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On the Eve of the New York Primary, Upstaters Know Donald Trump Is Right About Manufacturing
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If the polls are any guide, Donald Trump should romp home in tomorrow’s New York State primary. Besides a home-state advantage, he will have key economic issues working for him. The fact is that in few regions of the United States does his case against the decline of American manufacturing resonate so powerfully.

As the author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity (Boston: Houghton Mifflin, 1999), I have often wondered how long it would take for the manufacturing issue to catch fire. It finally seems to have done so — and certainly few thoughtful residents of upstate New York are any longer prepared to hold their peace as mainstream GOP bigwigs implicitly or explicitly suggest that “manufacturing doesn’t matter anymore.”

As America’s most advanced overseas competitors know to their great advantage, complacency about the death pangs of US manufacturing has been at the root of the U.S. economic malaise that so many American voters are now beginning to wise up to.

The American establishment seems unaware that three key points can be made for manufacturing:

1. It creates jobs for everyone, from top managers down to the least educated shop-floor workers. By contrast the new “information age” that the American policymaking establishment has bet the house on has been creating jobs mainly for a narrow-gauge intellectual elite.

2. Manufacturing — at least leading-edge manufacturing of the sort that America used to specialize in — creates the potential for high wages. This is because it is not only generally extremely capital-intensive but extremely knowhow-intensive, in the sense that workers benefit from highly efficient, often secret, production systems carefully evolved over years or even decades of learning-by-doing by top production engineers.

3. Leading-edge manufacturers are disproportionately strong exporters. The reason is that manufactured products, particularly high-end items such as producers’ goods, generally need little adaptation to sell around the world and cannot be easily reverse-engineered by foreign rivals. By contrast, information-age companies such as those of the American software industry create products that have to be extensively adapted to sell in foreign markets and are often copied by foreign rivals. The adaptation is generally done in the overseas markets concerned and counts as a large deduction from the export revenues flowing back to the United States. Japan’s emphasis on manufacturing helps to explain why, even with a declining workforce (due to a population reduction programme initiated by Eugenic Protection Act of 1948), it continues to earn healthy current account surpluses even as the United States has become inured to current account deficits reaching as high as $500 billion a year or more.

Why has it taken Americans so long to wake up to the continuing importance of manufacturing? A key illusion, constantly propagated in the press, is that latter-day manufacturing consists merely of the assembly of consumer products. Such manufacturing is, of course, self-evidently labor-intensive and has rightly migrated to the Second and Third Worlds. But it is only the final stage of manufacturing and many of the earlier stages are vastly more sophisticated.

Consider the sort of products Japan specializes in these days. Here are some examples:

Laser diodes. These are the crucial drivers of optical fiber communication and Sony is the world’s leading supplier.

Semiconductor grade silicon. If you think that silicon chips are merely made of sand, you are a little behind the times. Each new generation of chip requires a higher degree of chemical purity in the silicon. Things have developed to the point where even infinitesimally small impurities can sabotage a chip’s workings. Japanese companies, led by Shin-Etsu Chemical, enjoy a world monopoly on state-of-the-art semiconductor silicon.

LCD steppers. LCDs are the most important components in iPhones and similar devices. But how do you make an LCD? Answer: you need super-precise machines known as steppers, which create each screen’s highly miniaturized circuitry. The Japanese optics industry monopolizes the manufacture of such machines.

Back to Trump. Although the press has rarely given him much air time to make his case, the manufacturing theme is clearly one of his biggest winners — not only as an immediate vote-getter but as a fundamental contribution to the contemporary history of the United States.

 
• Category: Economics • Tags: 2016 Election, Donald Trump, Free Trade 
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  1. Unless Trump is going to:

    1/ Bring back the Erie Canal to the position it once had…

    2/ Allow fracking in NYS…

    3/ Reduce the World’s power output level so that the Niagara River can once again be a major power source…

    4/ Ban leisure air travel so that New York City residents are again forced to vacation only nearby…

    I’m afraid upstate NY will still have lots of problems.

