Tuesday, September 15, 2009

My reponse to a Business Week article

I recently submitted this answer to an article in Business Week titled: "Can the Future be Built in America" September 21, 2009 issue.

Re: “Can the Future Be Built in America?”

If the product is a patented monopoly, it can still be built in America. Otherwise it will be made in Asia or India. Not because of the cost of direct labor normally a maximum of 15% of sales, it will be moved because of the governments aversion to manufacturing jobs that pay (by Federal DOL stats) $20,000 more than service jobs. The cost of OSHA, ADA, EPA, Workman's Comp, Tort insurance, minimum wage, medical insurance, paid vacation and holidays, paid leave of absence for maternity, taxes on inventories, taxes on buildings, land, payroll taxes, etc.

Are these programs wrong? Perhaps not. The problem is that these millions of manufacturing jobs and the millions of supplier jobs have been moved outside the US because the countries taking these jobs do not have these hidden costs of manufacturing added to their materials and labor costs.

When the products come back to the US there is no tariffs charged on products to equal the US government's added burden on US manufacturing. Having been a consultant in manufacturing productivity for 17 years, I will unequivocally say that the US worker, properly motivated, will outproduce any other worker in the world. All they needed was a level playing field.

Now, because US manufacturing was not given an equal chance, we have tens of thousands of shuttered plants, millions of lost manufacturing jobs all of which do not pay any taxes. This yields broke governments., companies bailed out, people who once held good manufacturing jobs forced out of foreclosed homes, holding insurmountable credit card debt, and experiencing what will be over 10% unemployment simply because some people in government thought bringing in cheap goods was good for the poor people in the US and for the US environment.

China now with trillions of US dollars used in purchasing stockpiles of critical commodities is now engineering and designing products as well as systems once the purview of US manufacturers. By next year, they will have sufficient internal demand for their goods, they will not need US sales. Then would they need to purchase our debt? These are exceptionally smart, hard working people focused on a long time horizon. So don't bet on it.

The great economist Adam Smith got it right. A nations wealth is dependent on Agriculture, Mining, and Manufacturing. This leaves the wealth of the US hinging on Agriculture. Almost everything else has been outsourced.

My book “China's War on the American Economy” details the manipulation and emasculation we have experienced over the past ten years. If you really loved manufacturing as I did, you might enjoy the book.

George Koeninger

, 9/21/2009 issue.