Economy, vanishing jobs, growing debt, trade imbalance etc. have been the daily subjects of media and political rhetoric. The concerns are real. In truth, economically this nation is living on borrowed time, not unlike individuals who pay only the minimum on credit card debt. How did we get into this mess? How do we get out of it?
The complexity of the problems is enormous; I will limit my remarks to the aspect of manufacturing in Connecticut, having been directly involved in it during my working career.
While being nationally intertwined, industrial characteristics of each state are peculiar to each. The basis of Connecticut industry is different from that of states like e.g. Illinois, Michigan or Ohio, geared to mass production. Ours is “small batch”. Whether it is Pratt & Whitney, Electric Boat, Sikorsky Aircraft or the Mom & Pop machine shop down the street, they all have one thing in common – small, customized orders. As such, they require a high investment in engineering, set-up and execution, which call for a trained and dedicated workforce.
The tradition of accuracy made Connecticut a favorite supply source for out of state industries. Factories in Bridgeport and New Britain turned out machine tools and products such as ball bearings for automotive industry. A Valley company I worked for produced processing machines for rubber and plastics, used in tire and car body manufacturing. All of these shared the ups and downs within that industry. Products such as hardware, typewriters or guns, while more freestanding, lent themselves more to foreign competition from existing foreign sources.
Quality has never come cheap. Even smaller manufacturers had apprentice programs, training future shop personnel. Some larger companies even had engineer-in-training programs for young graduates, lasting as long as one year, intended to acquaint them with all phases of operations. Shortages were often supplemented by attracting trained personnel from Europe. During 1960s the British government even protested to Washington about the “snatching” of young engineers and trained machine operators.
Having invested heavily in their employees, companies were eager to hang on to them. As an example, during the periodic production slowdowns my employer would have part of the lathe bay produce bolts and nuts “for stock”, or accept orders with “zero profit”, just to avoid layoffs and machine tool downtime. The management knew that slowdowns were cyclic and adjusted to it.
The reliance on experience was also reflected on the customers’ side. Quality, reliability and durability of the product received prominent consideration. The customers were mostly willing to pay extra if the reputation of the product and support service backed it up. For example, during 1970s the company I worked for stocked special bearings, each worth $23,000 (in those days!) just in case a paper mill in Maine might need a couple to prevent months of downtime.
The years of stability following World War II lulled American industry as a whole into a laid back attitude. Gradually greed reared its ugly head. Reluctant to modernize, manufacturers pushed production with outdated equipment and methods. Labor union leaders demanded higher wages and benefits. The industry complied, as production costs rose and profits shrank. As American automotive industry gradually lost to Japan and Germany, Connecticut industry suffered in equal proportion.
Connecticut has had a long tradition of parasitic administrations. They have neglected to support manufacturing, while welcoming defense products, banking, insurance and gambling, since these have fed the state bureaucracy essentially for free. To this day manufacturing, both traditional and modern, are a mystery to our politicians and their “concerns” are simply rhetorical.
It must be understood by our leadership that manufacturing is crucial to our state economy. However, the era of Yankee self-reliance of this industry is over. The rebirth of manufacturing in a modern, globally competitive mode will require a coordinated effort based on a realistic plan. This idea, in order to succeed, must have federal support, which will not come easy considering the lobby of greed at the highest level.
While our industry was slowing down, a new approach to manufacturing was being developed and implemented in Japan, of all places, to serve as both driver and pattern for the rest of the industrialized world.
After World War II Japan was facing a dilemma. Its industry was in ruins and its trained workforce needed employment. It had to overcome its reputation of poor quality and imitation. Stateside, Dr. Edwards Deming had developed new production control concepts, which the somnolent American industry pooh-poohed. As early as 1950 the Japanese, however were quick to realize the possibilities. Combining the process with automation, they applied it with vigor in automotive and shipbuilding industries, changing manufacturing forever.
I’ve heard it being explained that another difference between American and Japanese organizations is that in the latter, bankers sit on the corporate boards. Thus, from the start, major Japanese companies could plan and implement, without having to go hat in hand to banks and explain their needs to people lacking any understanding of the issues.
From early on Japan realized it had two major flaws in her industrial development – one was a limited workforce, the other the lack of raw materials. Sometime during late 1960s the government devised a long range plan for Japan to concentrate on developing technologies and relocating as much of manufacturing as possible to other countries, closer to major markets and raw material sources. Today, for example, many Japanese cars are assembled stateside.