    Read More
    • Replies: @bluedog
    Lol yes your right on that and our biggest problem is of course downstate, or NYC as you can see by the map upstate went to Sanders while downstate NYC and its burbs went Clinton wiping out any representation that upstate may have had, and as long as this continues upstate will remain a poor section by any measure you wish to use with the only exception of course being the taxes it pays.!!!
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  2. There is no force on earth that can revive upstate New York..might as well abandon it to the bears and deers.

    Read More
    • Replies: @eah
    There is no force on earth that can revive upstate New York.

    It was just one of many possible examples, Dummkopf. What do you want to do? Abandon great swathes of America to the "bears and deers"?

    The general point is that huge numbers of people in the US are and were never suitable to be or become -- eg after being laid off from their jobs assembling television sets or Fords -- IT or engineering professionals (ask the people who used to work for Disney in Orlando how secure those jobs are) -- they just do not have the brain power -- it is simply ultra-idiotic for a country to leave such a large portion of its low(er) IQ population to its own devices -- since by definition they are not as capable of mastering the situation -- and to make matters worse, the country has been absolutely flooded with unskilled immigrants in the past few decades -- this has further damaged the job prospects and upward mobility of the most economically vulnerable, eg Blacks and lower class Whites -- finally, adding insult to injury they've paid tax to the governments that have made their plight worse.

    , @Ragno
    Exhibit #1 of the defeatism promoted as a 'normal' byproduct of buying into the system as currently, corruptly constituted; and Exhibit #1-A of why Trump, now.
  3. @Merema
    There is no force on earth that can revive upstate New York..might as well abandon it to the bears and deers.

    There is no force on earth that can revive upstate New York.

    It was just one of many possible examples, Dummkopf. What do you want to do? Abandon great swathes of America to the “bears and deers”?

    The general point is that huge numbers of people in the US are and were never suitable to be or become — eg after being laid off from their jobs assembling television sets or Fords — IT or engineering professionals (ask the people who used to work for Disney in Orlando how secure those jobs are) — they just do not have the brain power — it is simply ultra-idiotic for a country to leave such a large portion of its low(er) IQ population to its own devices — since by definition they are not as capable of mastering the situation — and to make matters worse, the country has been absolutely flooded with unskilled immigrants in the past few decades — this has further damaged the job prospects and upward mobility of the most economically vulnerable, eg Blacks and lower class Whites — finally, adding insult to injury they’ve paid tax to the governments that have made their plight worse.

    Read More
  4. Are you familiar with Robert Fitch’s book The Assassination of New York, Eamonn? He talks about the death of the manufacturing economy on Manhattan Island (500,000 jobs in 1960) as a conspiracy of railroad and real estate executives who wanted to erect offices that would pay higher land rent, a purer entire mentality that killed the high-value specialized manufacturing culture of NYC,

    Well worth a read. I’ve ordered your book in the meanwhile. Is there a way I might contact you? You might send an email to the address at which I have logged this comment.

    Read More
    • Replies: @Eamonn Fingleton
    The story of what did or did not happen in Manhattan in the 1960s is surely of little relevance to the latter-day disaster of America's misguided trade policy I write about in my books. That said, I can be reached at efingleton at-mark gmail.com.
    , @Lost american
    Interesting Tom Schmidt- I will look up this book.
    I remember al lot of hustle and bustle in Manhattan in the 60s.
    A cheap rent for a small apartment in NY City is now $3000 per month. I remember when things made more sense.
  5. Another important fact about manufacturing that we tend to forget or neglect: When we lose an industry we lose skills. Physical skills and crafts are the basis of all other forms of knowledge, and physical accomplishment is the best source of plain old sanity.

    Humans are meant to get things done. Staring at a screen is no substitute for planting a crop or changing a diaper or cooking a meal.

