Amazing Modern Manufacturing

I worked many years for the National Association of Manufacturers (NAM) and I have never been as excited about the prospects for U.S. manufacturing as I am today. We are entering a new era – a new golden age of amazing modern manufacturing.

All of a sudden all the ingredients of competitive manufacturing are swinging our way. The biggest single reason is the dramatic drop in the cost of natural gas, which has always been a critical factor in our manufacturing base. We pay about $3.50 per million BTUs, opposed to $12 in Europe and $16 in Japan. And we will keep that edge for a long time, even as we are also ramping up our production of oil. By 2025, the U.S. will be a net exporter of energy.

Meanwhile, other key costs associated with manufacturing, such as labor and land, are rising faster among our main competitors. Wages and benefits in China are rising 15-10 percent a year and the yuan is gaining ground on the dollar. Also, industrial land is much cheaper in parts of the U.S. than in the coastal regions of China where most of the industrial base is located. Ergo, we are fast closing the gap in production costs between the U.S. and China.

But another advantage of U.S. manufacturing, and one that will have greater impact over the long haul than energy, is the creativity of the American people. Manufacturing accounts for about two-thirds of all private sector research and development, and the lion’s share of patents and innovation. Our legal system protects intellectual property which is a big reason why manufacturers pump so much capital into R&D. And the shop floor, today as always, is the real world where new ideas are tested – whether new products or new processes for  making products of  higher quality more efficiently.

As technology roars ahead, the U.S. is well positioned to build on its leadership because of our commitment to innovation. Today as always, manufacturing is our economy’s primary driver of productivity gains. Thanks to innovation, the turnaround time for new product lines is shortening, which adds yet another incentive for manufacturers to produce their products here where they can closely monitor the development process.

All of which means a growing number of manufacturers are bringing production back to the U.S. from overseas even as more foreign manufacturers are shifting production into the U.S. To be sure, U.S. manufacturing will never be the jobs machine it once was, but we will probably add 2.5 million or more new manufacturing jobs by 2020, nipping 2-3 points off the unemployment rate, and by and large they will be good jobs that pay well.

This is not idle speculation; it is happening and it will continue to happen at a quickening pace in the months and years ahead. Hang on to your hats, friends. This promises to be an exciting and productive ride.

Culture Clash

General Sir Charles James Napier, who conquered the Sindh Province of India (now Pakistan) during the heyday of British imperialism, was appalled by the quaint local custom of the suttee — burning widows on the funeral pyres of their husbands. He issued an order banning such things. He was soon thereafter visited by some Hindu holy men who sought to explain to him that the suttee was an ancient and revered tradition in their society that he should respect. Napier heard them out courteously. “You say that it is your custom to burn widows,” he said. “Very well. We also have a custom. When men burn a woman alive, we tie a rope around their necks and we hang them. Build your funeral pyre. Beside it my men will build a gallows. You may follow your custom. And then we will follow ours.”

I have always thought that story, which I believe is credible, speaks volumes to the ancient quandary of clashing cultures. We are conditioned to respect other societies and their cultural values, which generally speaking is a good thing to do. But sometimes we come face to face with values so unspeakably abhorrent to our own that accommodation is virtually impossible.

Some years ago, I wrote a book, “Lincoln and the Sioux Uprising of 1862,” about how our 16th President handled the bloodiest Indian uprising in American history in the midst of the bloody Civil War. In performing research for that book, I was struck again by the clash of cultures when our ancestors tried to co-exist with Native Americans. The Sioux of southwest Minnesota went on a bloody rampage in part because they were being cheated out of their land and money, but even more because they resented the daily insults to their culture.

To be sure, our government was not overtly trying to insult the Sioux. Rather, we were trying to persuade them to become farmers like the European settlers who were moving into the area. The U.S. government offered generous inducements to the Sioux to take up the white man’s ways – free farmland, free farm equipment, instruction, seeds, animals, everything they needed to launch productive farms. A few of the Sioux accepted this generous offer and for the most part they prospered.

