breaks and incentives, we’ve seen widespread cases of corruption, bribery and blackmail.” p69.

Solutions include fighting devaluation of monetary units, and increasing import tariffs on occasion. Hard-core Free Traders always bring up: If we raise our tariffs, then they will increase their tariffs and their will be a trade war. Mr. Dimicco argues that we are already in a trade war, the US is the only one playing “by the rules”. (It is funny that in capitalism where there is no rules, that the U.S. is playing by an artificial set of rules).

Infrastructure

The author sees a real need for infrastructure, it will not only add US jobs, it will improve our productivity. The author believes that our recovery has been tepid with a GDP growth of only 1-2% and that the U.S. actually needs to create 30 million new jobs by 2025 (taking into consideration the growth of the US population) and we need to invest $3.6 trillion in infrastructure by 2020. He says it is just too bad that Congress can’t get anything done, and that a certain party is being too short-sighted at looking strictly at the deficit – investing in infrastructure will actually decrease the deficit.

Other Recommendations

Like most Republicans, Mr. Dimicco says we should cut the corporate tax rate to 23%, even though special taxes and loopholes have greatly decreased the percentage of GDP paid by corporations. Also, he says we need to cut regulations – whereas my suggestion is: instead of states competing each other for business – that they work together; that we get rid of corporate rebates for offshoring jobs to other countries and making the Chamber of Commerce an actual working group instead of a political one – they can streamline the process for potential new entrapreneurs – like getting all permits you may need, line up a number for inspectors, organize phone numbers to people who are willing to loan them money – basically do what China does to get US businesses over there. It is easier to start up a business in China that it is in the U.S. because there is nobody in the U.S. that will help you. In China they hold your hand and walk you through the process.

Criticisms of American Made

Although I truly believe that Buy American is a great book with identifying the true problems and solutions of today’s US economy. Mr Dimicco is a hard-core Republican, hard-core capitalist, and Ronald Reagan hero-worshipper. What is unique about Mr. Dimicco is that despite being “all of the above”, he actually is the 1-2% exception that think we should dump Free Trade and Buy American.

Re-writing the economic policies of Ronald Reagan

It is interesting in how Mr. Dimicco cherry picks the facts when describing the administration of Ronald Reagan who more than anybody else put America on the path to: “supply-side” economics, Free Trade and Trickle-down economics. In fact, the biggest things that have caused the crash of the US economy are the things that started by President Reagan. Mr. Dimicco’s defense for Reagan was a “band-aid” when he outlawed foreign currency manipulation in 1985 (against his own advisors) and when he imposed a 45% tariff on Japanese motorcycles to help out Harley-Davidson (Two episodes of “Protectionism”). And then, in 1987, Reagan appointed Mr. Free Trade himself, Alan Greenspan, as Chairman of the Federal Reserve.

Think like a Capitalist

Some people have difficulty about the mental process of a capitalist. People who don’t understand Capitalist say “Why do they send jobs to China and Bangladesh? Don’t they care about America? Don’t they worry about mis-treating workers? My answer is of course not, it is only about money.

Here is a quote from Mr. Dimicco that gives you some insight: “.. don’t ever blame a company for trying to make money. Corporations didn’t move to China to destroy American jobs. A corporation exists first and foremost to make a profit for its shareholders. If one country passes laws, raises taxes, and erects a wall of work rules and business regulations while another country cuts taxes,carves out exceptions to certain laws, and keeps regulations to a minimum, where would you want to do business? Where are you more likely to fulfill your obligation to your shareholders?”p71

That is their “loyalty: Profits and shareholders.

I do have to commend Mr. Dimicco’s behavior during the Great recession, instead of doing what all other corporations with still giant profits were doing, which was firing tons of workers, instead, he kept all of his employees working, albeit at a reduced pay rate. That should have been the point that Mr. Dimicco should have hammered home – CEO’s should be loyal to their employees.

Overall

I would recommend this book in those interested in bringing the US economy back to greatness. The solutions are practical – there are no “we-are-just- waiting-for-the-next-tech-boom-to-save-us thinking that some economists have passed as their solutions. If you can get through the one-sided political thinking, and just see the facts that Free Trade and off-shoring are bad ideas and that investing in manufacturing and infrastructure are good ideas, you will enjoy this book.

Final Editorial Comment

Mr. Dimicco did a great job at looking at the factors leading to the downfall of the U.S. Economy, but he misses the point that everybody else has missed. The number one reason the U.S. economy has done poorly in the last 30 years is just overwhelming American Greed. That is why Wall Street has come up with schemes to make more money without any work: Derivatives, Buying Back your own stock, Bundling Loans, etc. That is why the top financiers came up with Free Trade, to maximize profits for CEOs. And why don’t we fight back especially against China who uses their one sided tariffs and monetary manipulation (artificially de-valuing the Chinese Yuan)? Because American CEOs still want to get into that big fat, potential Chinese market of 1.37 Trillion citizens (compared to the US population of a measly 321.4 Million). China has been trying to lure American business with this promise for years, it is like offering a bride with a giant dowry, except they keep putting up roadblocks and changing rules and the Americans are too stupid to realize that the only one that is going to get this bride is someone from China. That is why America doesn’t fight against monetary manipulation. Because our leaders are stupid and extremely greedy.

 

 

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