    Read More
    • Replies: @TomSchmidt
    Exactly. When you produce a thing, you produce actually two things. The thing itself, and the knowledge of how to make it. Given the secondary, tertiary, quaternary value of data to Big Data companies, we know that that there is value in this production know-how.

    Now ask yourself where all the studies that look at comparative advantage and place a value on this knowledge are? By not being systems thinkers, we have destroyed the economy as ecosystem and focused on it as monoculture. There is a definite linkage between government support for corn and outsourcing: both impoverish the land/people in the long term but enrich a connected group in the short term.
  6. @TomSchmidt
    Are you familiar with Robert Fitch's book The Assassination of New York, Eamonn? He talks about the death of the manufacturing economy on Manhattan Island (500,000 jobs in 1960) as a conspiracy of railroad and real estate executives who wanted to erect offices that would pay higher land rent, a purer entire mentality that killed the high-value specialized manufacturing culture of NYC,

    Well worth a read. I've ordered your book in the meanwhile. Is there a way I might contact you? You might send an email to the address at which I have logged this comment.

    The story of what did or did not happen in Manhattan in the 1960s is surely of little relevance to the latter-day disaster of America’s misguided trade policy I write about in my books. That said, I can be reached at efingleton at-mark gmail.com.

    Read More
  7. There’s a lot of unwarranted simplification of the decline in American manufacturing. I happened to work for Kodak in the 60’s at a great upper floor Tower job. Though I left for greater adventure my gratitude for the job continued. But 40,000 Rochester jobs were wiped out by the new charge coupled camera that was invented at Kodak.

    The fact is that after WW2 we were coasting on previous work and allowed to do so because the rest of the world was undeveloped or leveled by WW2. Companies were fat. Unions were fat. This left a big opening for less well positioned foreign companies/workers to take business. And they were aided by governments –theirs and ours.

    Getting our government on the side of manufacture is just the first step. Then we, management and workers, have to perform. A recent survey of consumers developed the fact that they prefer to buy from abroad if the price is at all favorable.

    It will be important to Trump’s efforts favorable to manufacturing to remember that our government is good at the negative but pretty useless at actually building something profitable. The best Trump can do is get out of the way. We have to do the actual work.

    Read More
    • Replies: @Sean
    Business intolerance to organised labour, and the ease with which profits are hidden by non- manufacturing corporations, may explain a substantial amount of the decline.

    Trump has an excellent plan (amnesty and low rates for those who take it up) for encouraging successful companies using offshore fund tax avoidance to bring their money home.

  8. @OutWest
    There’s a lot of unwarranted simplification of the decline in American manufacturing. I happened to work for Kodak in the 60’s at a great upper floor Tower job. Though I left for greater adventure my gratitude for the job continued. But 40,000 Rochester jobs were wiped out by the new charge coupled camera that was invented at Kodak.

    The fact is that after WW2 we were coasting on previous work and allowed to do so because the rest of the world was undeveloped or leveled by WW2. Companies were fat. Unions were fat. This left a big opening for less well positioned foreign companies/workers to take business. And they were aided by governments –theirs and ours.

    Getting our government on the side of manufacture is just the first step. Then we, management and workers, have to perform. A recent survey of consumers developed the fact that they prefer to buy from abroad if the price is at all favorable.

    It will be important to Trump’s efforts favorable to manufacturing to remember that our government is good at the negative but pretty useless at actually building something profitable. The best Trump can do is get out of the way. We have to do the actual work.

    Business intolerance to organised labour, and the ease with which profits are hidden by non- manufacturing corporations, may explain a substantial amount of the decline.

    Trump has an excellent plan (amnesty and low rates for those who take it up) for encouraging successful companies using offshore fund tax avoidance to bring their money home.

