Pandemic Reveals Rocky State of U.S. Manufacturing
A nation that, lacking self-awareness, continues to delude itself as being the most powerful in the world has imploded. In a matter of days, life in the United States stopped—in too many cases, literally.
The impact of COVID-19 on this country didn’t need to be this bad. It shouldn’t have been this bad. But this is what happens when a country turns its back on manufacturing. America traded its independence for short-term corporate profits, and recovery is going to take much more than a few trillion dollars in federal emergency loans. A euthanized industrial base can’t magically be brought back to life.
Who is responsible for this mess? The easy (and appropriate) targets are Wall Street, “private equity” and corporate management. They have strip-mined great companies for personal gain. Money needed for capital investment instead goes for dividends and management fees. In a world where “long term” is measured in months, manufacturing has no place.
But the money people are not solely responsible for our current problems. Politicians make the laws and policies that determine how a country functions. We have an enormously prosperous defense manufacturing sector because politicians decided that America should spend more on defense than the next ten highest-spending countries combined. We pay more for drugs than any other country in the world (often for drugs developed and sold by highly profitable American pharmaceutical companies), yet virtually none are actually produced here. We are reduced to asking the auto companies to make ventilators (not exactly their core competence) because our scandalously underfunded public health budgets did not allow stocking up on equipment for the inevitable rainy day. Apparently, we don’t even refine enough of the raw materials used in test swabs, let alone have the physical capacity to actually make swabs.
Manufacturing matters for more than just the ability to make things that could save lives here and abroad. Manufacturing is truly an “essential business.” Even in a pandemic when most of us are working from home, people need goods—food, packaging, hand sanitizer, toilet paper, gas, tires, shingles, furnaces, trucks, etc. That makes manufacturing jobs more resilient than service jobs. In January 2020, jobs in service-providing industries outnumbered jobs in goods-producing industries by a 5-to-1 margin, according to the latest figures from federal Bureau for Labor Statistics. And yet, in March, when the U.S. economy lost an astonishing 713,000 jobs, job losses in service-providing industries outnumbered job losses in goods-producing industries by a 12-to-1 margin.
Tariffs are a crude approach to industrial development; they invite retaliation from trading partners and, ultimately (despite presidential claims to the contrary), end up being paid by our own companies and consumers. But there are libraries full of books explaining more effective tactics that economists call “non-tariff barriers.” (During research for my book Optimizing Quality in Electronics Assembly, I came across an amazing non-tariff barrier used by Japan to protect its domestic ski manufacturers from Scandinavian competitors. The Japanese simply banned Norwegian skis because “Japanese snow is different.” Other countries simply impose punitive import restrictions, such as undermanned customs facilities that can tie up inbound cargo for months.)
Manufacturing matters. But that’s not what we are hearing from Washington now. The administration wants to save airlines, hotels, restaurants and even cruise lines. But I haven’t heard or seen a word about prioritizing the independent manufacturers who have stuck it out here despite an environment that can, at the best of times, be charitably described as “challenging.” A lot of otherwise good companies won’t survive this catastrophe.
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Yes, manufacturing matters. Every American realizes that now. But, when life returns to what we once considered “normal” (which likely won’t happen until universal immunization with a yet-to-be-developed vaccine), I am quite certain that there will be no new industrial policy. I hope I’m wrong.
Editor’s note: Jim Smith began work in electronics assembly in 1965 and founded Electronics Manufacturing Sciences in 1981 to teach soldering as a unified science. Thousands of engineers, technicians and managers worldwide have attended his "Science of Soldering" classes. Jim’s articles have appeared in more than 100 publications worldwide. His "Unconventional Wisdom" column appeared monthly in ASSEMBLY Magazine for more than 10 years and he remains a regular contributor to the magazine. For more information, visit www.emsciences.com.