The recent announcement of five plant closings by General Motors has justifiably triggered emotional reactions, but less thoughtful analysis as to what might be done to rekindle manufacturing in the United States.
I have enjoyed associations with manufacturing companies in many areas of the U.S. and overseas. Manufacturing is a noble enterprise — essential to the prosperity of the nation. But, if we are serious about strengthening manufacturing, we must ignore much of the shallow and uninformed political dialogue and concentrate on a few key facts that must be addressed for industrial resurgence.
Fact 1: Excessive overhead, and not labor cost, is the principal headwind facing American manufacturing. By world standards, the U.S. has extraordinarily high overhead costs, which dwarf production costs as an inhibitor of competitive strength.
The causes: excessive costs of litigation, health care, financial services, pointless speculation and poorly coordinated governmental activities. These are much more significant as headwinds than the 8.5 percent of the civilian labor force employed in manufacturing. In 1950, that figure was 31 percent. In Germany, it is still close to 20 percent.
Fact 2: The U.S. has many dedicated professionals in education. But by world standards America’s education system is expensive, disorganized, inefficient and frequently off target. At the K-12 level, U.S. education is too easy and compares unfavorably to the systems in place in most developed countries. According to the Pew Research Center, American students rank an unimpressive 38th out of 71 countries in math and 24th in science. The U.S. compares better at the postsecondary level, but there is a catch. Much of our postsecondary education is aimed less at educating and more at training people for overhead roles for an already overhead-bloated society.
Fact 3: Our financial investments are not helping America remain competitive. U.S. stock market valuations are often irrational speculations oblique to both reasonable financial values and any long-term societal benefits. Twitter, a company that mainly provides a forum for unsubstantiated political rants, has a market value greater than our largest steel company. And Canopy Growth Corporation (with a stock market symbol of WEED) has achieved a market capitalization three and a half times greater than US Steel by selling pot to our citizens.
Meanwhile, predatory retailer Amazon is valued 25 percent higher than the combined value of 3M, Caterpillar, GM, Ford, Deere, Dow Dupont, General Electric, General Mills and the nation’s largest homebuilder.
We should ask, are our investment portfolios supportive of a promising economy for the future?
Fact 4: Some of our policies are short-sighted and counter-productive and are working against us.
The Dutch re-engineer their land to prevent catastrophic floods. We provide funds for rebuilding in the same flood-prone places.
We abruptly blurt out policy additions and reversals without sufficient regard to consequences. As a result, industrial behavior is shifted in ways that impact both our environment and the competitive position of major employers.
Today, I listened attentively to Rep. Tim Ryan of Ohio — a credible speaker with some cogent observations on what makes a lasting economy. Over time, I have met thoughtful union officials such as Douglas Fraser and Minnesota’s Bob Kileen and listened to Damon Silvers, who currently works on policy for the AFL/CIO. Manufacturers have thoughtful leaders such as Greg Page of Cargill, Jeff Ettinger of Hormel and, yes, Mary Barra of General Motors.
Industrial strength should be a national project. We have some good workers, some responsible executives, and occasionally a thoughtful politician.
We are all in this together and we can do better — if we stop and think about what we are doing.
Fred Zimmerman is a professor emeritus at the University of St. Thomas. He has written a number of books on U.S. manufacturing and served on the boards of directors of several companies.