    Read More
  9. @TomSchmidt
    Are you familiar with Robert Fitch's book The Assassination of New York, Eamonn? He talks about the death of the manufacturing economy on Manhattan Island (500,000 jobs in 1960) as a conspiracy of railroad and real estate executives who wanted to erect offices that would pay higher land rent, a purer entire mentality that killed the high-value specialized manufacturing culture of NYC,

    Well worth a read. I've ordered your book in the meanwhile. Is there a way I might contact you? You might send an email to the address at which I have logged this comment.

    Interesting Tom Schmidt- I will look up this book.
    I remember al lot of hustle and bustle in Manhattan in the 60s.
    A cheap rent for a small apartment in NY City is now $3000 per month. I remember when things made more sense.

    Read More
    • Replies: @TomSchmidt
    Indeed. New York was once a productive place, paying for the high salaries earned there by exporting items of value. Now we export services of presumed value, a lot of them clearly valuable, and a lot of them not something most people would willingly pay for. From being a place that was mulcted by the Federal Government to fund Appalachia, it has become a place that extracts wealth through control of finance from the rest of the country.

    The city looks better now than it has probably since the 60s, and crime has dropped dramatically. Would it be so well off if the bailouts of 2008 hadn't happened?
  10. Trump is a third-generation New York german-american. He instinctively understands the centrality of TANGIBLE productivity to the real every-day economy. Germany and Switzerland have understood this very well, and arguably have the most highly-educated and productive manufacturing base in the world. So while America chases bottom-dollar labor around the globe, the germans understand that they really have nowhere to run: they must build community and capacity at home. America’s plantation economic policies won’t pencil out in the confined space of Europe.

    As an example, compare and contrast the textile industry in the Rhineland-Westphalia region of Germany with that of New England. New England’s textile manufacturing base is long gone, leaving behind abandoned mills and dystopian communities from New Bedford to New Hampshire mired in absolute poverty. Germany’s textile industry is still alive and kicking, and sustaining the same localities it was 150 years ago, only now it is THE cutting edge manufacturing, not bulk cotton fiber, but high tech specialty textiles. Immense value added and not easily poached by the second and third world.

    Americans are VERY slowly waking up to the fact that we, like the germans, have nowhere to run. No frontier left, California’s closed. We are going to have to make tangible, useful stuff, and if our elites can’t handle this they will ultimately be roughly shoved aside…

    Read More
  11. @polistra
    Another important fact about manufacturing that we tend to forget or neglect: When we lose an industry we lose skills. Physical skills and crafts are the basis of all other forms of knowledge, and physical accomplishment is the best source of plain old sanity.

    Humans are meant to get things done. Staring at a screen is no substitute for planting a crop or changing a diaper or cooking a meal.

    Exactly. When you produce a thing, you produce actually two things. The thing itself, and the knowledge of how to make it. Given the secondary, tertiary, quaternary value of data to Big Data companies, we know that that there is value in this production know-how.

    Now ask yourself where all the studies that look at comparative advantage and place a value on this knowledge are? By not being systems thinkers, we have destroyed the economy as ecosystem and focused on it as monoculture. There is a definite linkage between government support for corn and outsourcing: both impoverish the land/people in the long term but enrich a connected group in the short term.

    Read More
  12. @Lost american
    Interesting Tom Schmidt- I will look up this book.
    I remember al lot of hustle and bustle in Manhattan in the 60s.
    A cheap rent for a small apartment in NY City is now $3000 per month. I remember when things made more sense.

    Indeed. New York was once a productive place, paying for the high salaries earned there by exporting items of value. Now we export services of presumed value, a lot of them clearly valuable, and a lot of them not something most people would willingly pay for. From being a place that was mulcted by the Federal Government to fund Appalachia, it has become a place that extracts wealth through control of finance from the rest of the country.

    The city looks better now than it has probably since the 60s, and crime has dropped dramatically. Would it be so well off if the bailouts of 2008 hadn’t happened?

    Read More
  13. @Merema
    There is no force on earth that can revive upstate New York..might as well abandon it to the bears and deers.