But to the majority of the Sioux, these few were sellouts. The Sioux men considered themselves warriors and hunters. Farming was women’s work. And by the way, virtually all of the menial work was performed by the Native American women. That also was part of their ancient and revered culture that our ancestors disrespected. In studying this history, I found myself sympathetic to the European settlers who were offering the Native Americans a better way of life. The traditional Native American culture, at least as represented by the Sioux in that area, was ripe for history’s dustbin.

Today we have yet another major league culture clash afoot between the modern world and the Islamic world – at least as it is expressed by its more traditional exponents. The contrast between that culture and ours is extraordinary. They build their entire lives around their religious faith. They tolerate no dissent. Anyone who is not a Muslim is a heretic to be destroyed. They seek to manage their governments and economies according to the Koran, a 7th century book written by illiterate camel drivers.

Worst of all in my book is their contemptuous treatment of women who have no say in public affairs, who are forbidden to have professional careers or even drive cars (at least in Saudi Arabia). In Afghanistan, a little girl was shot in the head for daring to attend school. The leaders of the Taliban publicly proclaimed this a good thing. Are we really supposed to pretend that this culture deserves our respect?

The rigid discrimination against women also retards Islamic cultural, political and economic development. Women are half the population. To simply dismiss half of the population from making critical contributions to their society, the Islamic world is condemning itself to endless stagnation and backwardness.

I understand the desire of our political leaders to seek to placate the Islamic world, and in fact the great majority of Islamic people are not captive to the extremist views I have herein described. But the discrimination against women is a basic tenet of Islam everywhere. I long to hear our leaders condemn this evil for what it is and call on the Islamic world to shake off its ancient shackles to join the modern world.

Bureaucratic Inertia

It was perhaps inevitable that the bungled launch of Obamacare — the Affordable Care Act – would throw an unwelcome light on the federal bureaucracy which has never been noted for its efficiency and productivity. The federal bureaucrats had three years and about half a billion dollars to get this thing off the ground, and they blew it. What else is new?

I have worked in and around the federal bureaucracy for almost half a century, and am thoroughly familiar with its strengths and weaknesses. I knew early on that this project, given its complexity and reliance on digital technology, would present the bureaucrats with an unprecedented challenge they were unlikely to handle very well.

The problem is not that federal employees are lazy or unmotivated, but they operate in an inverse culture where routine private sector pressures do not apply. Managers cannot reward initiative or punish ineptitude. Almost no one is ever dismissed for cause, and on those rare occasions when adverse employee actions are undertaken, they tend to linger for years unresolved while the people involved continue to draw full pay and benefits. Managers are evaluated, not by how much work gets done, but by how many bodies they can add to the payroll. Quite a few of those bodies are doing virtually nothing.

Perhaps the upside down nature of the bureaucratic culture is most on display near the end of the fiscal year as the agencies scramble to spend all of the money in their budgets on anything and everything. In the private sector, this would be regarded as malfeasance if not insanity. But federal bureaucrats of every agency know if they do not spend all of their money on time, Congress will conclude they have more than they need and reduce that agency’s appropriation in the next budget cycle. Washington abounds in consultants and contractors well versed in this practice and ever eager to take advantage of it through lucrative government contracts.

Like lawyers, bureaucrats have their own language that outsiders generally find dense if not impenetrable. For example, they never say use, they say utilize. They never speak with each other; they interface.  And they prefer modified nouns to verbs – such as optimize, maximize, minimize, systematize, prioritize, and incrementalize. No self-respecting bureaucrats would ever express a clear thought such as “We did the job.” Rather, they employ the passive voice, as in “The plan was implemented” or “The policy was reviewed.” Bureaucrats are the only people I know who can speak without saying anything, and mean it.

The bureaucrats have discovered over many years that writing and speaking this way has a hypnotic effect on people outside the Beltway, conveying the impression that the job is being done without conveying any real information on what that job might entail. I have no doubt the government employees responsible for The Affordable Care Act conveyed that impression to the Obama team right up until the day the great plan was rolled out and laid a giant egg.

The bureaucracy is in dire need of overhaul, but don’t hold your breath. Republicans don’t pursue reform because they do not want an efficient bureaucracy, and Democrats don’t pursue it because they do not want to antagonize federal employee unions. The only certainty is that no one in the federal bureaucracy will be held accountable for this fiasco. No one in the bureaucracy is ever held responsible. That never happens. It just isn’t done.