I've been meaning to get back to this ever since say my first post back January? February? (TPM archives lost, what to say...), but thank Phoenix Woman over at FireDogLake for giving the perfect segue for me: <a href="http://firedoglake.com/2008/05/03/come-saturday-morning-the-silver-lining-thats-green/">Youngstown</a>

For some time now there's been a great moan rising over the land because of the loss of our manufacturing base. (I think that's how Michael Moore became well known back in Roger & Me times). And yet it never seems to strike people that we kept creating jobs. Then in the early 2000's, gloom and doom over computer outsourcing, but if you look at the Bureau of Labor Statistics pages on job predictions,  computer-related jobs are projected to be some of the biggest winners over the next 10 years, along with the health field.

Should we be worried? Well, yes and no. First, as the Youngstown article gets at is that you don't just turn around cities and ways of life instantly, and it's not always clear how to manage the transformation. (Someone suggested not long ago that a tube factory be turned into an LCD factory - not exactly the simplest, cheapest conversion). But in terms of loss of jobs, no, not really as long as we're maintaining quality job growth, which we more or less are, and as long as we're not sacrificing strategically important industry knowledge, which in some ways we are. Those I'll discuss in a moment.

But in terms of money, offshoring is a great bargain. From a $20 Barbie, 35 cents stays in China and the rest reverts back home. The money saved goes to investors and to consumers who presumably pay lower prices, and for every dollar off the price tag, that's $1.50 or $2 of earned income if you consider taxes. So the downward pressure on prices has been huge. If we hadn't squandered our savings on Iraq and other wastes we might notice it.

Now much of the profits on the Barbie goes to the marketing chain - one of the underappreciated jobs in the world, perhaps up there with lawyering in terms of respect, but aside from creating sometimes annoying ads and a few worthy of YouTube, marketing also helps tailor products for customers - end consumers or corporate consumers. And as long as the US manages to do a good job of managing the processes of China to tailor products for the rest of the world, and continues to own the processes if not the factories themselves, this is a huge bargain.

But if you talk about the service industry, Americans think you're talking shake machines. Actually shake machines are manufacturing, just on a JIT basis, and that's why they pay so poorly - if we could, we could export these jobs to China too (and some enterprising guys have outsourced the drivethru window to call centers to let the local staff focus on shakes and burgers). And while there was a lot of creativity in developing our manufacturing base, including factory designs and planning, the labor inside the plant provides little value-add beyond a particular point. And so it becomes a prime candidate for outsourcing. If America's to be on top of the economic heap, it has to be providing products and services of better quality and ingenuity than elsewhere, and if this process can be broken up into more efficient pieces, it should be - this is what led to the creation of the assembly line and other production enhancements. You can have a Dell Computer that basically makes nothing, only assembles from different providers and handles marketing - an excellent business prototype, but anathema to those who value old-style manufacturing. And anathema to those who see manufacturing as one of the corner-stones of liberal values, unions, and may I say Marxist scripture. It's a class issue as much as a jobs or economics, and there's just not the Bruce Springsteen glamour of Pittsburgh as a finance or marketing or computer town as it is as a steel town. Not that I know of anyone aspiring to sweat 10-12 hours a day in a steel mill, but somehow we know they're out there in scores.

In terms of the economic transitions, offshoring and the whole manufacturing shift has been poorly handled, planned and explained, and of course the people at home have real lives to adapt and real cities to adjust to the new life - whether downsizing and beautifying the city, as Youngstown did, while some people move elsewhere, and unfortunately government has not been on the ball as it should be to assist with this needed and wanted transition. Yes, wanted. We're continually upgrading our economy for a better model, but instead of controlling this like a typical controlled economy, we need features that help us adjust, including portable health care and practical job retraining programs and other ways to make it easier for industry and business to upgrade. America has a huge job churn each year - in 2005, 40% of workers switched jobs! 55 million jobs lost, 57 million jobs gained! Now there are good sides to this job dynamism, and bad sides. The personal disruption has little to say for it, but people like job advancement and moving up wages - which we now know happens more through transfers than promotions. Companies are able to tailor their workforces, though in the end they prefer much less than a 40% turnover to keep business running smoothly. So dealing with this reality and taking the unwanted pain out of the job churn should be highest priority.

Of course people tend to believe that the job churn means jobs going to China and India. But it typically means jobs going down the street or to another state. During the great 2003 offshoring computer scare, the BLS showed a ton of computer programming jobs lost - and slightly more computer analyst jobs created. Perhaps the shift from "programmer" to "analyst" was the value-add part, maybe field-specific knowledge combined with computers to give a leg up on foreign competitors.

Of course there will always be local content, not just Hollywood entertainment and gaming industry and music, but also just having a local cultural flavor and intuition to a service whether computers or fashion. As long as the particular product or service is not too generic to sustain a cost difference, it can stay local. But it has to compete with foreign products as well, just as high class couture has to compete with WalMart bargains. It's just a matter of finding a successful niche. Which is part of marketing.

Now what would be nice is if people in our government not only understood these pressures and movements, but could also create reasonable programs to assist the transitions in helpful and not destructive ways (both for people and in an economics sense). And the best would be someone able to actually communicate what is happening so that Americans don't maintain a relatively distorted view of the transition happening right now. Youngstown seems to get it - manufacturing isn't coming back, large populations aren't coming back, but we can create good jobs, have a good lifestyle, and come up with a new design. Perhaps we'll think of the Midwest as the new model in the near future.

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