    Exhibit #1 of the defeatism promoted as a ‘normal’ byproduct of buying into the system as currently, corruptly constituted; and Exhibit #1-A of why Trump, now.

    Read More
  14. Andrei Martyanov [AKA "SmoothieX12"] says: • Website     Show CommentNext New Comment

    Why has it taken Americans so long to wake up to the continuing importance of manufacturing? A key illusion, constantly propagated in the press, is that latter-day manufacturing consists merely of the assembly of consumer products. Such manufacturing is, of course, self-evidently labor-intensive and has rightly migrated to the Second and Third Worlds. But it is only the final stage of manufacturing and many of the earlier stages are vastly more sophisticated.

    This is also a cultural problem, which starts as early as public school STEM (or rather lack thereof) education through snowball process of mental de-industrialization. Many youths still think that iPhones grow on the trees (I am being sarcastic, of course), or that jets are made of…something. This all is a result of shoving myth of FIRE economy down the throat of couple generations at least. And this is just the part of a problem. Having said that, a real economic prowess is measured in the numbers of complete (enclosed) technological cycles, not in Dow Jones growth and “capitalization”, but that brings us in the very “dangerous” vicinity of the heart of liberalism and free trade orthodoxy, which, as Corelli Barnett states, destroyed one of the fundamental principles “that nation should generally be self-sufficient”(c). And then we come here close to even more scary and threatening thing–a nation, a nation-state, which US is not.

    Read More
  15. It is part of the European character to derive a sense of self worth through making stuff. As good Americans despair of ever having meaningful work again and of ever deriving a sense of pride from having contributed to the well-being of their communities they will resign themselves to decline and death, e.g. suicide by opiate overdose. These good, sensitive, conscientious people capable of feeling a sense of pride and accomplishment will lose hope, despair and die.

    Meanwhile, the mediocre, the dull, the inert will be unaffected and plod onward. Having little in the way of dreams and expectations and never having developed a work ethic, they will be unaffected by underemployment. They will breed and survive.

    The long term consequences of our disastrous manufacturing and trade policies will be dysgenic. Good productive people will die off, plebeian louts will survive. We will regress to a pre-Enlightenment type population.

    Read More
    • Agree: Andrei Martyanov
    • Replies: @Andrei Martyanov

    It is part of the European character to derive a sense of self worth through making stuff.
     
    Excellent and a very true observation. The lumpenization of American economy is absolutely staggering.
  16. @anony-mouse
    Unless Trump is going to:

    1/ Bring back the Erie Canal to the position it once had...

    2/ Allow fracking in NYS...

    3/ Reduce the World's power output level so that the Niagara River can once again be a major power source...

    4/ Ban leisure air travel so that New York City residents are again forced to vacation only nearby...

    I'm afraid upstate NY will still have lots of problems.

    Lol yes your right on that and our biggest problem is of course downstate, or NYC as you can see by the map upstate went to Sanders while downstate NYC and its burbs went Clinton wiping out any representation that upstate may have had, and as long as this continues upstate will remain a poor section by any measure you wish to use with the only exception of course being the taxes it pays.!!!

    Read More
  17. Andrei Martyanov [AKA "SmoothieX12"] says: • Website     Show CommentNext New Comment
    @Threecranes
    It is part of the European character to derive a sense of self worth through making stuff. As good Americans despair of ever having meaningful work again and of ever deriving a sense of pride from having contributed to the well-being of their communities they will resign themselves to decline and death, e.g. suicide by opiate overdose. These good, sensitive, conscientious people capable of feeling a sense of pride and accomplishment will lose hope, despair and die.

    Meanwhile, the mediocre, the dull, the inert will be unaffected and plod onward. Having little in the way of dreams and expectations and never having developed a work ethic, they will be unaffected by underemployment. They will breed and survive.

    The long term consequences of our disastrous manufacturing and trade policies will be dysgenic. Good productive people will die off, plebeian louts will survive. We will regress to a pre-Enlightenment type population.

