Michigan Throwing in the Towel

April 16, 2009

http://www.freep.com/article/20090415/BUSINESS06/904150404

Today it was announced that unemployment in the state of Michigan jumped to 12.6% in March, the worst in the nation.  Bankruptcy is now almost a sure thing for General Motors.  For Chrysler, it’s more than a sure thing.  It might as well have happened yesterday and there will be no reorganization.  They’ll go straight to liquidation.

Against this backdrop comes this report from “Michigan Future, Inc.”, an Ann Arbor based think tank.  (See the above link.)  The following paragraph is of special interest:

“The decline in autos is part of an irreversible new reality that manufacturing is no longer a sustainable source of high-paid jobs,” the report from the Ann Arbor think tank Michigan Future Inc. states. “The world has changed fundamentally. We either adjust to the changes or we will continue to get poorer compared to the nation.”

“Manufacturing is no longer a source of high-paying jobs.”  I guess somebody forgot to tell China, Germany, Japan, South Korea, Taiwan, Ireland and every other nation that has built a high standard of living using manufacturing as its back-bone.  These are all nations where manufacturing workers are very well paid and receive benefits that are as good or better than any in the U.S. 

So what’s the solution proposed by “Michigan Future, Inc.”?  They want Michigan to become a “knowledge-based economy,” employing the following strategy:

• Build a culture that highly values learning, an entrepreneurial spirit and being welcoming to all.

• Create places where talent wants to live by making public investments.

• Increase public investments in higher education.

• Transform teaching and learning so that it’s aligned with the realities of a globalized world.

In other words, we’re going to retrain everyone to do something else.  We’re going to pump them full of the kind of “knowledge” that the global community so desires.  Have you done your knowledge-shopping today? 

Knowledge is useless unless it’s put to work – primarily for making things.  Oh, sure, I suppose we could train more people to be economists, teaching them 18th century economic theories and other “knowledge” that is now a proven failure.  Or we could train more MBAs to run more hedge funds, operate more off-the-books accounting schemes and design more investment vehicles like mortgage-backed assets and credit default swaps. 

But what “Michigan Future, Inc.” probably has in mind is more software developers.  No doubt, we need people to do the coding that makes our computers work.  For example, consider the period at the end of this sentence.  It took some sophisticated programming to make that dot appear on your screen.  But nobody thinks about everything else that was involved.  What about the sprawling, multi-billion dollar, computer-controlled chemical complex that was required to make the acrylo-butadiene-styrene plastic that went into making that particular key on your keyboard?  Or the injection molding plant that shaped that plastic into the key?  Or how about the enormous boiler and steam turbine required to move the electrons from my keyboard to your display? 

Let’s go back to the subject of auto manufacturing.  Low tech stuff, right?  High school dropouts bolting stuff together, right?  Is that what you think?  Think again.  Think about huge factories crammed full of computer-controlled robotic equipment, and the people trained to design, build and maintain those robots.  Think about the engineering skills and computer applications involved in designing the chassis to crush perfectly in a collision, absorbing the impact while protecting the occupants.  Or just think about the bolts themselves:  the heavy equipment involved in mining iron ore, the steel mill required to turn that ore into raw steel wire or bars, the maching equipment required to turn that bar stock into fasteners with hex heads and perfect thread patterns.  Now think about the engineering and manufacturing that went into making all of that equipment.  Doesn’t sound so simple now, does it? 

Manufacturing is an absolutely essential ingredient to a healthy economy and a high standard of living.  The demise of manufacturing in the U.S. goes a long way toward explaining the steady decline in our standard of living.  The only knowledge that’s in short supply in Michigan and the U.S. in general is the knowledge of the role that misguided trade policy has played in exporting our manufacturing jobs to nations that fully appreciate the value of manufacturing. 

 


Nearly 600,000 Jobs Lost in a Week

January 22, 2009

http://www.reuters.com/article/ousiv/idUSTRE50L36C20090122

The Labor Department reported today that nearly 600,000 people filed for unemployment last week.  That’s an annual rate of over 30 million workers losing their jobs – over 20% of the work force. 

I thought you might be interested in some anecdotes from the state of Michigan.  It was reported yesterday that in one month, from November to December, unemployment in Michigan rose by a full percentage point to 10.6%.  And it seems that the unemployment offices have been completely overwhelmed.  Phone lines are jammed.  The web site has crashed from overuse.  People are forced to take their questions directly to the unemployment office.  The local news showed a line at one such office that appeared to stretch for a full city block.  I’m reminded of pictures of the unemployed waiting in lines during the Great Depression.  And many of these are highly skilled people.  One guy interviewed had two master’s degrees and worked in an IT department.  Yet, some politicians still offer up “job retraining” as the solution.  Retraining to do what?  Where is the huge demand for labor that’s going unmet because Americans are too uneducated to fill the positions?  The only retraining needed around here is how to fill out unemployment application forms. 

I’m also reminded of a visit to Michigan by Mitt Romney during the Republican primary campaign.  He told Michiganders condescendingly that we’re in a “one-state recession.”  Well, it isn’t a one-state recession any more, is it?  It makes you wonder whether the state of Michigan is the canary in the coal mine for the U.S. economy.  If we are, the rest of you had better hunker down because it’s going to get much, much worse!