Ostensibly, this practice benefits the economy of host countries, by providing jobs. However, economist Roger Gilpin writing in “East Asia in Transition” ( edited by Rober S. Ross, publ. by M.E.Sharpe, 1995) explains the Japanese system as follows:, “Although in recent years Japan has imported an increasing fraction of the manufactured goods it consumes, this trade has tended to be “intrafirm” trade; that is, these imports have been transfers from an overseas subsidiary of a Japanese firm to a Japanese firm located in Japan itself”.
I stress the Japanese model, because it has affected manufacturing worldwide. In U.S., NAFTA has further facilitated this practice, by providing foreign competitors with additional sites and cheaper workforce in Mexico and Canada, whence the products are easily shipped to U.S.
“Exporting American jobs” is a favorite complaint in the press and media. However, a far greater harm has been done through sheer greed of our government and the industrialists. We have given away our technology and know-how to low cost labor countries, like China or India, thereby allowing them to become competitive instantly, saving time and $ billions in development costs. The damage done to our nation has been enormous and its aftermath will continue getting worse and will last for decades. Certainly, this nation will recover, but it must adjust to reality first!
The attitude taken by many of our leaders has been to assume that the American Way of Life would indefinitely attract top flight scientists, engineers, physicians etc. from other parts of the world, making up for the need to produce our own. According to them, we could prosper on “service” economy.
This theory is wrong. As education and manufacturing ability of our competitor countries improve and reach ours, a reverse is bound to occur. We are already seeing immigrant computer specialists, scientists and physicians leave for better opportunities in their native countries. Note “60 Minutes” episodes dealing with hospital facilities in India and Thailand, equipped with latest technology and American-trained native staff, offering more for much less than the cost here.
In another twist , India ‘s “talent pool” is running dry to the point that its Tata Consulting will hire 500 Americans graduating from top colleges like MIT and University of Georgia this year (“Coming and Going”, U.S. News & World Report, 1/23/2006). I would suggest the entire article should be read, to appreciate the size of the global job market and also the fact that there is a growing “homeshore” market in American Sun Belt.
As the standard of living improves in China, South Korea etc., their labor cost will increase. Since most of their production is of the “mass” variety, they will start looking for providers of the kind that is slowly dying out in Connecticut. Unless our state administration wakes up and starts planning now, our traditional industry will perish.
Education is a critical factor. Emphasis must be placed on more rigorous middle and high school curricula, stressing math and science. Graduates must have a generally adaptable background. The more ambitious should be given an extra opportunity. In Waterbury we do already have the building blocks in place. High school and Kaynor Tech students may, for example, take college level courses at NVCC. This equips them for a far more productive further academic or technological education, appropriate for a wider career choice.
Colleges and universities must adapt to real world needs and provide appropriate long range career guidance to students. The Post College, for example, will expand their course choice to offer “job-oriented” types, at the expense of “academic” ones. An unmarketable degree is of little use.,
Our state administration must create and implement a durable plan, incorporating education and manufacturing as interdependent entities and creating reliable business atmosphere. It must not wait until defense contracts and gambling income fizz out. Economic plans applied in Southern states to attract and develop industries should be studied and adapted to our needs.
Our corporate entities must cease the fixation on maximum profits and compensation for their top management. They should realize that, sooner or later, they will have to again rely on American workforce and pay the heavy price for neglecting its quality. Even with computerization and robotics, there will always be a segment demanding human skill.
Last but not least, labor unions must realize that high wages and benefits are useless to members laid off as the result of extravagant contracts. The basis of American labor unions policy should be to keep the members employed, first and foremost, even if it means tightening the belt and cutting into the frills and political ambitions of union leadership.
The manufacturing sector is fully aware of the prospects of inaction, but will not be able to avert the consequences without a state backed coordination. Our state administration and the entire subordinate infrastructure must realize the fix we are in and, unless immediate corrective action is taken, a disaster is down the road. It will take at least a decade to produce viable results, so time to start is now! Sadly, our leaders have repeatedly demonstrated their lack of vision and determination shown by Japanese when facing a crisis. Let us only blame ourselves for keeping the greedy and incompetent in power.