    It is part of the European character to derive a sense of self worth through making stuff.

    Excellent and a very true observation. The lumpenization of American economy is absolutely staggering.

    Read More
  18. @Sean
    Business intolerance to organised labour, and the ease with which profits are hidden by non- manufacturing corporations, may explain a substantial amount of the decline.

    Trump has an excellent plan (amnesty and low rates for those who take it up) for encouraging successful companies using offshore fund tax avoidance to bring their money home.

    Trump isn’t tolerant of organized labor.

    Read More
    • Replies: @Reg Cæsar

    Trump isn’t tolerant of organized labor
     
    Organized labor isn't tolerant of unorganized labor, either. The "I've got mine, Jack" attitude dominates. Maybe you can imagine ballplayers honoring peanut vendors' picket lines, but I can't.
  19. workers benefit from highly efficient, often secret, production systems carefully evolved over years or even decades of learning-by-doing by top production engineers.

    The Chinese aviation industry is a great example of this. They can build fighter jets, helicopters, even airliners. But they can’t make a good turbofan jet engine. There is a secret sauce to making jet engines that the Chinese have been unable to replicate.

    The Chinese have had no trouble cloning Facebook, Google, Twitter, and all the other American “tech” monopolies. Oh, sure, these “tech” companies use technology, but so does the phone company and the local TV station. If the Chinese can operate their own phone company and their own TV stations, then they can also operate their own Facebook.

    Can you really call yourself a “tech” company when a team of hotshot programmers can clone your main product in three months? True high tech is when the Chinese have spent twenty years trying to clone our jet engines, but they still can’t do it.

    Read More
    • Replies: @HdC
    Ditto for leading-edge machine tools and manufacturing systems.

    These also require the Royal Jelly.

    Not forever; the know-how will eventually diffuse and, bright people will also gather the know-how the old-fashioned way through "learning by doing", and learning from their mistakes.

    But this takes time and enormous commitment.

    In another life I was a participant in a transfer-of-technology agreement. The potential client was adamant that they receive all revisions of every document pertaining to this technology.

    It was priceless to see the crest-fallen faces when I pointed out to the client that the really important stuff was not written down but in the minds of our experienced personnel. HdC
  20. @Historian

    workers benefit from highly efficient, often secret, production systems carefully evolved over years or even decades of learning-by-doing by top production engineers.
     
    The Chinese aviation industry is a great example of this. They can build fighter jets, helicopters, even airliners. But they can't make a good turbofan jet engine. There is a secret sauce to making jet engines that the Chinese have been unable to replicate.

    The Chinese have had no trouble cloning Facebook, Google, Twitter, and all the other American "tech" monopolies. Oh, sure, these "tech" companies use technology, but so does the phone company and the local TV station. If the Chinese can operate their own phone company and their own TV stations, then they can also operate their own Facebook.

    Can you really call yourself a "tech" company when a team of hotshot programmers can clone your main product in three months? True high tech is when the Chinese have spent twenty years trying to clone our jet engines, but they still can't do it.

    Ditto for leading-edge machine tools and manufacturing systems.

    These also require the Royal Jelly.

    Not forever; the know-how will eventually diffuse and, bright people will also gather the know-how the old-fashioned way through “learning by doing”, and learning from their mistakes.

    But this takes time and enormous commitment.

    In another life I was a participant in a transfer-of-technology agreement. The potential client was adamant that they receive all revisions of every document pertaining to this technology.

    It was priceless to see the crest-fallen faces when I pointed out to the client that the really important stuff was not written down but in the minds of our experienced personnel. HdC

    Read More
  21. @Stephen R. Diamond
    Trump isn't tolerant of organized labor.

    Trump isn’t tolerant of organized labor

    Organized labor isn’t tolerant of unorganized labor, either. The “I’ve got mine, Jack” attitude dominates. Maybe you can imagine ballplayers honoring peanut vendors’ picket lines, but I can’t.

    Read More
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