Handmade Manufacturing

As the nation, and the world, experiences the worst economic crisis since the Great Depression, manufacturing in the United States has slipped away to places outside the country. Manufacturing only makes up 17% of our GDP (19.8% in 2007) (Gross Domestic Product), while the service and financial sectors had moved ahead to a rank of nearly 40% before it imploded. In 1948, manufacturing GDP was 46%, while the service sector GDP only made up 21% of GDP. Later, manufacturing fell to 36%, in 1960, while the service sector GDP grew to 25%. The trends continued, and in 1970, manufacturing GDP slipped to 34% as the service sector GDP gained more strength making up 26% of GDP. In 1982, they both converged. By 2000, manufacturing GDP fell to 28%, while services went up to 40%. The service sector economy has been made up of franchising, news media, hospitality-entertainment, legal, healthcare, hospital care, real estate, garbage/waste hauling, and consulting, as well as business solutions and services, financial, and personal services. Wikipedia.com listed those as “intangible goods”, plus included public utilities as a “tertiary sector”.

One can understand how the service sector grew as a support to, but later, separated from the nation’s manufacturing industry. As we learned, this split from being symbiotic to each other was not sustainable. The model of a dominating service sector disconnected from a strong and viable domestic manufacturing sector cannot work.

Factories, which once brought a hum to communities from Maine to California, have been relocated to East Asia, and elsewhere, along with the jobs. Since 1948, domestic manufacturing began to steadily fall as a leading economic engine of our gross domestic product--measure for our national income and output for our economy.

Small towns and cities, along with their bigger brothers and sisters, such as parts of the greater Chicago area, Cleveland and Pittsburgh, have seen their economies decline as steel, furniture, clothing, and shoes are now made by foreign nationals, and sold back to Americans, while the profits are sent back to the home country, or country of origin. We seem to have been drunk on buying cheap stuff, and in large quantities, as we blindly watched our trade surplus of 30 years transformed into a deficit. We participated in the largest consumer spending frenzy, which has made up 72% of our economy, or GDP. Today, our trade deficit has reached $900 billion. That means the United States buys $900 billion more than it exports. China’s economy relies on 40% of their exports to fuel their economy, and much of it heads over to the United States to be sold in discount and other retail stores.

We have devolved, over 30 years, into the world’s biggest exporter of raw materials and the world’s biggest importer of finished goods, and world’s fattest debtor nation. Before then, we were just the opposite exporting finished goods all over the industrialized world, and ranked as the number one creditor nation. Today, we are now a more global economy, but many say it is without balance. Our economy is finding itself broken and broke. We have become a service economy that is hard to export. Try exporting a double cheeseburger with fries and a soft drink!! Or, try exporting in-home health services, or window cleaning, or roofing services.

A service economy tends to be domestic in nature and less of an exporting commodity. Manufacturing has been, and will continue to be the most valuable exportable product this nation has available to them. To export financial services will no longer be trusted by many around the world after specialized financial products ended up burning down right before the investor’s eyes. Many people have called it the World’s Biggest Ponzi Scheme, and that is hard to be argued against.

What can be trusted, though, is a handmade item that can be used over and over and has reliability built into it. You can call it a hard good, even though it will likely have a limited lifespan of varying degrees. When you buy a coat, or shoes, or stove, or frying pan, you know it will be there today, tomorrow and next year. We need to get back to that. We are getting closer to it now, than several years ago. Unfortunately or fortunately, depending how one sees it, our economy has declined so much over the last 12 months, our exports have become more affordable to foreigners.

Handmade manufacturing employs people with a variety of tradable skills, ranging from highly skilled to lower skilled; yet, nevertheless, all have a place in the world of manufacturing.

Yet still situated behind apartments, condominium buildings and retail stores, still lies manufacturing. American manufacturing has kept that remaining 17% of GDP still alive. Unfortunately, it continues to fall. Consumer demand for most hard goods, such as cars, home building supplies, clothing, electronics, and more has dramatically collapsed. The consumer feels squeezed and at-risk of further economic vulnerability.

Manufacturing is what this nation needs to rebuild its economy again. This way of making things that can be exported keeps local economies alive. Workers spend their skilled labor incomes in their communities, and buy local services stimulating the economy. Taxes are generated and paid by both the company’s owner, as well as all the employees. This fuels our GDP and helps reduce of trade deficit.

Often what stifles a small or medium sized manufacturer from expanding, or paying higher wages, or investing in research and development are the costs affiliated with the paying of rent, insurance, and debt loads, such as lines of credit, and commercial paper payments. This has showered the fire, insurance, real estate (F-I-RE) and financial sectors with lots of cash to alter the face of our economy, and many say for the negative.

By placing these heavily expensive pressures on domestic manufacturing, many owners have been forced to leave the country or fold up completed over the last 30 years. A company having difficulty getting customers to pay on time then has trouble operating, and making payments to suppliers.

Many economists have stated that domestic manufacturing is burdened with the payment loads put on them by the FIRE and financial sectors. Such expenses inhibit their growth potentials.

In order for domestic manufacturing to begin its resurgence, these heavily burdensome economic pressures must be modified and reformed if manufacturing is to grow again, and begin to hire the good ole’ American worker.

Factories are the long-term life preservers of our sinking ship. A stimulus package might be helpful in the short run by hiring out-of-work construction laborers and skilled machine operators to fix bridges, roads, tunnels, and schools, among other projects, yet more is needed to build a sustainable society and nation.

The United States must invest in sustainable energy resources, which should be manufactured by skilled American laborers. The technologies are out there today to build small, localized renewable energy power plants to provide electricity to those users within that localized community.

For example, there are magnetic levitation wind generators, which require minimal wind to spin and create electricity. Communities could take empty, abandoned, or condemned properties and build such power plants all over this nation. But, we need a strong president and administration to initiate and champion such ingenuity and reforms, while pushing back against the powerful forces that are afraid of losing their economic stranglehold upon the consumer.

America needs to realize that without handmade manufactured products that domestic workers can afford to buy with their wages, and export to other countries, there will not be an America. Our nation will diminish in strength and respect throughout the world, as well as the value of the dollar and its investment products. If credit will ever return, those at the top end of the income ladder must accept that without lower and middle income workers earning a good wage allowing them to save, spend and borrow, once again, there will be no America. As long as consumers are afraid to spend due to disappearing jobs, stagnant wage growth, and shaken by their neighbors, friends and relatives losing their homes and retirement investments, there will be no borrowing, or willingness to take on more debt. The financial sector might as well give it up.

With 12 consecutive months of declining manufacturing output, and the lowest percentage of GDP in 50 years, the Obama administration needs to realize that giving the too-big-to-fail financial banks is not the answer to our economic crisis. A significant portion must go to rejuvenating the handmade manufacturing sector so workers can gain employment, pay off their debts, save, and pay taxes so as to reduce our deficits and help pay for our overall national economic recovery. The sooner Congress realizes these facts, the quicker we will see a recovery.